Based at their headquarters in Johannesburg, South Africa, BankServAfrica is the continent’s largest automated payments clearing house. With the Fintech world fully immersed in Sibos 2017, I was delighted to have the chance to speak with Executive Head of Digital Infrastructure, Martin Grunewald.
Founded in 1972, BankServAfrica now processes payments across 40 banks – and about 34,000 ATMs – with peak volumes in 2016 reaching R10.5 Trillion (includes electronic, POS and ATMs).
The National Payment System is the infrastructure that BankServAfrica have created in order to combat the previous lack of interoperability between banks across both South Africa and other African countries. The system will also ensure regulatory compliance and reduce complexity in the industry.
Martin has been at the forefront of the NPS development and we were excited to quiz him on this and plenty of other key topics. Our interview covered the below:
- Drivers and Approach to modernising NPS
- M-Pesa in South Africa
- Impact on the unbanked
- Fintech, Blockchain and NPS
- Interoperability across Africa
What do you see as your role at Sibos this year?
Sibos is the gathering of about 8000 Financial Services and Fintech stakeholders across the globe. I will not only be representing BankServAfrica and South Africa, but also the whole African continent. I am keen to engage with the global community, share ideas and also learn from the rest of the world on how they are solving problems with the digital economy.
I would also be discussing and sharing ideas around addressing the unbanked and improving financial inclusion across the world. We will be flying the African flag and engaging with the globe.
Why do you need NPS to be modernised and what are the drivers?
NPS modernisation is a very interesting space and we are working closely with the Payments Association of South Africa to make it happen. SA is a two-economy country where payments infrastructure has mostly served the middle class and the corporates.
Statistics are distorted when they claim that 70% are banked in SA, as they include 12 Million government grant earners who have bank accounts but are mostly unbanked. Without this population, the banked percentage falls to 57%.
We are redesigning the NPS so that it can be used by a wider audience. A redesigned NPS alone will not automatically provide financial inclusion for the unbanked. But we can definitely ensure that the design doesn’t inhibit the process.
For example, SA has had a real-time payments system from 2008, for higher value transactions, that are priced that way. Even fraud detection is designed around high-value transactions. A motorbike can be bought using real-time payments, but not a 2 Rand transaction. NPS redesign problems such as this.
What was the approach to the NPS redesign?
We have taken a three-staged approach to the NPS redesign.
First step involved looking at international markets. Countries like US, Canada, EU, UK and Australia act as comparable ecosystems economically, where there have been different approaches taken to address different functionalities. For example, RTGS has been addressed differently across these countries.
We also performed a comparison across developing economies such as Brazil, Mexico, Nigeria and India on how they are achieving modernisation of their payments infrastructure. For example, India is moving towards a pay by proxy style mobile payments infrastructure.
Second Step was to interview about 50 key stakeholders across these economies that included, banks, retailers, regulators, mobile operators and getting their views around the key problems we were trying to solve in SA.
Third Step was to arrive at actionable insights from the data gathering and execution of the actions. We have now kicked off modernisation of the NPS based on the results of the analysis.
What are your thoughts on M-PESA and its role in SA?
M-PESA has done well in West Africa, particularly in Kenya and Tanzania. However, it has failed to penetrate SA, twice. From a SA perspective, we need to open up the NPS system to other players. SA has an entrenched banking system. Kenya can’t be easily replicated in SA.
West Africa (Tanzania/Kenya) has closed loop systems running their course. Economies can’t scale on closed loops systems. Payments for SA and the rest of Africa should be open and cater for other players that scale.
How will the Fintech, Blockchain and Telecoms revolution influence NPS?
New Fintechs can create leapfrog moments using new technologies, but when it comes to NPS the challenge is that there are legacy software and processes involved. They have to be open ecosystems that can interoperate, and not siloed. I see many tech solutions going into environments, without taking a top-down approach.
Next generation of payments infrastructure can’t ignore mobile. 10 years ago, we couldn’t have imagined a life without mobile. It’s a key channel for transactions going forward. Informal set-ups would depend on mobile for connections. Payment systems that do not make mobile friendly customer journeys will fail.
There is a lot of activity happening in the Blockchain space. While across other industries, applications are starting to emerge, within Financial Services it is still a great piece of technology looking for a problem to solve.
How do you see your role across Africa?
I think Africa needs interoperability with the payments infrastructure. Financial inclusion has vastly improved in some countries, thanks to Fintech. However, they are currently quite closed ecosystems. We are working with the Gates Foundation and the World bank on our vision for Africa. We are working towards an open ecosystem that provides seamless interactions across Africa.