Putting your money where your phone is

Although great strides have been taken in cashless payments, there is still 80-85% opportunity for the industry, according to Markus Eichinger, executive vice president of group strategy at Munich-based Wirecard.

“If you look at the cashless payment industry, only 10-15% is fully digitised where both merchant and customers have a fully digital experience,” he says, adding that in markets such as Africa, technology and smartphones have disrupted the payments ecosystem, moving it from cash to digital.

Technology has significantly changed the landscape, bringing the previously unbanked into the equation, driving financial inclusion. Andrew Stewart, managing director EMEA of WorldRemit, says a classic example of this is in Tanzania, where 91% of WorldRemit volume is going to rural areas.

From a day to an instant

“Historically, that was not the case because individuals would have to leave the village and come into an urban area, find an agent and get the cash,” he says.

“That would be almost a day’s experience, and unfortunately on the way home there [would be] significant leakage for whatever reason. With mobile-to-mobile you can now send directly to the intended recipient and then that money can be used for education, staple food or any other purpose.”

Eichinger agrees, noting that digital devices with internet connectivity have changed the landscape. According to the ICT Sector in South Africa 2019 report produced by the Independent Communications Authority of South Africa (Icasa), SA’s smartphone penetration was 81.72% as at the end of September 2018, compared to 74.2% in September 2017 and 43.5% in September 2016.

“There is no longer a need for card distribution or terminals when you can provide a fully digital solution and mobile phones now have internet connectivity,” says Eichinger.

AI the next big driver

Looking at the long-term landscape, Eichinger believes that artificial intelligence and working with data will prove to be the next driver of change in the payments industry. “If you think about it, a payment really means that you are sending data from one server to another. Actively working with data that is generated by payments will be key to successful payment business models going forward.

“For example, if you consider tax refunds – when you travel abroad, you know you can reclaim the Vat at customs. Typically, you ask the vendor for a voucher and then you have to process the paperwork before you get the Vat back. If a company combined this with the payment process, it would be able to instantly recognise that the person who has just paid is a foreigner based on their bank card – and issue the tax voucher automatically.

“That’s a win-win situation,” says Eichinger. “The client gets their tax refund and it’s a streamlined efficient process.”

Working across territories

Hannalie Marsh, Wirecard’s general manager for South Africa, notes that the group already has a presence in six African countries – South Africa, Namibia, Zambia, Kenya, Mauritius and Botswana. “We’re excited about our plans to exponentially grow our presence to other African countries over the next two to five years,” she says.

Corrie Bakker, head of business development and strategy for Africa at PayU, says one of the challenges in working across different territories lies in the need to clear dollars in some of the countries. ”Due to anti-money laundering regulations, the forms are as complicated for smaller sums as they are for larger sums of money,” she points out.

Partnerships

Marsh says Wirecard is looking at collaborating with bank partners – using Wirecard technology and leveraging the bank’s financial services provider licence to open up opportunities in the remittance payments space. “This is already a well-serviced market on the African content and we have no plans to compete with companies that already offer a bespoke service,” she says. “We would rather partner with them.”

She notes that while remittance fees in Africa and South Africa were much higher than international remittance fees a few years ago, this has already changed. “A year or two ago, remittance fees were between 12 and 15%, which was quite staggering when you consider the amounts that are typically transferred.”

However, Marsh says with the entrance of retailers such as Checkers in the remittance market, these fees have come down dramatically to around 5%, “which is more in line with global best practice”.

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