South Africa – leading the way in affordable payment solutions

mobile-merchantsYou might not think that South Africa was one of the nations leading the change in payment solutions on a global stage. After all, we’re still a developing economy with a lot of catching up to do compared to economic giants like the United States and China – even though the latter is a fellow BRICS nation. But according to think tank Brookings’ Financial and Digital Inclusion Project (FDIP) report released this year, South Africa ranked second out of 21 countries examined, with an overall score of 80%. A very encouraging finding for anyone requiring payment solutions in South Africa.

Overall economic morale in the country is not at its healthiest

The economic sentiment in our country is not at its healthiest, with the declining strength of the Rand in FOREX markets doing nothing to bolster morale. Not only that, but a high national unemployment rate of 26.4% is another worrying symptom. The country’s drought, low commodity prices and tightening visa restrictions for foreign tourists visiting the country are other factors that have brought about a meagre GDP growth of 0.7% in the last quarter of the year, with the mining, agriculture and electricity industries in recession already. It’s no surprise then that business confidence is at its lowest level in five years, according to the RMB/BER Business Confidence Index.

South African businesses are still persevering, thanks to strong financial inclusion

Yet, despite all the doom and gloom, small businesses are still spawning – an indication of the tenacious spirit of South Africans. Brookings FDIP report is a testament to this. The fact that our payment solutions industry is flourishing demonstrates not only the financial inclusion and innovation that’s rife in the country, but the demand for payment solutions points to a business landscape that won’t be defeated by harsh economic times. As emphasised in the study, “having greater access to financial services promotes entrepreneurship, lifts people out of poverty, and gives them greater hope for a brighter economic future” – a much needed dose of hope after so much pessimism in the economic press.

South Africa comes out top when it comes to mobile adoption

The report assesses each country based on government commitment to financial inclusion, mobile infrastructure and adoption, banking regulations, and how well traditional and digital financial services have been adopted. As well as coming in with a score of 90% for commitment to financial inclusion, South Africa received a 100% score for mobile adoption. Brookings found that unique mobile subscriptions comprised 70% of the population, with a 96% 3G mobile network coverage. The profusion of payment solutions like mobile money services offering domestic peer-to-peer transfers, bill payment and international remittances also contributed to the high score.

 Financial inclusion is alive and well – even among women, rural areas and low-income groups

Another area in which South Africa scored highly is in the adoption of traditional and digital banking services, ranking third with a score of 69%. This due to a strong penetration of traditional bank accounts, as well as the provision of mobile money accounts. What’s even more encouraging is that the study looked at financial inclusion in rural and low-income areas, finding high financial inclusion in these often marginalised groups. Not only that, but there’s an equal penetration of bank accounts among men and women. Further research conducted between Imperial College London and Citi Bank found that a 10% increase in digital money adoption could lead to an increase in 220 million individuals (across 90 countries) entering the formal banking sector – refer to page 8 of the study for a full breakdown. Not only does this impart benefits to consumers, but also to government and businesses.

 Payment solutions provider are a key ingredient in financial inclusion for both individuals and businesses

 So how does all this affect South African payment solutions? Payment solutions providers play a key part in this financial inclusion through aiding the adoption of mobile money, as well as providing SMEs access to the affordable merchant services they need to transact and grow their business. Not only that, the providers can also help businesses reduce admin and save money. Their payment solutions can offer merchants more flexibility in how and where they operate, as well as more secure ways in which to receive payments.

If you’d like to find out how Paycorp is supporting financial inclusion for individuals, and helping South African businesses grow, download the Paycorp brochure.