07 May 2009

Reserve bank needs to reform payment systems to allow increased competition

Submitted by: Leila Beltramo
{pp}The Reserve Bank needs to review payment regulations and to “hold bi-lateral talks with South African technological innovators to liberalise payments and opening the market to those who normal can’t afford to bank.” Which is most of the earning market in South Africa and the developing world.
David Reynders, managing director of Pocit, an independent cellphone payment system backed by Capitec bank said that electronic transactions needed to be made faster, easier and cheaper. “Cash moves between people immediately but electronic transfers don’t. This makes cash far more attractive to some and keeps them out of the electronic, banked community.
The FICA regulations, as an example, were introduced to curb money laundering, but make it relatively difficult and time consuming for people with little money to make it electronic. It seems more effort than it is worth and so people keep cash unnecessarily. Few, if any, money launderers are going to make average deposits of R500 or less each time”

Reynders said that: “Also, a person who is not a high income earner needs money to be quickly available, but there are delays of two to seven days before money will clear through their bank account, if they have one. This effectively dissuades them from becoming part of the banked population and excluded them from the benefits (including convenience and security) and the electronic world. It also limits the ability for third parties to offer niche payment services to the unbanked, which limits competitiveness in the South African market.” Praising the Reserve Bank’s conservative fiscal policies which had helped keep the South African economy more stable than many other in the world. “It is the role of the regulator to guard against systemic risk, but too it also has to look at measures to spur economic growth through competition and inclusion.” Reynders said, however, “the financial crisis has shown that existing banking structures and economic management need to change.

We need to simultaneously increase security, access and convenience. Information technology has created the capacity for faster and safer movements of money but this privilege tends to be restricted to high income, already banked people.” Reynders said that, “if you can enable low cost, immediate transfers between banks and other players you immediately increase competition between payment systems.” He pointed out too that with new technology like mobile phones there is increased security – there is no evidence of any being hacked into, unlike internet and ATM systems.”
“There has been scant attention to the role that non-banks can play and certainly institutions like the Payment Association of SA which has membership restricted to banks, should consider opening membership to other payment providers to more carefully regulate this industry, but too, to allow greater competition, faster payments, lower rates and better services to consumers and employees across the economy.”

Contact information:
David Reynders
Managing Director
POCit
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www.pocit.co.za

Issued by:
Charlene Smith Communications
011 646 7637 or 021 762 2656
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Charlene Smith Communications (Pty)Ltd
Contact: Leila Beltramo
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Tel: 021 762 2656

Published in IT, New Media and Software

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