FinMark Trust supports the extension of transaction banking accounts as widely as possible, as the backbone for access to all other financial services. This includes conducting research on domestic retail payment systems performance and experience, assessing the risks and performance of existing models to identify challenges and opportunities for market players and also to inform the regulatory debate to develop a risk framework.
All people, regardless of where they live, how they make a living or how wealthy they are, need to transact. Paying for goods or services, sending or receiving money or getting paid – be it for your harvest, receiving your wage or receiving payments from clients as is the case for so many small-scale businesses and street vendors throughout Southern Africa is part of everybody’s everyday reality. A move away from a cash-dominated society in favour of electronic payment systems can have substantial efficiency gains for low-income households by allowing people to pay and get paid efficiently, securely and cost-effectively. Indeed, a safe and convenient way to transact may be the first financial services need of many and can be regarded as a gateway to the use of other financial services.
Through its work in this theme area, FinMark Trust aims to facilitate regulatory frameworks and market conditions conducive to financial inclusion in the payments space. This includes strategic research and stakeholder dialogue to advocate for removing regulatory and market barriers to domestic transactions or cross-border money transfers through the formal financial system, thereby creating room for product and channel innovation (such as mobile-enabled payments) to flourish.
Overview of Projects in the Payment Systems Theme Area
Retail payment systems are used by consumers to transact and enable the use of other financial services. Cash is still the most widely used payments mechanism in SADC to pay for goods and services, as well as for the payment of salaries and wages. Although it is convenient and flexible, it is also prone to theft and creates substantial costs for governments and financial institutions. Cash is more difficult to intermediate which limits the extent to which capital can be accumulated and allocated for productive uses to develop economies. Identifying appropriate means to reduce the cost of consumers to transact is therefore critical in enabling access and encouraging use of payment systems by the poor.
Payments are one of the most complex areas to properly regulate and supervise, with many SADC regulators under-capacitated and without the necessary skills to establish and monitor regulatory frameworks that manage risks, while still encouraging access by reducing costs. During the past financial year, training was provided to regulators in the region during two sessions hosted in Malawi and Zimbabwe.
Remittances is one of the key products used by the poor to support dependents. Cross-border transfers from South Africa to other SADC countries have been identified as some of the most expensive channels globally. However, cross-border transfer corridors have been developed with Lesotho to support remittances.