PAY@: Future Proofing Payments by Embracing Digital

Africa is largely viewed as the continent which has made the most progress with money movement. For not too much longer will cash be able to justify its claim as undisputed King across all territories. Today, digital players and fintechs are busy trying to dethrone cash payment incumbents. And the amount of money on the move every single day is eyewatering on the continent that has promised to bypass others through technological advancement, desperate to leave behind its tag of underdeveloped or economically insecure.

Mobile money is amongst the royalty of Africa’s fintech boom. In 2020, the GSM Association reported that 43% of all new mobile money accounts started in 2020 were in sub-Saharan Africa. Registered accounts reached 548 million in 2020 (a 12% y-o-y increase) with 159 million active monthly users (up 18%). The region saw an astronomical 27.4 billion transactions, worth an immense $490 billion.

Interestingly, the report found that not only are users active with their accounts more often, they are increasingly looking for more services. The Covid-19 pandemic has obviously moved many previous cash-only users online, and this has been welcomed by mobile money players as well as bill issuers who are on the hunt for improved ways to collect remittance from customers.

Whether it’s retailers, financial services, online or digital TV subscriptions, medical providers, educational facilities, government institutions or more, cash is now rivalled by fast, efficient, effective and affordable digital payment solutions.

Leader in the payments industry is Pay@. Headquartered in Stellenbosch with clients countrywide, Pay@ has been assisting with bill collection, whether cash or digital, since 2007. Settling up through Pay@ has never been easier for end users, and this has made life better for the companies issuing the bills.

ALWAYS EXPANDING

Growing into Africa is the next step for this exciting business, as the pandemic has moved more people online and as big-name South African clients continue their push north of the border.

“We are integrated to, from a Southern Africa perspective, the largest independent network of collection points,” Pay@ CEO Andrew Hardie tells Enterprise Africa. “The history of that is around financial inclusion. Not everybody is banked, and even for many people who have a bank account, they go and draw out all the cash, they keep it under their mattress to use as their tender and currency.

“To serve this market in other parts of Africa, mobile money has really taken off, but mobile money in South Africa is not quite there yet. We do have a mobile money product, but our core service and collection points are retailers – large tier one retailers in South Africa – and we have pretty much all of them. We have 9000 retailer points; you can go to any tiny little town in the middle of nowhere and there will be a Shoprite, Pick n Pay, Pep store or a Spar store and you can go and pay a Pay@ bill in those stores. We also collect retailer payments via kiosks and many thousands of mobile point-of-sale agents.”

This model has allowed clients including some of the biggest businesses around – Multichoice, DStv, Eskom, Standard Bank, Assupol, SABC, SAA, HomeChoice, Mukuru, and many more – to issue, validate, collect and confirm bill payments from any customer, in any form, anywhere in South Africa. In fact, “MultiChoice is one of the largest billers in Africa and we have served them over the last 10 years to great effect. MultiChoice use pretty much every single one of our services and we have a team that focusses on delivering behind their requirements,” Hardie highlights.

But Pay@ recognised early in its journey the potential of digitisation and the importance of the ability to manage different payment methods. Easy online payments, cards, EFTs, mobile money and wallets are all accepted seamlessly.

DIGITISATION JOURNEY

“Over the last six years, we have been building out a digital strategy. That has two sides. One is online digital payment methods, such as the conventional online card mechanism. And the other is digital bill presentment, such as an interoperable QR code,” details Hardie.

“One of the deployments we have made that combines a digital payment method with digital bill presentment is our QR code solution. A QR code payment method is fast, contactless, card-not present and secure. It provides a great, seamless payment experience.”

We helped Mastercard build Masterpass out in South Africa, which was really great. Masterpass can read our QR codes wherever they deploy their functionality, so whether it’s VodaPay, all of the banks, or any other mechanism, they all now read our QR code.

“We put a QR code on a bill payment statement that can be read by all the mobile apps. We also have the independent apps like Snapscan and Zapper that can read the code and collect on our behalf. It’s actually not about the technology; it’s education, trust and security around digital. As that increases, we see tremendous growth there.

“To find the payer – the consumer of the bill issuer, you have to access them in a form that resonates with that consumer. What I mean by that is you might have a highly banked, tech savvy, smartphone user who doesn’t want to get a USSD message, so you access them via Whatsapp, app, web, etc. Whereas where people use feature phones, there’s no data and the likes, you rather use USSD or your telco partners. That’s another side that we’ve set up. We have a broad base of either proprietary or third-party presentment services. SMS, USSD, WhatsApp, in-app, web, QR, email pay now buttons, and we’ve also created a platform where both networks as well as bill issuers can do direct billing on their own websites. They use the product we have called DigiAPI.”

As cash and card payments at retailers are still strong, Pay@’s solution that links digital presentment to physical payments in-store is also seeing great traction. Thanks to this all-encompassing digital approach, built on the foundations of the payment acceptance through retail networks, Pay@ has been called in to assist its clients further afield.

“The company is diversifying,” confirms Hardie. “Our core market is South Africa; geographically we’re also in Botswana, Namibia, Lesotho, and we service transactions in Zimbabwe. We’re heading next into Zambia and Mozambique, and possibly Angola on our retailer strategy, but we’re looking from a digital point of view at how we can do things slightly differently into other parts of Africa where retail may not be as strong. We are also diversifying into different services.”

While expansion into Africa is often at the heart of every expansion strategy for those succeeding in South Africa, Pay@ has ambitions beyond the continent.

“Regionally, we are expanding much further into Africa and also broadening the lens in terms of services that we provide there. We have already started looking at international expansion. We went to the USA last year and we’re working with some of the major payment value chain brands that are partners of ours to access other markets. That could be Latin America, Asia or Eastern Europe on the emerging side or it could be the US on the high-end side. Due to the breadth and depth of our solutions we can straddle both.”

The management team are quick to innovate and search for new opportunities in existing and new markets. Stagnation is not acceptable at Pay@. That is why Hardie and colleagues are rolling out new offerings to add to the strong portfolio. The core of the business is that of being a payments and bill aggregator whereby through integrated retailers, banks, telcos, mobile wallets and other payment services providers collections are made for organisations of all sizes across multiple industries. But the business is expanding into software-as-a-service, presentment-as-a-service, e-commerce, new industries, SME services, rapid payments, and industry solutions, such as banking, telcos and insurance.

“We’re going into new industry sectors like gaming and internet, online businesses etc. We also have an electronic bill presentment & payment (EBPP) platform for SMEs – doctors, plumbers, electricians etc, and this platform enables a whole different servicing side of our business.

“Where the value is that via a single integration into Pay@, billers get access to all of those payment networks and don’t have to have multiple individual integrations to these networks, and similarly the networks don’t want to have integrations to hundreds of companies – we aggregate all of that for them,” Hardie adds. “Essentially, we take care of the whole transaction. We present the bill, we manage the real-time validation of the transactions, and any business rules linked to the transactions. Once the payment takes place, there’s confirmation, and that takes care of the actual transaction. We then manage the flow of funds by collecting all monies paid across all networks and we then aggregate that into a single bulk settlement to each bill issuer. We provide reports and a reconciliation file to the bill issuer that they can upload to their back-office system ERP. The process is seamless and automated, manual bank reconciliations are a thing of the past!”

Pay@ processes millions of transactions each month, with a 99.995 success rate. This efficacy rate plus the safety and ease of use of the system enhances the customer experience and reduce process and overhead costs of stakeholders. There are a many big-name user caser studies.

“Software as a service within the payments industry is a real opportunity because of the inefficiencies in the value chain. We are deploying a few of these services, such as real time notifications for banks, presentment-as-a-service, reconciliations-as-a-service and others. Interestingly, companies are struggling with POPIA and we are quite advanced in our progress on that side so we could maybe offer that as a service as well. There’s lots of scope.”

COVID CRISIS?

Pay@ has been a South African success story since its establishment, and even during the tough 2020-21 Covid-19 period when some of its retailer channels were closed in hard lockdown, the company has registered strong results.

A research paper from American Express found that the pandemic had changed consumer preferences when it comes to payment, finding that people will now actively seek out shopping options with a mix of payment solutions. More than half of the respondents said they would spend more, and interact more frequently with businesses that accept digital payments. The digital offering that Pay@ has put so much work into is proving its worth.

“Payments businesses are doing well and what’s very interesting is that payments really are the fuel of any business or the economy. It was great for us as a business that we could really add value to our stakeholders over the last year. We actually grew our volumes and values by almost 25% since the start of Covid. It wasn’t business as usual though. Most of our payments are still going through the retailer channels because the lower LSM consumer brackets are still largely limited to this channel. You would think that with five weeks locked down that we had last year, the instore payments channel would just come to a grinding halt. But in fact, cash and card payments at in-store at retailers increased over this period. The clothing retailers closed and the food retailers were open. We have a mix of both so we didn’t get any transactions from the clothing retailers, but the food retailers increased transactions,” explains Hardie.

“However, we were incredibly well positioned on the digital side, and we saw over 150% growth in digital transactions. What’s interesting now is that when you change a behaviour that becomes entrenched. What we are seeing now is that many of those digital transactions haven’t gone back to the retailers or to other channels, that’s become the standard way people are paying and it’s only growing.”

The American Express study confirmed this switch with more than 60% of people stating they plan to continue using contactless, digital payments in the future and more than a third of respondents saying they would actively avoid cash-based transactions in the future. This is especially true in developed markets.

The diversity of Pay@’s aggregation model has seen it through the pandemic. Where one sector saw a downturn, others ticked up. It shows the benefit of aggregation and scale – something which Pay@ has achieved but where others are yet to match. 

“Cable TV, insurance (people were wanting to have funeral cover, etc), money remittance; it was fascinating,” says Hardie. “In terms of the growth in money remittance, we were wondering, nobody’s working so where’s this money coming? These are migrant labourers, living in South Africa, sending their money back home. One of the key alternative channels for sending money home is to give it to a taxi driver. He drives the 15 hours or three days to get back to Malawi or wherever, and then goes and gives the money to the family in that area. With borders closed, that whole channel was stopped. We saw an increase in volumes and lots of interesting stories that have come out.”

PRESENTMENT IS KEY

As the pandemic raged through closed economies, worry beset businesses with outstanding bills. Hardie puts a large part of their success in supporting these businesses, even in the most challenging times, down to a focus on presentment.

“It becomes so critical to find your consumer,” he says. “Sure, they might be struggling and might not be able to pay but if you’re not finding that person, then you’re not going to even have a chance of getting that payment, and so we’ve seen lots of interest now around the digital presentment.

“Presenting digitally but paying in-store with cash, that is bridging digital and physical, is also a common theme coming through which is interesting.”

According to PYMNTS.com and Versapay, more than 60% of CFOs in small and medium sized businesses see innovation in the payments space as vital to the future of their income, but most see digitising as too expensive to handle internally. In Africa, consumer payments are expected to exceed $2.1 trillion by 2025 with only around 5% through digital rails.

“If you look at some of the problems in payments industry, poor experience, value chain problems, and the lack of a multi-dimensional approach etc are big hurdles. We feel the aggregation model is going to become a more common and popular model going forward,” says Hardie.

“South Africa has always been quite advanced in Africa and there is a dichotomy of a highly sophisticated paying markets combined with the grassroots side and a lot of the time you have companies that service one or the other but not all. That is where our aggregator model comes into play.”

This aggregator approach is not only attractive from an efficiency point of view, it has a major impact on cost base. By investing in a partnership with Pay@ companies can benefit from a reduction in process costs and overhead saving. “There are many millions of transactions each month and only 0.005% of those require human intervention, so it’s an incredibly scalable, seamless process,” says Hardie.

“We process large numbers each month but we only have 40 people in the company. We really are a tremendous example of fintech scalability. It’s really more about the system.”

To date, Pay@ has seen tremendous and consistent year-on-year growth. This growth is not through acquisition, merger, or over stretched borrowing; it is organic and completely funded by the Pay@ balance sheet. Hardie is proud of the company’s history but ambitious and fervent about the future.

“We are super excited about the next three years,” he smiles. “The company is 14 years old now. We’ve built a tremendous platform, not only with our current set of clients and networks, but also the actual system capacity and governance and all of those good things. Over the next three years, we’re looking to grow additional services into our current biller base, onboard the tremendous pipeline we have of new billers, and diversify both regionally and from a service perspective. We’re looking for exponential growth,” he concludes.

With Pay@’s digital drive coupled with ‘new normal’ market conditions present globally, the business is future proofed for the ever-increasing move to digital. That said, it also is tremendously strong in its cash and in-store payment offerings, which is important as it can continue to support this payment channel which will take time to be replaced by digital and this also enables Pay@ to assist its retailer partners to migrate into the digital world. As the coronation of digital edges closer, another new normal approaches where digital money movement will be more common and bill presentment will gain even more importance. In some countries, especially in the developing world, it can cost 1.5% of GDP to print, replace and distribute bank notes annually. 

Bill issuers and payment networks alike must be ready for a switch. Pay@ is the ideal partner for the now and the future.