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Understanding RPP – SA’s new rapid payments programme

By September 2, 2022Articles

South Africa – a land of astonishing beauty, diverse cultures… and a massive percentage of unbanked people. It’s no secret that a significant part of the country’s economy is cash-driven; in fact, it’s entirely normal for most people to carry at least some small amount of cash on them, even for those who engage in banking. Over half of all point-of-sale transactions are done in cash, and over 80% of the informal economy is entirely cash-based. However, there are always risks with carrying cash, from accidental loss to theft, counterfeiting and even money laundering. 

The solution seems simple – encourage everyone to open a bank account, promote card payments over cash, move towards a cash-free society. Of course, it really isn’t that simple, or easy either. There are access challenges, lack of personal financial education, rampant unemployment. And, even nearly three decades on, we cannot ignore the legacy issues of Apartheid, when people were legally blocked from opening bank accounts. This led to long-term mistrust of banking, and reliance on cash-based cooperative community banking, which still holds strong today.

With the understanding of how South Africa’s economy operates, and in an effort to include the unbanked in the banking system while still giving people the flexibility of cash, the South Africa Reserve Bank will be launching the Rapid Payments Programme later this year. This programme aims to reduce people’s reliance on cash, promote the use of electronic payment methods and, in the long term, to improve the country’s banking as a whole.

What is RPP?

The Rapid Payments Programme, at its core, is a means for everyone, whether they have a bank account or not, to access digital payments. It will enable people to transfer money directly to one another through a variety of applications, including popular instant messaging services like WhatsApp.

According to the South African Reserve Bank: “This RPP, when fully implemented, will offer a cost-effective instant payment service across banks, a proxy service to embed user banking details, a request to pay service, as well as support for several known retail payment use cases.”

Effectively, all one needs to use these new digital payment methods will be the receiving party’s phone number, email address, or another piece of identifiable information. Money can be transferred into your bank account, or any other kind of cash wallet.

What does it mean for business?

The RPP opens many avenues for businesses to improve their revenue collection and speed up payment processes. One of the biggest advantages to the RPP is that payments are instantaneous, thereby eliminating, for example, lengthy wait times for EFT or bank transfer clearance. RPP will also make it possible for people to set up recurring payments, such as instalments. From a business perspective, this can make managing credit facilities and debit orders simpler and faster.

For businesses whose primary income is cash, the RPP offers a safer and more secure way to transact with customers. By removing physical cash from the equation, and relying on instant payments instead, these enterprises can continue to do business as usual, while reducing the risks associated with having cash on the premises.

How does it work?

Together, the SARB, Payments Association of South Africa, and BankServ Africa have developed the legal construct around the RPP, which included forming a payment clearing house and establishing the scheme. The technology solutions, which are currently being tested for launch later in 2022, were developed by BankServ Africa, working in conjunction with several of the major SA banking players.

The platform enables not only existing payment methods to expand their options, but also paves the way for innovative fintech development in South Africa. Established financial service providers and fintech startups alike will be able to develop unique digital payment mechanisms, or tap into existing ones to improve their cash flow.

What will it mean for Three Peaks clients?

At the moment, there are no immediate changes for our clients. However, we are actively following the development of the RPP, and we are excited to investigate the possibilities it will open up for our customers. We hope and expect that this new programme will help smooth processes, speed up payments and help us provide an even better service to our clients.