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Online payment solutions

Content provided by bidorbuy.co.za - Africa's largest online auction site and marketplace. bidorbuy.co.za is a primary or secondary sales outlet for numerous home businesses, as well as small and medium businesses in South Africa.

Womanwork-from-home.jpgInternational and local players are jostling for a place in what is expected to be a growing and a very lucrative market.

South African internet arena is dotted with numerous online payment options powered by banks or other companies. EBucks, Standard Bank Autopay, mimoney, Npay, PayFast, payGate, SID and more are jostling for a piece of a relatively small pie of about 5.3 million South Africans who have access to the internet. No solution managed to become widely accepted even within national borders.  

This diversity creates confusion rather than wealth of choices. This and the complexities of collecting money from overseas customers have thwarted the development of South African online entrepreneurship.

PayPal enters the market

The introduction of PayPal into the local market couple of months ago was greeted with cheers. Everyone thought that this payment method will provide the long-awaited universal solution. Since then, the euphoria has cooled down, as South Africans realised that, in order to become a part of the PayPal family, they need to (1) open an FNB account; (2) withstand relentless Reserve Bank scrutiny; and (3) have all the transactions done in the US dollars. The last requirement is the biggest problem, because it practically excludes PayPal for local trade.

In South Africa, ecommerce accounts for only about half a percent of the national retail cake; in mature economies, that percentage is about seven to ten percent. If South Africa is to experience similar growth, it needs a reliable, trusted and widely accepted online payment method.

Online sellers, especially small ones, need to be able to accept credit card payments from their customers without going the length and the cost of (1) becoming internet credit card merchants and (2) subscribing to own safe online payment gateway.

Online shoppers need a reliable, trusted, reasonably well-known and relatively widely accepted solution that lets them make online payments without providing their personal or financial information to the sellers. With the limitations currently imposed on it in the country, PayPal cannot satisfy the needs of either buyers or sellers. 

The 'Big Guns' are joining the party

Recently, two big credit card companies, MasterCard and Visa, have announced moves that may signal their readiness to move into the arena of online payments. The two must have been watching enviously the growth of PayPal which is, after all, in majority of cases a mere intermediary between sellers and buyers and their credit cards (only in South Africa is PayPal linked to a bank account). Now they seem to be positioning themselves to squeeze out that intermediary.

MasterCard is allowing outside developers to use the company’s technology without having to get a merchant agreement, set up the payment system and make the consumer enter data each time. MasterCard’s Open Platform is scheduled to become available around the world later this year. The company is working on a way to share the revenue with the developers and is hoping to see a wide utilisation of its payment technology in mobile and online applications.

Visa has introduced a payment system called payclick, designed to provide a reasonably priced solution for online micro-payments. For the time being, payclick is tailored only for low-cost items and limited to Australia, but no one doubts that Visa has the ambition to spread its own online payment system.

PayFast enters the local market

On the local front, PayFast has teamed up with the South African marketplace bidorbuy in order to enhance its own online payment solutions. The idea is to offer a product capable of integrating seamlessly with any ecommerce site. It remains to be seen whether the enhanced PayFast online payment solutions will be embraced by online vendors in South Africa.

However, having in mind the South African Reserve Bank rules and regulations, it is difficult to see how any online payment solution, local or international, will manage to walk the last mile and enable the flow of digital money across borders. 

Cell Phone Money

While related to online payments, moving funds via cell phones represent a distinct field of digital transfer of money. The Kenyan M-pesa is often cited as one of the most successful examples of mobile money.

South Africa has seen the birth of numerous mobile payment solutions, none of which really took off thus far: Mzansi Money (ABSA Bank), MTN MobileMoney (Standard Bank), Wizzit (SA Bank of Athens), Instant Money (Standard Bank and retailer Spar)... The latest is this arena is that Nedbank and mobile operator Vodacom are teaming up to launch M-Pesa in South Africa. Perhaps the Kenyan namesake’s good fortunes will rub off on this local endeavour.

Ukash

Ukash is a payment method available in about thirty countries around the world. In South Africa, it is offered by PayFast.

Ukash brings together one aspect of high technology, namely online trading, with pre-information technology means of payment, namely cash. Basically, Ukash allows someone who has internet access (either via cell phone or a computer) to drive or walk to the nearest agent, dig into his pocket, exchange his cash for Ukash vouchers, and then proceed to shop online.

And if anyone thinks that’s an anachronism – the representatives of the South Africa’s online marketplace bidorbuy say they receive quite a few queries about Ukash.

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