Electrum recently hosted the third Open Payments Conference in Johannesburg. The event is an opportunity for payments specialists to gain actionable insights from thought-provoking conversations.

Three takeaways from this year’s keynote addresses:

1. Innovation happens at the edge - what got you here won't get you there

With the shifting landscape, banks need to adjust to remain competitive. In order to move from surviving to thriving, you should identify the part of the market that you can claim as we move into an ecosystem of high competition and a contested customer base. From this, create an offering for your customers that is either unique or remarkable, this is the ‘edge’ that will make you stand out from the growing competition.

With bank customers exhibiting high levels of ‘stickiness’, those businesses that are slow to adapt and offer innovative services stand to lose the first movers. Once the early adopters have been lost, winning them back will be extremely difficult, especially without an offering that puts you above your competitors. Finding a reason for customers to return is always a challenge.

Globally, it can be seen that once consumers make the move to instant payments, they never go back to using older rails. Your bank cannot afford to be the business that doesn’t offer customers an instant payment option - especially once it becomes expected.

2. We need to become specialists in order to thrive

Finding your edge, your stand-out offering, means you need to become specialists in what you are providing customers. This is only made possible by leveraging the expertise of partners and utilising other specialists who will focus on the things that are not core to your business.

Advancements in technology are making it easier to specialise. Cloud services can accelerate time to revenue and make it possible to adapt quickly to market developments. You can continue to build intellectual property in your core business and develop new use cases for your customers; with cloud technologies, you can optimise your business by freeing up capacity and in-house resources.

With the expected release of the exemption notice for non-banks to participate in faster payments more industry participation is coming. This creates the need for banks to re-establish their edge and determine how they can work with fintechs to bring more services to consumers, together.

3. There can be more than one winner

Understandably, change can be threatening to banks’ profit margins. However, if we look at global examples where low-cost faster payment rails have been introduced, there is no evidence that card rail profits are cannibalised. New rails compete with cash, or bring in new entrants - and where profits from payments are negatively impacted, aggregated bank profitability is not reduced. By digitising payments, the cost associated with cash handling goes down and bank account utilisation increases. 

The South African payments system has already benefited from the rise of fintechs and their innovation, with the landscape becoming more dynamic and with customers being offered more services at a better price. Digitisation is bringing in more entrants to the ecosystem. 

Cash continues to dominate the ecosystem, with the latest SARB Payments Study Report showing that cash remains the most utilised payment method in South Africa. This proves that a significant opportunity remains to tap into this market - if you can find the right services and user experience to appeal to the consumers who transact in cash.

The cost of innovation is also going down year on year as technology advances and makes it faster, easier, and cheaper to implement new services. As this innovation makes it possible for more cash to flow, the opportunity will continue to present itself to all parties involved.

In conclusion, we are at an exciting time in South Africa where we are being forced to embrace change. Cloud-native technology, payments digitisation, and new regulations mean that businesses have the opportunity to relook at their operations and push themselves to find their edge. Ultimately, this will benefit all South Africans and evolve how we view payments. 

We will be expanding on these and other themes over the next few weeks, follow us on LinkedIn to read the articles as they are published. What other topics stood out for you? We would love to hear from you and continue the payments discussion, so pop us an email.