In a bid to boost financial inclusion in South Africa, bank accounts may soon be linked to easy-to-remember identifiers like cellphone numbers.

The linking of bank accounts to easy-to-remember identifiers such as mobile numbers and e-mail addresses is said to be being considered in an overhaul of the National Payments System.

Industry stakeholders — including the central bank, commercial banks, the payments association and the facilitator of interbank settlements — are working to upgrade the current system, developed in the 1980s, as previously reported by TechCentral.

The various stakeholders involved had a two-day meeting last week to explore options and discuss the scope of the planned upgrade.

Carlo Palmers, head of market infrastructures at Swift, said the South African team is closely monitoring new payment systems implemented in several countries, with a focus on the new payments platform that went live in Australia last month.

“Australia has very consciously rethought their project from looking just at instant payments to a new payments platform. A new payments platform means that they are building a new infrastructure that can cater for any type of transaction so instant payments and many other transaction types would go through the system,” he explained.

Enabling instant payments, or at least reducing transaction processing speeds, is a consideration in South Africa. This is in line with retail market expectations, driven by consumers’ ability to purchase and pay for goods online almost instantaneously.

Another consideration is the linking of bank accounts to mobile numbers and e-mail addresses, which is a key feature of the Australian system. The system allows consumers to make payments to each other using mobile numbers and e-mail addresses instead of a bank account number, which can be complicated and difficult to remember.

Proxy database

To make use of the Australian system, account holders must register their personal information on a proxy database, which forms the link between mobile number and/or e-mail address and bank account, all while shielding underlying bank account numbers. Only account holders may link their bank account number to their mobile number and e-mail address and the proxy database has the “highest level of security”, Palmers said in response to questions about linking publicly available information to bank account numbers.

He said the South African banking community is exploring a similar system using easy-to-remember mobile account numbers in lieu of bank account numbers to help boost financial inclusion. Mobile research group GSMA found that South Africa had a 68% mobile penetration rate in 2016 while a separate study by FinScope laid bare the extent of financial exclusion in the country. According to the 2016 study, South Africa appears financially inclusive on the surface as 77% of adults are banked but, if South Africa Social Security Agency card holders are excluded, only 58% of adults are in fact banked. It also found that 11% of the adult population is entirely excluded from the financial system.

An upgraded system could also provide the country with a way to “support the official economy” by reducing the amount of cash in circulation and therefore cash used in suspicious transactions. This has worked well in Sweden, which is aiming to become an entirely cashless society.

Based on his experience with Swift, building payments systems across the world, Palmers said the all-encompassing nature of the South African team and open-minded approach to overhauling the system is very promising.