Could real time payments dethrone the almighty credit card?
woman making payment on smartphone

For many online shoppers, being able to pay with a debit or credit card is a given. That’s why it’s probably not surprising that plastic is the preferred method of paying online in many countries around the world.

In South Africa, online shoppers who were surveyed in the Effective Measure eCommerce Industry Report 2017 (downloadable as a PDF) also heavily favoured the credit card, with 45% of respondents indicating it as their payment method of choice. Debit cards were the second most popular payment method with 21% responding positively toward it.

While people have favoured card-based purchases for a variety of reasons, advances in payment technology have opened the door for a number of innovative solutions to address gaps in the market. Despite being the most widely used online payment method among online shoppers, credit cards still have a relatively low penetration in South Africa. A study by Mastercard revealed that over 50% of the South African population still transact using cash on a daily basis even though the number of banked adults rose to 77% in 2015.

Considering South Africa’s banked market and the slow uptake of credit cards, online merchants are uniquely positioned to meet the demand for a reliable and trusted alternative to card payments. Indeed, the 2017 Effective Measure eCommerce Report shows heightened interest in bank transfers, which currently stand 20% of all online purchases. Electronic fund transfers (EFT) may be around for some time now but, owing to the regularity of online fraud, it is making a comeback on the payments scene with some innovative features.

Older online EFT payment gateways usually revolve around the customer settling the payment at a later stage. With the expectation that nearly every need can be solved with the help of technology, a more evolved EFT solution is available such as PayU’s new instant EFT payment service which is powered by i-Pay. This EFT solution addresses consumers’ demand for immediacy and online security. Real-time payment infrastructures can provide an opportunity for online merchants to improve efficiency and their cash flow in the following ways:

1. Lowering the barrier to entry for thousands of shoppers - online shoppers who don’t own a credit card, can make purchases via their internet banking on all smart mobile and desktop devices.

2. Immediate transfer of funds – instant EFTs generate payment confirmation within a matter of seconds. Website owners are then able to release goods and services to customers immediately, leading to greater satisfaction.

3. No additional verification steps – Instant EFTs do not require additional user confirmation such as 3D Secure (where a number of additional steps are required to authenticate the holder of the credit card process).

4. Automatic payment matches – with older forms of EFT payments, there may be delays in allocating the payment due to mismatched reference numbers. Instant EFT payments automatically match payments to reference numbers, removing the risk of human error.

5. Lower fraud risk – EFT payments lowers the risk of fraud since no sensitive information is shared online.

Another benefit of EFT payments on the merchant’s side is that they come with lower transaction fees and a reduced risk of chargebacks. As such, eCommerce websites should be able to acclimate their payment gateways to their own growing needs as well as that of consumers. With technology now focused on creating faster and more convenient ways of payment, instant EFTs could eventually become the most favoured method of payment by many.