Impediments to the provision of payment aggregator services by financial technology companies

Abstract

The term “fintech” reference to innovative financial technology companies and their associated service offerings which incite payment services as a non-bank entity. Financial technology firms (fintechs) are often referred to as payment service providers (PSP) who, as part of their service offerings provide payment aggregation services. This includes the facilitation and collection of large volumes of transactions on behalf of customers (either merchants or consumers) and settle the payments on behalf of the customer through a sponsoring bank The study contributed to the necessary research for understanding the value of payment aggregators and their inhibiting factors in addressing the unbanked market. By enabling the 11 million unbanked market in South Africa to engage in financial services, fintechs would inadvertently be improving their socio-economic environment and the South African economy, thus creating a shared value model. The study was done using qualitative research methods to explore the impediments in the provision of payment aggregator services by financial technology companies. The researcher was interested in understanding the impact of these factors on the unbanked market of South Africa. 17 participants were interviewed using semi-structured, in-depth, face-to-face interviews. The participants consisted of highly experienced experts in the payment landscape working at the banks and fintechs. A thematic analysis approach was used to analyse the findings of the interviews. The main factors that emerged were the costs associated with the distribution network necessary to facilitate payments, the interoperable payment technology required to foster the partnerships required across the banks, retailers and mobile network operators. The third factor showed that regulation had a significant influence in the enablement of the payment aggregator services. Fourthly, the need for partnership across all entities in the payment process underpinned the study as a criterion to the sustainability of the payment aggregator in creating shared value. Finally, the fifth factor revealed the challenge associated with the sentiment of the unbanked market of formal financial institutions