Why don't banks offer their own custom online payment gateway/solution?

[Praemon]

So why don't banks create their own payment gateway solutions outside of the normal online payment options (ie. card/EFT). To be clear, I'm talking about a bank offering the ability for online and retail merchants to receive instant payments from their customers for a low fee, like 1% or so. Effectively the bank will just be drawing the money out of their client's accounts on authorisation, taking a 1% fee, and then giving the remainder to the merchant. There's really no difference between their current solutions for cards, except there will be no third-party (ie. VISA/MasterCard).

This solves two problems: 1) the fee is lower than credit card, and 2) it's faster and less error prone than EFT.

It seems like such a gaping whole in the market, since there's no real solution that has the speed and reliability of paying with a card, but without the cost for merchants. The bank would fully control the solution, and it's easy money from customers who would alternatively just pay via EFT anyways. They could just add it as part of the banking mobile app.

So is it because of some kind of PASA restriction? Or perhaps they earn more forcing customers to buy with their credit card? Customers would still use their credit cards anyways - this would not be a replacement - but something to work alongside other options.

Thoughts?

 

[Messugga]

So why don't banks create their own payment gateway solutions outside of the normal online payment options (ie. card/EFT). To be clear, I'm talking about a bank offering the ability for online and retail merchants to receive instant payments from their customers for a low fee, like 1% or so. Effectively the bank will just be drawing the money out of their client's accounts on authorisation, taking a 1% fee, and then giving the remainder to the merchant. There's really no difference between their current solutions for cards, except there will be no third-party (ie. VISA/MasterCard).

This solves two problems: 1) the fee is lower than credit card, and 2) it's faster and less error prone than EFT.

It seems like such a gaping whole in the market, since there's no real solution that has the speed and reliability of paying with a card, but without the cost for merchants. The bank would fully control the solution, and it's easy money from customers who would alternatively just pay via EFT anyways. They could just add it as part of the banking mobile app.

So is it because of some kind of PASA restriction? Or perhaps they earn more forcing customers to buy with their credit card? Customers would still use their credit cards anyways - this would not be a replacement - but something to work alongside other options.

Thoughts?

I think you underestimate how much sits behind a function like this, and how much it would cost to get up and running, and keep it running.

 

[Praemon]

I think you underestimate how much sits behind a function like this, and how much it would cost to get up and running, and keep it running.

Maybe. But a company like Payfast does a similar thing with EFTs. There's no reason the bank couldn't also use EFTs, ensure they clear immediately into a merchant type account, and force the beneficiary reference (which most banks can already do). That's obviously not the ideal solution, but I'm just saying there are different ways of achieving the desired outcome, but all require the bank to actually implement something from their side otherwise the end result will be clunky (like Payfast).

 

[The Trutherizer]

Banks have systems you can integrate with. The regulatory hurdles are significant though. It takes a lot to integrate with a bank basically. Money, time, effort. Far better to have a 3rd party gateway that crosses all the t and dots all the i, adds another level of security, provides collateral, carries some of the risk, and then exposes a bouquet of transacting features to its clients.

 

[Compton_effect]

Banks have systems you can integrate with. The regulatory hurdles are significant though. It takes a lot to integrate with a bank basically. Money, time, effort. Far better to have a 3rd party gateway that crosses all the t and dots all the i, adds another level of security, provides collateral, carries some of the risk, and then exposes a bouquet of transacting features to its clients.

What he said. I'm at a bank myself. you have no idea the number of legal and regulatory issues you have to go through.

 

[Messugga]

Banks have systems you can integrate with. The regulatory hurdles are significant though. It takes a lot to integrate with a bank basically. Money, time, effort. Far better to have a 3rd party gateway that crosses all the t and dots all the i, adds another level of security, provides collateral, carries some of the risk, and then exposes a bouquet of transacting features to its clients.

And is already accepted all over the world.

 

[Praemon]

Thanks for the feedback everyone. I suppose I am over simplifying things. I do wish banks would come up with a better solution to card or EFT payments though, something that was cost-effective and instant for online and retail use, and importantly easy to use for current bank customers.

 

[Messugga]

Thanks for the feedback everyone. I suppose I am over simplifying things. I do wish banks would come up with a better solution to card or EFT payments though, something that was cost-effective and instant for online and retail use, and importantly easy to use for current bank customers.

You'll end up with another card/eft service. The problem's been solved. The fees are what they are because it costs a lot to do what's required for something like this to work. The banks are constantly trying to improve their systems to make things more cost effective.

Std Bank's last iteration of their SAP implementation, which failed mind you, was a R7bn project. They've been trying to get this right from around 2003. 15 years later and it's still not done. The complexities are legion and the regulations on such a service are massive.

If you want something different, try using cash. It satisfies both your proposed solutions:

This solves two problems: 1) the fee is lower than credit card, and 2) it's faster and less error prone than EFT.

 

[Gtx Gaming]

When I pay ster kinekor online, it redirect's to fnb online gateway. Only place that I have ever seen it being used.

So I think it does exist.

 

[Praemon]

You'll end up with another card/eft service. The problem's been solved. The fees are what they are because it costs a lot to do what's required for something like this to work. The banks are constantly trying to improve their systems to make things more cost effective.

...

If you want something different, try using cash. It satisfies both your proposed solutions:

How we currently transact with cards/EFT could barely be considered a "satisfactory experience". The number of issues surrounding both have been around for a long time, and seem to be nowhere near improving anytime soon, which is why a different solution (or complementary solution) may be better. And cash does not in anyway solve these problems as it's extremely inconvenient to use, not to mention the spiralling costs of handling cash. The purpose of this would be to allow for convenient, fast and cheap payments, not the other way round. I also don't believe that you'll end up with the same costs as credit cards, but then again I don't have any true insight, and I'm just assuming that banks have to pay a fair bit for MasterCard/Visa to process card payments. I'm also not denying there's major obstacles in creating any kind of new payment mechanisms, but if anyone is in a place to do it, it's a bank that already does payment routing as their business.

If banks have no intention of providing better and cheaper payment options, then hopefully we'll see something in the blockchain/crypto space, although that seems to be many years away and will also be hampered by the lack of regulatory clarity.

When I pay ster kinekor online, it redirect's to fnb online gateway. Only place that I have ever seen it being used.

So I think it does exist.

FNB do have a payment gateway, but it's for card payments only. I'm more interested in cheaper - but still automated and quick - payment solutions.

 

[vic777]

I think they already have a slice of the pie almost everywhere - even microloans, they refuse to give the clients of the microlender a loan, but they charge the microlender huge transaction fees for those transactions

 

[Mike Hoxbig]

When I pay ster kinekor online, it redirect's to fnb online gateway. Only place that I have ever seen it being used.

So I think it does exist.

Yep it will slowly grow in functionality and customer base...