PayFast - South African Payment Processing

August 30th, 2008South Africa, Startups

Written by: Brian Herbert

PayFast

PayFast is a new startup based in Johannesburg and is a direct competitor with PayPal.  Essentially, PayFast is a solution for South Africans to purchase goods online, send and receive money using electric funds transfer (ETF) or a credit card.

One of the major benefits for using PayFast is that a credit card is not required.  At least in Kenya, many people do not carry credit cards which makes it difficult to conduct business or purchase products online.  If a South African has a bank account, they will be able to hook into this service and initiate transactions with merchants that utilize PayFast.

There are three different types of accounts.  With a personal account, the limitations for users are they will not be able to accept credit card payments or set up an ecomerce store. Also, all fees are waived for personal accounts.  The next level is a premium account which is like the personal account except users with premium accounts can accept credit card payments (see edit at the end of this post).  Finally there is a merchant account which allows users full access to the service.  All accounts follow the same fee structure which is anywhere from 1.4-2% of the transaction.

Services like these are important for the growth of the e-commerce sector in Africa. However, there needs to be a broader approach with services allowing users to charge their accounts with methods other than a bank account.  I will be examining a service by Safaricom in Kenya which offers another alternative.

Check out PayFast here.

8/31/08/ Edit: Richard Catto of Cape Town News brought to my attention the fact that PayFast has yet to enable credit card processing. This is a critical feature for a system like PayFast so it will be able to adopt new users easily. For instance, when purchasing a product from a website that uses PayPal, you do not need to be a PayPal member if you use your credit card to initiate a transaction. According to the PayFast website, this feature is coming and will be a welcome addition to their service.  Even thought accepting credit cards is an important feature to launch with, PayFast is young and has an opportunity to improve on its offerings.

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6 Responses to “PayFast - South African Payment Processing”

  1. Richard Catto Says:
    August 31st, 2008 at 12:58 pm

    At the moment, PayFast is not accepting payment by credit card, unfortunately.

    Also their web site is not completely functional. Some things, such as upgrading your account has to be tackled manually by contacting the support staff.

    I have an account on their system, but I won’t be deploying them as a payment solution until they accept cc’s.

    Their current service is little different from accepting payment via direct EFT except you have to pay them a transaction tax if you use them.

    Also I cannot use my PayFast account to purchase any services online. So right now, it looks like a closed loop system with little immediate benefit to me.

  2. Brian Herbert Says:
    August 31st, 2008 at 1:05 pm

    Thanks for the follow up, Richard! I can’t sign up for an account to try it out since I don’t have a bank account in South Africa. I’ll be sure to add an update to the article.

  3. Chris M Says:
    September 1st, 2008 at 5:46 am

    I wrote a post on PayPal and PayFast, which mounted up over 200 comments:

    http://imod.co.za/index.php/2008/02/13/i-called-paypalcom-today-from-south-africa-and-asked-wasssup/

    http://imod.co.za/index.php/2008/03/04/is-payfast-the-south-african-alternative-to-paypal/

    Those should allude to your article and allow for more information to circulate..

  4. Brian Herbert Says:
    September 1st, 2008 at 1:50 pm

    Thanks for the great info, Chris. You’ve made an interesting post on PayPal. It’ always good to pick up the phone and make a call.

    You are right in your article. When someone hears there might be issues with PayPal and doing business in another country, they might not take the time to figure out another alternative to doing business.

  5. angeli Says:
    September 2nd, 2008 at 5:44 am

    Certainly one to watch. Sadly, all still miles away from the convenience and ubiquity of Paypal. VERY curious what the credit card fees will be, as this is where the local solutions really differ from Paypal. 5-6% is miles away from 3% and really does make a difference. Those fees are not trivial to merchants.

  6. Brian Herbert Says:
    September 2nd, 2008 at 12:01 pm

    Interesting comment about the credit card fees in South Africa. In the States, fees are somewhere in the range of 2-3%. On the PayFast site, though, they say they will only charge 1.4-2% per transaction which doesn’t seem profitable if fees are as high as 6%.

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