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Pay by bank

‍The growth of open banking technologies has been a tale of two worlds. In the developed world, they have enjoyed not only regulatory support, but popular growth. Yet developing countries have generally lagged in uptake due to a number of systemic factors.‍ However, this has begun to change with fintech companies in developing countries increasingly offering access to world-class open banking-driven solutions, such as Ozow’s Pay by Bank.‍ The parallel evolution of payments that has defined the technology in the 21st Century. Now, Ozow is breaking new ground, and Pay by Bank is driving the future of financial access on the African continent.
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The early evolution of payments

While the modern payments landscape has evolved rapidly over the past 30 years, it's roots stretch back much further. As far back as the 1870s, Western Union used their telegraph network to send wire transfers, with codes and passwords in place to ensure the security of the funds.1 For more than a century, this remained the only form of electronic funds transfer, or EFT.

The change that enabled the rapid development of the system we know today began on 1 January, 1983 with the birth of the internet.2 The internet enabled new forms of communication, and collaboration, but also new forms of payment. And in the 1980s, banks made online services available to consumers for the first time, although it wasn’t until 1994 that these services reached broader audiences.3

That said, despite the obvious promise of this new technology, its spread wasn’t equal.

Payment in the developed world

Advantages in infrastructure development in the lead up to the new millennium allowed developed economies to effectively establish a head start in the dissemination of payment innovations.

In the same year as the first fully digital payment (a pizza, supposedly) Jeff Bezos founded Amazon as an online bookstore. Now the world’s largest retailer, its influence is nevertheless most concentrated in developed economies, although over the past decade the company has begun to pursue expansion in the developing world.4

The founding of PayPal at the end of the‘ 90s seemed to herald a new age of access. It expanded digital payments to include mobile – until then largely a novelty – and became one of the first digital payment providers with a global presence. However, behind the scenes it utilised the same payment mechanisms as everybody else.

Payments in Africa

While the developed world quickly adopted digital payments, developing economies such as those in Africa lagged behind.

Historically, many Africans have been excluded from, or have had difficulty accessing consumer banking services. This has led to a reliance on cash at the same time that many developed economies are rapidly moving away from it. In South Africa, the problem is bad enough that despite a banked population of 47 million people (that is, the number of people who make active use of banking services), cash still accounted for at least 50% of consumer transactions in 20225, and nearly 90% in the informal economy6 By contrast, European use of cash transactions had already dipped below 40% by 20207

A major factor in this trend was internet access : By 2001, high-income countries – concentrated in Europe, North America, and parts of Asia – saw internet usage at more than 800 times the rates of low-income nations8 And even though the gap has closed enormously, by 2020 low-income economies trailed high-income countries with a usage rate nearly 10 times lower9

The birth of the smartphone augured a dramatic shift in the status quo, proving to be the catalyst for the rapid growth of internet usage in developing economies. As the technology became more popular and more reasonably priced options became available, interest skyrocketed in these countries. After the release of the first iPhone in 2007, mobile subscriptions in Sub-Saharan Africa exploded by 260%, compared to a meagre 26% amongst high income countries10

Nevertheless, there remains enormous deficit – and corresponding opportunity – for payments in these communities.

The rise of open banking

According to some sources, open banking has existed in one form or another since the 1980s. Put simply, it allows third-party providers to receive access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions. Modern iterations of open banking utilise an Application Programming Interface (API)to access the data and make changes. Its intention is to expand competition in financial services, as well as access to consumers by allowing third-party providers to develop products for the underserved.

However, the evolution of the internet to Web 2.0 in the early 2000s heralded new possibilities for multiple spheres of life. Alongside new forms of interaction such as social media, higher levels of interoperability between systems became common, and these promised important changes in the payments landscape.

Nearly simultaneously, seismic shifts were beginning to make themselves felt in the financial services space. In 2007, the European Union released Payment Services Directive 1 (PSD1), which redefined the regulatory regime regarding financial services within the EU.

PSD1 had its foundations in earlier innovations such as SOFORT, a digital overlay technology that made it possible for banking providers to access accounts as though they were the customer12. However, before the directive could take effect, calamity struck: In 2008, global financial systems were rocked by a virtually unprecedented crisis.

The ensuing chaos would claim some of the world’s most recognisable financial institutions and drive governments to the brink of insolvency13 Perhaps more importantly, it rocked confidence in a financial system that was largely considered at fault for the onset of the crisis. In its wake came more stringent regulatory oversight, as well as greater wariness from consumers who were already sceptical of the power of major corporations who seemed to control much of the world’s data.

By 2009, when PSD1 finally came into effect, the ground was fertile for systemic change.

Previously, competition in the global payments space had calcified to a small handful of major players, primarily Visa and Mastercard, while central banks and governments facilitated local payments.Under the new regulatory regime, a new category of financial service was created – payment service providers – and a framework was enacted to allow for third party payment providers. Essentially, PSD1 gave regulatory force to the conceptual impetus of open banking, while enforcing greater transparency in the financial services industry.14

A new generation of payments

While PSD1 set the foundations of open banking in Europe, in the United States it was driven primarily by fintech firms themselves.

Amongst the first companies to launch using open banking principles was Stripe, in 2010. The company found early success by creating an easy-to-implement API to facilitate online payments. In Europe, by contrast, it took some time before service providers were able to begin taking advantage of the possibilities offered by the PSD1 framework.

By 2012, companies such as Plaid and Swedish fintech Tink were beginning to find their feet. These companies utilise open banking protocols to interface between apps and users’ bank accounts. Their APIs smooth the process of drawing financial information for users, making it possible to integrate budgeting functions, undertake account and identity verification, and track transactions, amongst other tools. The founding of these and similar fintechs laid the groundwork for a revolution in payments.

While Plaid, Tink, and their contemporaries began with relatively simple offerings, the innovation made possible by open banking has led to the rapid proliferation of solutions, allowing once small fintechs to compete directly with the entrenched commercial power of banks and government institutions.

In contrast to the upstart fintechs, incumbent institutions were comparatively slow to realise the potential of open banking. Indeed, it wasn’t until the latter half of the 2010s that major banks and payment providers began to roll out open banking solutions at scale. That said, while these companies may have been subject to certain institutional inertia, once moving they were able to generate astonishing momentum. Able to draw on large established networks and huge customer bases, they quickly closed the gap on their young competitors.

Ozow's Journey

In sub-Saharan Africa – home to many of the world’s developing economies – regulatory uptake of open banking principles has proven slow. In South Africa, for instance, the South African Reserve Bank(SARB) first issued an open banking policy paper in 2020. This meant that early open banking pioneers on the continent operated in something of a regulatory vacuum. Nevertheless, companies such as Ozow have succeeded in establishing ethical and operational credibility, often while working in partnership with established financial institutions.

Like other fintechs of the early open banking era, Ozow was founded to realise the promise of open banking, but in an African context. Founded in 2014 as i-Pay, the company’s goal is to create oneAPI that connects fifty-plus countries, offering an alternative to both traditional banking and the cash economy that continues to dominate the continent.

Since then, Ozow has developed a suite of tools to open the digital economy to millions. Originally offering only digital payments, we now offer payouts and refunds solutions, giving merchants a full range of payment tools to run any business.

This has been supplemented by a growing peer-to-peer payments solution. Ozow.ME offers users easy access to Ozow’s payment flow, and the ability to pay and receive money using SMS, WhatsApp, and Facebook Messenger. It holds promise as a tool for consumers to pay each other quickly and easily, but also as a turnkey solution for informal traders– responsible for nearly a fifth of South Africa’s GDP.15

This offers these traders the means to manage their money easily, while moving away from the cash economy.

The foundation of these solutions lies in open banking, and Ozow’s own Pay by Bank product.

How Pay by Bank overcomes the limitations of traditional payments

The traditional payments landscape in South Africa has been defined more by an emphasis on security than ease or speed. Conventional payment systems are complex, owing to multiple checks and balances. Ozow’s innovation was to establish a system that embodies the essential philosophy of open banking. This solution – called Pay by Bank – combines world-class security with the ease and efficiency of modern innovation.


Like all open banking protocols, Ozow’s Pay by Bank operates using modern standards of consumer convenience. User experience design has come a long way since the early days of digital payments and Pay by Bank has been designed with this front of mind.

Where digital payments in the 21st century have generally operated as an extension of card payments, open banking allows Pay by Bank to take an entirely different approach. Indeed, the solution negates the need for a bank card, allowing a consumer immediate access to their own bank accounts in order to facilitate and complete payments.

From a business perspective, this ease overcomes many of the hurdles to making a purchase: On average, Pay by Bank experiences an abandoned cart rate of less then 15%, and frequently less than 10%. This compares to a global average of nearly 70% cart abandonment.16


The completion time of a traditional EFT is measured in days – unless consumers are willing to pay an additional fee to fast track the process.


Finding the balance between traditionally secure (but complex) payment solutions, ease of use, and speed has been a driving force behind the development of open banking. With Pay by Bank, Ozow has wholeheartedly embraced this philosophy to create a system that’s not only simple and fast, but safe for both consumers and businesses.

Pay by Bank utilises cutting-edge data security practices, including full compliance with international and local data regulation. Data is encrypted end-to-end, and payments feature two-factor authentication. Additionally, Ozow has secured licensing by the Payments Association of South Africa as a systems operator and third-party payments provider. We’re also PCI-certified, ensuring we abide by the highest level of security for credit card processing – even though we don’t process credit cards.

The future of African finance

While Africa has lagged behind the developed world in the uptake of open banking, the emergence and strength of solutions such as Pay by Bank is a strong indicator of the impact that these technologies can have.

The expansion of open banking on the continent has been impressive, and is only gathering pace. In South Africa, the Rapid Payments Programme has been developed by SARB in collaboration with BankservAfrica, an automated clearing house owned jointly by the nation’s banks. This collaboration gives institutional impetus to SARB’s Vision 2025, designed to modernise South Africa’s banking and payments systems. Combined with private sector open banking champions like Ozow, it promises to forge a new future for financial freedom on the African continent.

On a continent in which the majority of the population remains rural, easily available digital payment technologies have the potential to expand access to a marketplace that has thus far proven elusive for these communities.17 Products that were once out of reach become attainable, and entire new business models become possible.‍ This has the potential to uplift communities and jump-start economic growth in ways previously thought impossible.

Technologies such as Pay by Bank are a vital pillar for supporting this growth, and Ozow’s Pay by Bank has seen consistent growth since its release. Not only that, more than 90% of first -time users transition to regular use, showing the strong utility of the solution. However, there is vast room for further expansion, and a need for greater education of the benefits of Pay by Bank technologies in the informal economy in particular.

While the developed world has already embraced open banking, the developed world holds the promise of new frontiers of growth, and the ability to change these societies for the better.

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2 Online LibraryLearning Center(Nd). Accessed 6 December 2022.

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9 Our World in Data (Nd). Accessed 15 December 2022.

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17 The World Counts (2023).