Ozow vs Instant EFT

Instant EFT is a term used in South Africa to describe a bank-based payment method that offers faster confirmation at checkout than an ordinary electronic funds transfer (EFT). But unlike a card payment, Instant EFT still uses the traditional EFT rails, it is not a card payment and is typically used solely as a deposit method.

One way to experience Instant EFT in action is through Ozow, a South African payments player that enables secure pay-by-bank without the need for a card.

What Instant EFT Actually Is

Instant EFT is a specific product, rather than a general term for any same-day or real-time EFT. It is not the same as a card payment, in that card details are not shared with the merchant. However, it is not an entirely new clearing system: the underlying transfer still occurs on the ordinary EFT rails.

This makes Instant EFT a kind of optimized EFT. The sale is confirmed within seconds, using a specified reference and amount, but the funds still take time to clear the interbank network and appear in the vendor's account.

How the Checkout Flow Works

Let's look at how the Instant-EFT checkout process works, by taking Ozow's packaged flow as an example:

1. At checkout, the payer selects Ozow.
2. The payer selects their bank from Ozow's list.
3. The payer logs in to their bank using their regular internet banking username and password.
4. The payer approves the payment using 2-factor authentication, typically via their banking app.

The merchant is notified almost immediately, and payment proceeds to an Ozow-held merchant account, like any card-based sale.

Where Ozow Fits

Ozow has packaged this confirmed-but-not-cleared flow as its core customer proposition. For merchants, it offers a "set and forget" integration; for payers, it is a foreigner-friendly option, since customer slows and card fraud tend to be lower. Ozow also has a related offering for payouts, but here we are focusing on the merchant payments and e-commerce side.

Instant EFT vs Ordinary EFT

Normal bank-to-bank payments in South Africa, by contrast, can be a multi-day clearing process. Instant EFT helps on that front, but it is not quite real-time. Ozow in turn offers variations on that: real-timeclearing (RTC) payouts, but not necessarily on the same rails as the instant checkout deposit that brought the money in. There is also an important distinction between customers and cashiers.

Conclusion

To recap: Instant EFT offers fast confirmation of a payment, streamlining the bank-to-bank process so the payee is notified and the payee's merchant account is credited. However, the funds are still held in an interim merchant account, and processing times are then determined not by the Instant EFT rail itself but by the payment provider's own payout process, with RTC or ordinary EFT as an option. The base speed does not come from a new underlying payment rail, so the end-to-end process has limitations. But since Instant EFT still use the inexpensive bank analogues of accounts and references, rather than sharing card details, that fast confirmation for the merchant shows the way some innovation is still possible on these long-standing payment systems.

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