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Halal Payments System Providers – Malaysia and Tanzania

Souqa FinTech PayHalal and Halal Pesa Make Important Initial Inroads into the Islamic Payment Service Provider (PSP) Sector

A crucial aspect of the financial services system is payments processing and the evolution of FinTech has seen the emergence of global payment service providers (PSPs) over the last few decades, such as PayPal, WorldPay and WildCard.  These providers are now an important part of online payments services for the purchases of goods ranging from books, financial services, hotel bookings and travel reservations to almost every household item.

Not surprisingly PSP has traditionally been dominated by Western and Japanese providers – but to what extent is this dominance waning with the emergence of firms in emerging markets and in the Halal payment space?

In Africa, for instance, in a period of 13 years the Nairobi-based DPO has emerged as the continent’s largest PSP with a presence in 16 countriesserving some 53 airlines; a number of banks, including Standard Chartered, Eco Bank and UBA; merchants and outlets.

In the halal payment space, Malaysia-based Souqa Fintech Sdn Bhd PayHalal, which operates an online payment system as part of its ongoing efforts to offer end-to-end Sharia’a-compliant solutions to its customers, signed an agreement with Zurich Takaful Malaysia Bhd on 7 May 2019 for the latter to use the Souqa Fintech PayHalal online payment system.

Souqa Fintech Chief Executive Officer, Badlisyah Abdul Ghani, said the collaboration would not only be beneficial to both firms, but can also help Malaysia further push itself as a leader in global Islamic digital finance.

“As Malaysia positions itself as a leader in Islamic digital finance, it is important that our banking and Takaful industry strive to higher compliance and service excellence standards.  PayHalal is able to facilitate and empower merchants who wish to add value to their consumer base in the large and growing halal market. We aim to ensure consumers and merchants can conduct their commercial dealings with confidence and assurance,” he added.

Zurich Takaful’s CEO Mukesh Dhawan stressed that the “introduction of PayHalal Checkout as an online payment gateway option will give the firm’s customers peace of mind throughout their entire journey of obtaining Takaful protection.”

Similarly, in Tanzania, Vodacom Tanzania in partnership with the local Amana Bank has launched a new Sharia’a-compliant M-Pesa mobile payment service called “Halal Pesa.” M-Pesa is a pioneer of mobile phone payments, which are now well entrenched in several African, Latin American, Asian and Eastern European countries.

This first-to- market innovative saving product ensures that M-Pesa customers have access to a formal micro-savings and investment solution which adheres to Islamic financial and investment principles.

“The launch of Halal Pesa plays a key role in Vodacom’s strategy to become a key contributor in the rapidly growing Islamic Finance sector, as the product targets to service majority Tanzanians and the Muslim population through M-Pesa, where they will be able to save money and gain profit without incurring interest,” said Vodacom at the launch of Halal Pesa in Daressalam on 24 May 2019.

Vodacom continues to create innovative financial solutions for all by using digital technology at an affordable cost.  “Halal Pesa is a user friendly and distinct service that is in line with Islamic principles. The service has diverse choices including saving money for Hajj, children or long-term savings ranging from 3 to 12 months. Also, customers can use Halal-Pesa to offer their contributions to the Mosque and Zakat”, added Vodacom’s Head of M-Pesa Products Development, Tulisindo Rashid.

The Amana Bank Managing Director Dr Muhsin Salim Masoud said that this partnership with Vodacom is expected to have a positive impact on Tanzania’s Islamic banking sector. “As a bank, we are committed to reaching more Tanzanians with financial services and with Vodacom’s vast network and huge subscription this is possible.”

Halal Pesa is also in line with the Tanzania government’s National Financial Inclusion Framework Strategy (2018-2022) that focuses on enabling citizens to have access to formal financial services. “We are supporting the government by innovating and developing services that suit the needs of the population. Halal-Pesa is for all M-Pesa users – Muslims and non-Muslims – who would like to save their money while adhering to Islamic Sharia’a, and we remain firm in our commitment – to be the right partner to our customers in fulfilling their evolving demands; and to the Government’s agenda in increasing accessibility to financial services”, concluded Vodacom’s Rashid.

Eran Feinstein, CEO of DPO, sees the size of the PSP market in Africa – for both DPO and the market in general – growing at a healthy pace going forward. “The online market size is huge and much bigger than Western Europe. Take the airtime sector for instance. Once it moves to mobile money from cash, that market alone is massive,” as he explained to the editor of our monthly newsletter, Mushtak Parker.

Going forward he sees the PSP sector advancing steadily in credit card payment processing; mobile telephony, including cross-border transactions; bank transfers; online banking; and secure payment services such as DPO’s DumaPay and Paygate. 

He believes that the African digital and PSP experience has lessons for the markets in the West. Mobile payments accessibility is restricted in most parts of the world and is not as widespread and flexible as in Africa, where the digital empowerment of small merchants is driving change in the economy and new market segments, such as food and groceries delivery.

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