TMCnet Feature
October 12, 2020

Serge Belamant's History with NET1 Technologies, Financial Technology and Social Change in South Africa



Serge Belamant worked with many companies in different industries during his career, but it’s his skill in writing financial transaction software that earned him his reputation in technological development. His legacy is a transformation of the global banking industry, especially in South Africa. His company, NET1 Technologies, allows almost 10 million beneficiaries in that country to receive monthly grants safely and securely.



Belamant was born in Tulle, France, and moved to South Africa with his family when he was 14. He attended Witwatersrand University and The University of South Africa, where he initially studied engineering but later switched to computer and information systems. Belamant was a student who became inspired by the subject and used this knowledge and his instincts to develop ideas that would change the way existing systems work.

NET1 Technologies

Belamant founded NET1 Products PTY LTD in 1989, later known as NET1 Technologies. He also began developing his Funds Transfer System (FTS (News - Alert)) and Universal Electronic Payment Systems (UEPS) at this time. As a result of these accomplishments, VISA approached Belamant in 1995 to design a chip offline pre-authorized card (COPAC). Chip-enabled credit and debit cards throughout the world still use this or a modified form of this technology today. Belamant also listed his company as APLITEC on the Johannesburg Stock Exchange (JSE) in 1996, which is an abbreviation of NET1 Applied Technology Holdings Limited.

Belamant purchased Cash Payment Services (CPS) from the First National Bank of South Africa in 1999. At that time, CPS was the system that paid welfare grants to millions of recipients in South Africa, especially those in rural areas. However, CPS was antiquated and badly in need of modernization.

The South African government formed the South Africa Social Security Administration (SASSA) in 2005. Prior to that year, the social welfare department of each province in South Africa managed the welfare grants for that province, which was an inefficient approach as the solutions selected were not interoperable, often unsecured and expensive. The national government awarded NET1 Technologies a contract to pay all social grants from the SASSA in 2012, which is arguably one of Belamant’s social and technological greatest business achievements. Serge Belamant reformed the provincial payment systems that were sending grants to more than 10 million beneficiaries each month.

Serge Belamant took NET1 Technologies public in 2005 by completing an initial public offering (IPO) and listing his firm as NET1 UEPS Technologies Inc. on the Nasdaq Stock Market. He also listed NET1 Technologies on the JSE as a secondary listing in October 2008. This move allowed former APLITEC shareholders and South African residents in general to hold NET1 common stock directly.

Net1 was servicing more than 10,000 pay points per month by the time of Belamant’s retirement in 2017. The total value of these transactions was 160 billion rand per year, which was 15 to 20 percent of the national government’s annual budget. Belamant changed the course of global banking during his 27 years of leadership at NET1 Technologies, making him the founding father of social entrepreneurship in South Africa.

Technological Limitations

The provincial system of disbursing welfare grants in South Africa created problems for its beneficiaries. Borders between provinces aren’t controlled, so someone could easily receive payment in one province and need to conduct a transaction in another on the following day. Belamant recognized that solving this problem would require innovative technology that could treat all payments the same, regardless of where the beneficiaries lived or conducted transactions.

However, NET1 also needed to use infrastructure that was available throughout South Africa. The National Payment System (NPS) was the ideal choice, since banks, Automatic Teller Machines (ATMs) and point of sale (POS) terminals were already  apart of it. These systems were compliant with EMV, which is a payment method for smart payment card that ATMs and POS terminals accept. They were thus able to effect all online transactions in South Africa.

Rural South Africa has very limited communication and electrical networks, as the only physical infrastructure is in towns. Implementing thousands of pay points in this area therefore required a technology that would work offline without relying on electricity or internet connectivity. This system also needed to function seamlessly in South Africa’s cities, which used modern financial systems.

Traditional credit cards could not meet these requirements, because they required first-world infrastructures. ATMs and POS terminals are connected to a backend system, but they couldn’t resolve the problem of providing functionality without that connectivity. First-world systems can’t operate offline due to the financial risk against the card issuer. Beneficiaries are also at risk because they rarely have modern cellphones that can download applications and/or communications' networks are not available or reliable in these locations.

Biometric Technology

Many beneficiaries failed to receive their benefits under the old welfare system due to widespread corruption. For example, staff members could register themselves as the beneficiary so that they received the welfare payments instead of their clients. Another technique was to establish a ghost registration by posing as a legitimate beneficiary, allowing a fraudster to collect payment. In other cases, family members who knew a beneficiary’s PIN would simply use the payment card for themselves.

Belamant’s solution to supporting welfare payments in South Africa was to use biometric technology to physically authenticate a user. This approach involved capturing the fingerprint of authorized users when they registered the card and store that image on the card. Even if the card was lost or stolen, no unauthorized person could use it. The beneficiary could authorize others, such as a partner or family member, to use the card, a process that involved adding another set of fingerprints to the card. This system could thus record the identity of the person performing each transaction.

The use of biometric technology means that FTS can distribute any type of government grant and ensure that money will reach the correct recipient, who often has no other source of income. Additional features of FTS include a variable PIN and 1:N biometric comparison engine, which allowed this system to function for seven consecutive years without incident. The government was then able to deliver its grants quickly and securely, although banks were initially reluctant to accept FTS as a form of payment. The key to overcoming this challenge was demonstrating that FTS was the only practical method of reaching beneficiaries in underdeveloped areas of South Africa.

Summary

Serge Belamant’s drive to develop new payment methods was fueled by his desire to eliminate the fraud that was rampant in the older systems. NET1’s legacy is the ability of millions of South Africans to access a financial system that works, even those without access to modern technology.



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