Simple antenna technology within the new cards will ensure long check-out queues are a thing of the past as all customers now do is "tap" their card at the point of sale and head for the door.
The benefit for merchants is apparent as the process keeps sales moving and is easy to track.
Absa has partnered with MasterCard to issue the PayPass contactless card to the South African market, and says its relationship with Barclays (Absa's owner) was a key catalyst to the solution, which is now moving out of its 18-month set up and trial phase.
While the other banks are developing similar technology, Absa has gotten a march on them as Barclaycard started building the process around seven years ago and is now the market leader in the European easy payment arena.
So going forward, many Absa Chip cards will hold their normal accounts and a low value payment (LVP) wallet. Absa will also offer a stand-alone prepaid card containing the LVP functionality.
The bank aims to use the technology as a key tool to tap into the estimated 13 million unbanked South Africans.
"We have the opportunity to offer a payment solution to the un-banked market in terms of taxi and bus commuters, eventually empowering them to utilise services such as the ATMs and point of sale terminals," says Absa Card's Managing Executive, Arrie Rautenbach.
But all cardholders benefit via a tiered offering to existing clients (who will get a new card with the antenna technology), while the product is also being rolled out via co-branded transit cards (like through the City of Cape Town) and also via merchant services - at the corporate, business and retail. The main benefit for merchants is
General Manager of consumer issuing, Simon Just, says costs have not been determined yet, but is a low value high volume offering and it is envisaged there will be a once-off load fee, with no charges for transactions thereafter.
Absa has imposed certain limits on this payment solution which are aligned with the special exemption to control and manage these cards. Each transaction will be limited to R200 or less, a maximum load of R1500 per load on the card and a total monthly transaction limit of R3000.
This is in line with the special exemption from the provisions of the Financial Intelligence Centre Act which makes the issuing of contactless cards to under-banked consumers possible.
The Absa contactless card will be available to existing Absa MasterCard debit and credit card customers, and will also be issued as a standalone card from Absa branches countrywide in the near future.
LVP was developed as the next logical step to the cheque, savings and credit card accounts already packaged on Chip & PIN cards. "Why carry cash in your wallet if you can create a virtual 'wallet' to handle low value payments?" asks Rautenbach.
The LVP wallet works in the same ways as 'Pay as you Go' in the cell phone industry. Customers transfer cash from a conventional bank account to the wallet using the Internet or an ATM. They then transact from the wallet until its balance is depleted.
"While there is a long journey ahead to ensure these cards are accepted at a wide range of convenience retailers and merchants, South Africa stands to benefit handsomely from government's early commitment to a single standard for this type of payment and ensuring that all modes of transport in South Africa operates on the standard.
Many foreign countries have battled to ensure inter-operability because multiple systems and standards have inhibited broad acceptance, customer convenience and growth," says Rautenbach.
Government, financial services regulators and the private sector have been at work for a number of months planning how the technology will be applied in transit and retail in South Africa.
The National Department of Transport has committed to a standard payment system that uses bank cards to ensure that customers are able to use the same card "inter-operably" across different modes of transport.
"The technology also offers South Africa a payment standard that allows consumers to use the cards to pay fares in any mode of transit and for retail purchases on their debit, credit or prepaid cards, offering unparalleled convenience" says Rautenbach.
Absa and its consortium partners are already working to deliver a low value payment solution for the City of Johannesburg's Bus Rapid Transit (brT) system.
Similar solutions will be rolled out nationally by local municipalities and metros as their public transport tenders and projects are completed.
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