Property sellers and buyers are set to benefit from a new online payment settlement system that services the property industry, improving accountability, reducing errors, and mitigating financial risk for stakeholders throughout the payment process.
PEXSA offers a secure payment system and lays the foundation for integration with the envisaged new Electronic Deeds Registry System for South Africa.Payment Exchange of South Africa (PEXSA) is a secure online payment settlement gateway for property transactions. It is the first of its kind in South Africa, and was developed locally for global application.
Despite extensive legislation, last year claims to the value of R161 million were lodged with the Fidelity Fund due to error or misconduct during the conveyancing process.
“With over 285 000 South African property transactions during 2016, we need a payments and settlements framework that builds trust, creates certainty, reduces fraud, enables transparency and accountability, and essentially ensures social justice for the ordinary South African property buyer and seller,” said Willie Stoman, CEO of PEXSA.
Despite being one of the largest asset classes in South Africa, property payment transactions have lagged in modernisation, leaving payment and settlement processes less efficient, and more vulnerable to market disruption and security threats.
Currently The Deeds Registry Act 1937(Act No 47 of 1937) and the Sectional Titles Act, 1986(Act No. 95 of 1986), provide for a manual deeds registration process.
Traditional property payment systems have not kept up with technology and are in no position to handle the anticipated 20 million land parcels to be registered in the Deeds Office in future.
According to Renier Nel from Nel Attorneys, the conveyancing sector is in need of a modernised, secure and streamlined payment and settlement system. “Payment of proceeds at the end of a transaction is probably the most important and risky element, and the process would be futile if compromised.”
“As the law industry becomes more advanced, and in lieu of the advances in technology and the rise in fraud associated with such advances, I believe the industry will need systems that eliminate risk, and PEXSA is such a system,” says Nel.
“Currently, registration of title in the buyer’s name happens before the seller receives his proceeds. The seller, in many instances, only receives his proceeds days, or even weeks later. This is risky for the buyer, seller and financial institutions granting mortgages. Moreover, the seller doesn’t have his money, although the buyer is already the registered owner of the property,” says Stoman.
“Consumers receive email and mobile notifications and alerts for e-commerce purchases, but when buying and selling a property, they at the mercy of the conveyancer as to when they will receive payment,” Stoman says.
“Buying a property is probably the largest financial transaction a consumer will make in his or her lifetime, and savvy consumers are demanding more transparency, real-time updates and the need to have their money instantly available upon registration, and once the funds are available,” explains Stoman.
The PEXSA online platform removes the manual payment and settlement processes, enabling time savings, greater transparency, notification and immediate disbursement of the proceeds of a property sale. It is open to all banks, financial institutions, non-banking financial institutions and conveyancers and is designed for seamless integration with the envisaged Electronic Deeds Registration System.
“When developing this solution, as part of our research into improvements and efficiencies in the market we studied models used in other environments which have successfully mitigated a number of risks in the exchange of assets since its inception. Strate was one such company,” says Stoman.
According to Dale Connock, head of risk at STRATE, South Africa's Central Securities Depository (CSD), protection of the buyer and seller is paramount in the settlement of a transaction.
“In the context of a securities transaction, protection of both buyer and seller is one of our key objectives. To protect the buyer, the ecosystem must ensure that the securities being delivered to the buyer exist, and that they are freely available to be transferred. In the same way, and in order to protect the seller, there needs to be appropriate assurance that the buyer has the funds available to make the purchase,” says Connock.
The securities markets developed the concept of “delivery vs payment” where the one (delivery) could only happen if the other (payment) also happened.
“What we have achieved in the securities transaction space, PEXSA can pave the way in the property transaction space: simultaneous, final and irrevocable transfer of ownership in exchange for payment,” says Connock.
With this in mind, Stoman says that pre-selected property conveyancers in the Johannesburg, Pretoria, East London and Cape Town areas will participate in the first stage of the new platform’s roll-out. During this phase, beneficiaries’ accounts will be verified as correct and valid, and they will be able to select their preferred payments method for the payout, either the next day, the same day or immediately.
“A staggered rollout has been adopted to allow existing members of the PEXSA community the opportunity to gain familiarity and confidence in the additional functionality before broadening it to the wider market.”
“We encourage buyers and sellers to only sell their property with conveyancing attorneys who are ‘PEXSA’d’, thus they know that the payment and settlement process will be streamlined and above board,” says Stoman.
For more information see the PEXSA YouTube video or visit www.pexsa.co.za.
