A payments product that is free to the user still has to earn something, and understanding where that revenue comes from is how you judge whether it will survive. Peer-to-peer payment apps generally make nothing on the free transfers themselves. They earn from float, from merchant transactions layered on later, or from being acquired by an institution that wants the user base.
South African founders returning from markets where these products became large have repeatedly attempted the same model locally: sending money as easily as sending a message, across any bank and any network, at no cost to either party.
Free transfers are a customer acquisition cost
Making transfers free buys users quickly and cheaply relative to advertising. The business is betting those users will later do something that does pay: buying from merchants, holding a balance, or using a paid feature. Any business offering a free core product should be able to name that second step, because a free product with no second step is a runway calculation.
Interoperability is the feature that matters
The value of a payment product is that it works regardless of which bank or network either party uses. A product limited to one bank’s customers solves a much smaller problem. In a market with several large banks and no single dominant one, interoperability is the whole proposition.
Network effects cut both ways
A payment app is worth nothing until the people you pay are also on it, which makes the first phase slow and the later phase self-sustaining. Founders should plan for a long period where the product is good and nobody is using it, and should target dense groups, a workplace, a university, a family network, rather than the general public.
Payments are regulated whatever the app looks like
Moving money between people is a regulated activity, and the apparent simplicity of the interface has no bearing on the obligations behind it: identity verification, monitoring and the national payments framework overseen by the South African Reserve Bank. That compliance burden is why most of these products end up partnered with or owned by a licensed institution.
Founder experience matters most in regulated categories
Ventures in this space are commonly founded by people with banking, quantitative or international payments backgrounds, and that is not coincidence. Regulators, banking partners and investors all assess whether the team can handle the compliance side, and in payments that assessment happens before anyone looks at the product.
Frequently asked questions
How does a free payments app make money?
Usually not on the free transfers. Revenue comes from float, merchant transactions added later, paid features, or acquisition by an institution wanting the user base.
Why does interoperability matter so much?
Because a payment product’s value is that it works regardless of the bank or network either party uses. A single-bank product solves a much smaller problem.
What makes the early phase difficult?
Network effects. The app is worthless until the people you pay are also using it, which favours targeting dense groups rather than the general public.
Is a payments app regulated?
Yes. Moving money between people carries identity verification, monitoring and national payment system obligations regardless of how simple the interface is.
Why do these ventures have finance-heavy founding teams?
Because regulators, banking partners and investors assess compliance capability before product quality in this category.
Further reading
Originally published in October 2017. Updated September 2026 to explain how free payment products are funded and what determines whether they survive.
