True financial inclusion will never be driven by credit card technology, but South Africans already have the enabler in their hands - cellphones.
This is according mobile money players that are driving a move away from physical cash, which is known to motivate theft and even violence. This comes in the wake of a wave of developments in the mobile payments space, which indicate the notion of using a cellphone as a bank is gaining traction in SA.
Roan Murray, CEO of payment solutions company Switching House, says about 80% of retailers in SA have never been able to accept anything but cash, as this majority simply cannot afford the merchant device and merchant fee that Europay, MasterCard and Visa (EMV) technology entails. The result, says Murray, is that retailers resort to what he calls "subsistence retailing" - a dangerous scenario in which profit, turnover and working capital are stored "under your mattress".
This also leads to a "hidden economy", he says, a situation where market figures and gross domestic product are skewed because cash income is not reported. "We don't know if there is growth or decline - and so government cannot make macro-economic decisions."
Switching House is involved with a project with Amalgamated Beverage Industries (ABI) to enable informal shop owners to pay delivery drivers using their cellphones, in a bid to eliminate or at least mitigate the prevalence of cash on delivery trading. He notes that 140 million cases of Coca-Cola are delivered a year.
"Technologies like near-field communication, etc, will come into play and make a difference later too - but for now we have a billion phones that can transact on this continent. The capability is there, the infrastructure is there - all we need to do is switch it on. There is going to be a big change in the way the fast-moving consumer goods market in SA operates in the next 10 years."
Switching House aims to have 30 000 cash-only merchants equipped with its enterprise payments solution for ABI by the end of the year.
Herman Singh, Vodacom's managing executive of mobile commerce and one of the faces behind the operator's reconfigured M-Pesa product, says the boundaries between the physical and the virtual world in payments will eventually dissolve, thanks to mobile phones.
"We are trying to lower the friction in the payments process, because this hammers the poor the most." He says if companies do not see the opportunity in the growing potential of mobile phones and move to make buying and selling easier for merchants and consumers, they are "missing the trick".
Unbanked attitude
ICT veteran Adrian Schofield says, however, the assumption that lower income groups would be happy to be cashless is not true. He believes the focus should be on encouraging informal retailers to grow from micro to small to medium enterprises - rather than trying to make them part of the "formal economy".
"They have no wish to join the formal economy (many are illegal immigrants or need to stay below the radar of officialdom), so they will only use cash to buy their stock. They hand the cash to the delivery driver and make the security risk the responsibility of the distributing company. This same model applies in the distribution chains for bread and cigarettes.
"I do not understand why we see the need to be cashless. Every drive to bring more people into the formal (banked) economy is doomed to fail unless the overall economy begins to grow at a rate that will close the poverty gap. The informal economy is not anti-technology, just anti the compulsion to be registered and accountable. Until there is real investment in real growth that brings real jobs, the informal economy remains the lifeline for millions of residents in our country."
Schofield says it is not realistic to see mobile money as the go-to for the future of payments market statistics and payments in SA. "This is not realistic, any more than it is realistic to rely on the banking system for the same things. 'Horses for courses' - sometimes there is a natural fit between the added value service and the core competency of the supplier; many times there is not."
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