SA banks see surge in e-commerce, contactless payments

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 04 Nov 2020

SA’s big-four banks have witnessed a drastic shift towards e-commerce and digital transactions by South African consumers, as they seek safer, more convenient ways of transacting during the national lockdown.

Absa Bank, Standard Bank, Nedbank and First National Bank (FNB) say they have seen an uptick in e-commerce sales since government lifted the lockdown restrictions on online shopping in May. As brick-and-mortar retail sales for April plummeted to the largest decline on record – with sales down 50.4%, according to Stats SA – e-commerce has been touted as the lifeline for retailers.

The banks note consumer sentiment and spending patterns continue to reflect SA’s economic downturn due to the COVID-19 crisis, with spending patterns shifting to more essential items, such as groceries, learning materials, clothing and home appliances, while travel and accommodation reflect lower spending patterns.

Speaking at a virtual event held by Standard Bank yesterday, Ethel Nyembe, head of cards and payments at Standard Bank South Africa, explained that online shopping has been a lifeline for many consumers who have desperately sought safe and secure shopping alternatives amid the uncertainty of lockdown living.

Standard Bank’s latest data shows there was an 84% increase in the value of online spend at supermarkets and grocery stores year-on-year (YOY), while the increase in value of spend at online general merchandise stores increased by 458% YOY. The online purchasing of airline tickets decreased by 74% YOY.

“We witnessed a dramatic shift in behaviour around payments during the lockdown period. With concerns over COVID-19, consumers opted to make payments via online banking and our mobile app banking, or by using the tap-to-pay functionality,” noted Nyembe.

“Right from the start of the pandemic in SA we encouraged our customers to adopt our digital banking solutions. As a result of this, and the necessity to modify their behaviour because of changing living circumstances, we saw an increase in digital adoption. Many consumers now trust digital payment solutions, and we expect them to continue to use these moving forward.”

According to Standard Bank’s data, retailers that experienced a boom in online purchases over the last six months include bookstores (up 292%) and clothing and accessory stores (up 103%). There was also an increase in the percentage of charitable donations made online (up 56%). Online spend on universities and colleges was down 14%.

While in-store purchases were down in April, Standard Bank data shows signs of recovery in this segment: point-of-sale spend increased by 30% at grocery stores and supermarkets, 25% at hardware stores, 30% at computer and electrical stores, and 34% at nurseries and florists.

Strong transactional volumes

Absa says the pandemic fast-tracked the number of customers adopting and embracing digital transactions. From the online merchants Absa processes, the bank says it witnessed a 200% YOY increase in e-commerce transaction volumes between January and August.

Contactless payments made via mobile phones also doubled from May, with growth largely underpinned by exponential increases across groceries, general merchandise (shopping) and rapid payments (takeaways in particular).

“Grocery purchases contributed a massive 72% of Absa’s overall contactless volumes in 2020,” says Cowyk Fox, managing executive: everyday banking at Absa Retail and Business Bank.

With the average customer spending 50% more time online, nearly a quarter of South Africans already shopping online more frequently, and 66% of people preferring electronic payments over cash notes, don’t be fooled by fewer feet in-store this Black Friday – we expect transactional volumes to remain strong, albeit shifting towards digital quite significantly. Contactless payments are also expected to dominate for those that prefer the physical retail experience.”

According to the McKinsey Consumer Survey, South African consumer enthusiasm for all things digital has increased since lockdown, with 64% of surveyed consumers buying groceries online for the first time and 53% making their first online purchase from a pharmacy this year.

FNB says average e-commerce spend recorded on FNB merchant devices grew 30% YOY during the first half of 2020 compared to 2019.

Thokozani Dlamini, FNB Merchant Services CEO, says the impact is not only on shopping behaviour, but the manner in which consumers opt to pay for goods and services. For example, when considering franchise food delivery services, very few consumers physically pay via cash or card, as most of the payments are carried out digitally.

“For those consumers that still go into brick-and-mortar stores for groceries and other essentials, we have seen a significant growth in the use of contactless card payments,” adds Dlamini.

“Demand has been largely driven by educational services on the back of home-schooling and distance-learning requirements. This was further supported by an increase in demand for computing equipment and home/office furnishing to facilitate the distance-learning drive and work-from-home initiatives that many individuals and companies adopted.”

Nedbank says the major form factors that have been embraced by its consumers are e-commerce, contactless and QR payments, with overall digital payment volumes up by 72% in June.

“Online shopping is growing at a rate of 41% in SA .Looking at the month of August, our POS swipes at a portfolio level were at a 102% compared to the month of February,” says a Nedbank spokesperson.