What does the future hold for payments in SA?

Of late, the advent of digital technologies has proven revolutionary for developing and enhancing the payment space, both in South Africa and in the wider world. Making traditional business models seem outdated and unnecessary, this has fundamentally changed the way things are done, blurring the boundaries between disparate sectors and creating a greater sense of financial inclusiveness.

This has benefited a whole host of industries, from banking to retail and telecommunications, but most of all, it has benefited the consumer. Offering them a better and more convenient way to do things, it is believed that it will dramatically reduce the reliance on cash and foster a more inclusive and sustainable economic growth for all.

A positive step toward financial inclusion

In 2012, South Africa’s government set out a National Development Plan, which challenged the financial sector to achieve inclusion rates of 90% by 2030. While great progress has been made toward this goal, those in the know argue that more remains to be done.

The statistics are impressive, with 80% of the population using banks as of 2019, compared to 46% in 2004. That being said, financial inclusion, and its potential to encourage further growth, remain constrained by two primary factors: that a large number of people rarely utilise the financial services available, and that a majority of the population continue to rely on cash for sales and purchases.

What digital technologies have the potential to achieve, therefore, is a greater uptake in financial services usage and an increased incidence of online transactions. One way, in particular, in which this is being encouraged is the growing convergence between telecommunications and banking.  

With the adoption of mobile phones continuing apace, those who have previously found it difficult to access such services are discovering that they’re not only able to bank in a way that they were not before, but that prices are far more affordable than they previously were. 

The importance of financial inclusion 

While technology is doing a wonderful job of deepening financial inclusion, cash continues to dominate nonetheless. This is not to say that other payment options are not utilised and indeed, digital purchases are frequently made, with everything from grocery shopping through to online betting. Along with the transactions made on gambling and betting sites such as Lottoland come the growing number of large transactions now made digitally. With growing demand comes better technology, both in regards to the monetary proceedings, and the advanced security tech implemented.

However, studies suggest that for rural and township residents, as little as 4% of transactions with informal retailers are card-based, with the rest made using cash. Experts indicate that this is because of the perceived benefits to consumers of paying in this way: immediacy, simplicity, and the ability to use notes and coins anywhere and everywhere. 

While this may not immediately seem like a problem, the downside is that empirical evidence indicates that an over-reliance on cash can inhibit both growth and sustainable economic development – hence the goal of greater financial inclusion.

So what’s the solution? In effect, the answer is a simple one: digital alternatives must be able to offer the same perceived benefits as their cash counterparts in order to successfully compete with them. If those behind their development can achieve this, increased inclusion in South Africa should continue apace – to the benefit of all.