The South African payment ecosystem will need to increase co-operation if it hopes to reduce the country’s over-reliance on cash.

And, while the regulator still has a big part to play in the solution, flipping the way payments are generally incentivised in favour of the consumer, as well as finding ways to better incentivise businesses for secure card and digital payments acceptance, could be a big piece of the puzzle when it comes to building a more robust digital payment environment.

“South Africa continues to be an anomaly when it comes to the African payment landscape. We have a mature, sophisticated payment infrastructure and regulatory regime but we remain heavily reliant on cash. This is despite the big uptick in digital, and especially contactless payments, during the last two pandemic years,” explains Chris Wood, regional MD: southern Africa and PALOPS at Network International.

Speaking ahead of the 9th African Bank 4.0 Summit for the SADC region, taking place in Johannesburg on 24 to 26 of August, Wood says that unlike its continental counterparts, South Africa has never had a burning need to become a more cashless society.

“South Africa hasn’t experienced the mass uptake in mobile payments such as was seen with M-Pesa in Kenya. We also have an extensive network of ATMs which means that if we want cash, it’s fairly easy for most to access. There is a widely held view that if we hope to continue to stimulate the uptake of digital payments, we will either have to rely on creating a regulatory environment that in some way discourages the use of cash – as has been done in countries like India and Nigeria – or we will need to consider using the carrot,” Wood says.

Digital is not yet part of our transactional psyche

Wood says that despite having one of the most advanced banking sectors in the world, South African businesses have not felt the need to adopt purely digital transactions.

“A recent business trip perfectly illustrates the many digital opportunities we are missing out on. I was already at the airport only to discover that I was without my wallet. I was forced to go entirely digital for a full week. The first problem was before the plane had even departed.

“Without my bank cards I was unable to access any of the business lounges, despite having all my relevant cards stored virtually on my phone. Once in Mauritius, however, I was able to transact across the island, including the smallest merchants, simply using Apple Pay.

“This is where the interoperability of digital payments finds its biggest voice. I could pay the same way anywhere, irrespective of currency exchange or even a physical card,” he points out.

The missed opportunities are most keenly felt in the informal economy and Wood says this should act as the biggest motivator for the payments ecosystem to find a collective solution.

“It’s naturally frustrating to witness how people are forced to part with a large portion of their meagre social grant in just travelling to an ATM to access cash on a monthly basis. Innovation globally gives us good insight into potential solutions though, where we could look to transform our national identity card into a fully functional and interoperable payment tool. With cash continuing to grow, the everyday impact to consumers and businesses is costing us more than we realise.” Wood says.

Searching for the right lever to effect change

Finding new ways to address South Africans’ over-dependence on cash could lie in approaching the solution from a different perspective.

“Until now the consumer has been heavily incentivised to take advantage of various payment options, either through loyalty and rewards programmes or buy now, pay later offers. One angle the industry should be looking at more closely is how to properly incentivise merchants to encourage the uptake of digital payments.

“We cannot ignore the commercial side of enabling all players, from banks to merchants, to make money out of something we know will have a net positive impact across all layers of the economy. These are just some of the collaborative issues we need to be addressing and why conversations taking place at a summit like this are so important,” Wood says.