As South Africans gear up for the summer holidays, spending is set to surge. But this year, as has been the trend for the past few years, how they choose to do their spending is set to continue evolving.
By Privesan Naidoo, executive: trading product VP (card and payments) at Nedbank
The country continues to embrace cashless payments at an unprecedented rate, and this festive season will no doubt be marked by a further significant decline in cash transactions in favour of card payments, mobile wallets, and contactless options.
While it can’t be said that cash has been ousted as the king of payment methods in South Africa just yet, that time is almost certainly coming. Digital payments are fast becoming the backbone of how South Africans transact, with card payments witnessing a sharp rise.
According to Electronic Payments International (EPI), in 2023 card transactions in South Africa totalled R2,07-trillion, which is a massive 13,4% jump from the previous year. This growth in the card payments market is expected to continue in 2024, with the total market projected to grow by 11,4%, reaching R2,3-trillion by the end of the year according to GlobalData’s (publishers of ETI) Payment Cards Analytics.
Debit cards dominate this fast-growing market, currently making up over 70% of card transactions, as consumers seem to still prefer the simplicity and security of using money they already have. However, while debit cards lead in volume, credit card usage is seeing incremental growth, especially during the holiday season when people tend to need to stretch their budgets to cover gifts, travel, and festive feasts. The reliance on credit cards during this period is notable, with The Citizen reporting that 32% of consumers used them to finance their holiday spending in 2023, up from 27% in the previous year.
Beyond traditional card swipes, contactless payments and mobile wallets are also growing fast as go-to options for South Africans. Driven by the convenience of tap and go, contactless transactions have surged in recent years, with steadily growing numbers of consumers regularly using this payment method for their everyday purchases.
According to EPI, while this growth in digital payments is primarily attributable to evolving customer preferences, it is also being supported by the steadily increasing number of point-of-sale (POS) terminals, which rose from 424 873 in 2020 to a projected 531 387 by the end of 2024.
With more merchants adopting contactless payment platforms, consumers have greater flexibility and speed in their purchase processes, which is especially useful during the festive rush, when long queues are commonplace and quick transactions are a must.
Many households are also feeling the pinch this year, which is likely to drive even greater usage of payment mechanisms incorporating credit in some form. Credit cards and flexible payment options like buy-now-pay-later services allow consumers to spread the cost of their holiday shopping without immediately impacting their cash flow.
As a result, retailers and financial institutions are embracing and promoting these alternative payment rails as a way of helping consumers maintain some of their festive joy despite more thinly spread budgets.
However, this spike in credit card usage as consumers try to navigate holiday costs needs to be balanced with responsible spending and lending.
Reliance on credit over the holidays can lead to financial strain in the new year, so banks and other credit providers need to be proactive in promoting financial literacy and education, encouraging responsible spending, and offering tools like budgeting apps and spending alerts to help consumers track their expenses and avoid overextending themselves.
It’s clear that the growth in card, contactless and digital payments is not going to slow down anytime soon. This shift represents more than just a change in how people transact; it reflects the broader evolution of how society interacts with money. As we enter a festive season characterised by financial pressure and a need for smart spending, consumers and businesses need to navigate these changes mindfully.
Ultimately, financial institutions and retailers have a responsibility to support the shift with innovations that simplify, protect, and enhance the payment experience for consumers, while at the same time promoting and enabling responsible spending habits.
In doing so, they will ensure that the benefits of South Africa’s move towards cashless transactions extend far beyond this year’s festive rush, setting the stage for a more inclusive and sustainable financial landscape in 2025 and beyond.