Despite the advances in cheque and credit cards, payment apps, and cryptocurrency, cold, hard cash is thriving in South Africa.
Mark Labuschagne, Head of Cash and Cheque at Absa Retail and Business Banking, told MyBroadband that the demand for cash in the country was expected to grow in the coming years.
“The size of the parallel, or informal, economy is a significant determinant on the demand for cash,” said Labuschagne.
“Estimates put this as low as 35% of the formal economy, and as high as equal to it.”
But it is not just South Africa which is hungry for banknotes – international markets are seeing an increased demand for cash.
A recent report by Bloomberg stated that physical cash in circulation in the US and Europe was growing.
“There’s been a big increase in workhorse denominations – $1 through $50 bills and 1 euro to 50 euro coins and notes,” stated the report.
Labuschagne said that according to the PYMNTS Global Cash Index in 2015, South Africans used a total of $183.7 billion in cash. This is up from $156.9 billion in 2010.
“One of the major factors that has contributed to this growth is that cash is traditionally used for lower-value payments (R250 and less), but the volume is driven by the fact that around 90% of payments in SA are made in cash.”
He said cash will continue to be used for a number of reasons, including the fact that it is anonymous and has universal acceptance.
The demand will also remain strong due to “low levels of financial inclusion and the cost of adopting and managing alternative payment and collection mechanisms”.
“Because of the size of SA and the distances travelled due to our geography, cash demand is strongly linked to communities and centres.”
“Cash remains the payment means of choice because it is easily transported and recycled within these communities,” said Labuschagne.
Paying with plastic
While cash, and eventually card, payments are expected to fall away as digital payments expand and improve, there are multiple barriers to adoption, said Labuschagne.
“To participate in these payment instruments requires an account and access to technology. Both come at a cost and the former requires a higher level of documentary compliance,” said Labuschagne.
“Financial, or rather transactional, literacy also plays a part in keeping people in payment streams they and their stakeholders know, trust, and understand.”
With cash a straightforward payment method understood by citizens and businesses, its demand therefore remains healthy.
“Cash is the lifeblood of our economy,” said Labuschagne, even though it carries security risks like cash-in-transit robberies.
As stated by Bloomberg, when dollar bills in circulation start to decline, we can “write the eulogy for cash money”. It may not be anytime soon, however.