South Africa saying goodbye to cash

Cash is still dominant in South Africa, with almost half of all adults withdrawing all their money as soon as it is deposited in their accounts. The majority of payments in the country are made using physical banknotes. 

However, South Africans are rapidly adopting cashless payments through credit or debit cards and new systems such as PayShap. The Reserve Bank also plans to make the country’s economy cashless. 

Reserve Bank Governor Lesetja Kganyago said South Africans are over-reliant on physical cash and should transition to safer payment methods. 

Kganyago added that the Reserve Bank wants to reduce the use of cash in the local economy by modernising the national payment system and educating people on the benefits of digital payment channels. 

The Reserve Bank’s Digital Payments Roadmap showed that almost half of South African adults withdraw all their money from their bank accounts as soon as it is deposited. 

Reasons for this include a lack of trust in banks, fees associated with card transactions, and a lack of acceptance of cards by merchants in the informal economy. 

The bank also revealed that there has been little to no growth in the demand for banknotes and coins, which fell by 0.8% in 2023. 

Historically, cash growth followed economic growth, but this trend has been broken in the wake of the Covid-19 pandemic. 

Commercial banks have played their part in encouraging clients to adopt digital payment methods. 

In particular, their partnership with BankservAfrica to launch PayShap has resulted in the rapid adoption of digital payments in areas of the economy dominated by cash. 

Standard Bank said it has experienced a significant increase in instant payments, driven by a growing uptake of PayShap.

Over the past year, the number of Standard Bank clients registering for PayShap grew by 9%, and the active use of ShapID for transactions has increased tenfold (817%) year-on-year.

“This data clearly shows that consumers are increasingly seeking more convenient payment solutions. They want their transactions to clear instantly,” said Rufaida Hamilton, Standard Bank’s Head of Payments in South Africa. 

“Even our other immediate interbank transactions, beyond PayShap, have continued to rise, highlighting a growing preference for instant payments among our customers.”

The average PayShap payment now stands at R498, down from R594 in the first quarter of this year. 

Hamilton noted this decline signals a shift towards using PayShap for micro-payments, demonstrating that the platform – designed for fast, low-cost transactions for everyday needs – is fulfilling its purpose.

Since its launch in March 2023, the broader payments industry has processed over 74.2 million PayShap transactions worth a combined R46 billion.

Standard Bank has also seen a sharp rise in the use of contactless payment methods and digital wallets.

Crucially, these payment methods are penetrating the informal market, with over 90% of transactions through formal banks being conducted by debit or credit card in this sector.

Over half of Standard Bank’s clients tap their cards or phones at supermarkets, restaurants, and fuel stations.

These payment methods now account for 53% of all bank client transactions, up from 42% just two years ago.

The bank said this has been driven by merchants adopting new technology and clients increasingly trusting digital wallets.

Standard Bank recorded the most significant growth in 2023, with the value of contactless payments increasing by 37%. This year, the growth has continued with an additional 14% rise.

The trend spans across all income brackets, with the bank noting double-digit year-on-year increases in tap-to-pay transactions among both middle and high-income clients.

“For credit card users, the shift to contactless payments is even more pronounced, with over 60% of their transactions using this method,” the head of credit at Standard Bank, Tumelo Ramugondo, said.

“Consumers are becoming more accustomed to the tap functionality, and it’s becoming increasingly entrenched among merchants across various industries.”

While essentials like groceries, fuel, and utilities still dominate transaction categories, there’s a growing trend of discretionary spending through tap-to-pay.

For example, Standard Bank has seen a 23% year-on-year increase in contactless payments at clothing and footwear retailers this year.

The value of transactions paid via digital wallets like to devices like Apple Pay, Samsung Pay, Garmin Pay and Google Pay increased by more than 65% year-on-year at the end of August.

Digital wallet transactions now comprise 13% of all Standard Bank’s contactless payments transactions – up from 4% two years ago.

This article was first published by Daily Investor and is reproduced with permission.