Cash is still king in SA, says Cash Connect

At a time when SA’s financial services sector is fighting for more digital payments, Lesaka’s Cash Connect is forecasting that cash will be the preferred payment method for transactions this festive season.

Despite Covid-19 having done much to reduce the use of physical banknotes and coins — as that was seen as a possible vector for the disease — a truly cashless world is still a long way away, at least for SA.

According to Lesaka, cash remains the payment option of choice for most SA consumers, with peak trading periods such as the festive season seeing a sharp increase in the number of cash transactions that retailers need to handle.

“It’s important that retailers support customer choice by enabling shoppers to pay by card, with smart devices, or notes and coins,” says Mark Templemore-Walters, operations director at Cash Connect, a part of Lesaka’s recently acquired Connect Group.

He explains that as much as 90% of transactions in SA are still settled with cash.

Retailers need to continue to support cash transactions to avoid excluding people who don’t have bank accounts or cards, as well as to maximise sales over the festive season, he says.

According to BankservAfrica — the region’s largest automated clearing house and payments processor for the banking industry — consumer preference for cash is particularly evident over holiday periods such as the festive season.

The organisation says that the value of cash circulating in SA is about R182bn, with orders of R84bn processed during the December 2022 period.

Even then, there has been a marked increased in digital payments adoption in SA, with bank cards now seen as a big area of growth in the ongoing fight to dethrone cash as the country’s preferred medium of exchange.

Tshipi Alexander, head of card issuing at Absa Everyday Banking, says with Sassa social grant cards now being able to be used to pay for goods and services on point of sale (POS) devices and terminals has gone a long way to pushing up digital payments.

“We see the democratisation of POS devices no longer just being limited to the cities but moving into township, periurban and also rural areas. There’s lots of work going into driving that.”

“We see PayShap landing and people getting far more used to digital payments, even contactless payments, which is very big here in SA, as compared to other markets with QR codes. Customers are quite comfortable with that.”

BankservAfrica, together with the Payments Association of SA, recently launched PayShap, which offers consumers cheap access to instant payments across participating banks using cellphone numbers.

“So we do estimate that card will continue to grow and decash,” said Alexander.

“One sign of that, even in the Black Friday numbers, is that we continue to see the ATM numbers fall. So less cash. We find that the electronic payments and card payments are the ones that are that are growing and reducing that cash [use].”

He says this will be helped further by more capabilities becoming available on digital platforms, people becoming more used to noncash settlement, together with merchants who then start to see the different opportunities available to them.

Lesaka’s own findings suggest that the biggest growth driver for digital payments in SA’s informal sector will be bank cards, as opposed to smartphones as in other parts of the continent, owing to personal security concerns.

THE ORGANISATION SAYS THE VALUE OF CASH CIRCULATING IN SA IS ABOUT R182BN, WITH ORDERS OF R84BN PROCESSED IN DECEMBER 2022