Digital payments vs cash fight to continue
The battle between cash and digital payments is set to continue in 2024 as SA’s dichotomous economy grapples with these methods of settlement.
Fintech continues to be one of the big areas of innovation and technology investment in Africa.
This week, Business Day reported on a plan by Woolworths for some of its cafes to accept only digital payments. This points to an appetite in some corners of consumer retail to eradicate the use of cash.
Shoprite group’s 10 Uniq clothing stores also do not accept cash and neither does its Checkers Sixty60 delivery service.
Yet, cash is still king in SA. Research from fintech company Stitch shows that half of consumers favour cash because it is more convenient, while 41% say it is safer, 25% say fees for digital payments are too high, and 22% value the anonymity.
According to Bankserv, the region’s largest automated clearing house and payments processor for the banking industry, the value of cash circulating in SA is about R182bn.
Much of this attributed to the informal sector, a part of the economy that fintech company Lesaka estimates to be worth more than R600bn annually, or more than 6% of GDP.
Among this are key players such as taxis, which are estimated to carry 6-million commuters daily. With about 300,000 taxis on SA roads, this is still a cash industry estimated to generate R90bn per year.
“The inventory or total value of banknotes and coins in circulation is growing, and while digital and online transactions are growing faster, cash usage in the economy in transaction value terms is also growing,” says BankservAfrica’s Solly Bellingan and Andre Harmse.
The likes of Absa say card payments are now a big driver of growth in digital payments.
Much of the push across various fintech operators has been premised on the use of mobile devices as in the case of mobile money, tap payments through Apple Pay, Google Pay, Samsung Pay and others; super app platforms such as Vodacom’s VodaPay, MTN’s MoMo and Ayo, and bank platforms such as Nedbank’s Avo and FNB’s banking app.
BIGGEST RISK
But for SA, the strategy may have to centre on card payments.
GG Alcock, a specialist researcher into the informal sector, says the biggest risk about phones is that once people open their smartphone or tablet, the device can be snatched. If such a device is stolen while unlocked, it is possible for criminals to access and pilfer from banking apps.
In the informal sector, this appears to be more prevalent than the classic cybercrimes that are typically seen in traditional financial services.
Cards appear safer as the threat of immediate theft or harm is reduced. Criminals would first have to find an ATM or similar access point to steal money, if a correct pin is available.
But cards and other digital payments are not without risks.
LexisNexis Risk Solutions expects payment fraud to explode in the coming year, driven by digital adoption.
A total 20% of consumers worldwide have been victims of payment fraud, of which nearly 27% was authorised push payment (APP) fraud. With payments moving online and realtime payment systems becoming the norm, APP fraud is more prevalent than before.
APP fraud or scams take place when fraudsters deceive consumers or individuals at a business to send them a payment under false pretences to a bank account controlled by the fraudster.
LEVERAGING AI
LexisNexis estimates that this is the primary fraud threat globally, surpassing card fraud and identity theft. Fraud is expected to cost financial institutions $40.62bn worldwide by 2027.
According to eftsure, a payment verification platform, criminals are leveraging artificial intelligence and machine learning tools to craft sophisticated, convincing emails that mimic real individuals or organisations, persuading their recipients to make fraudulent payments or disclose sensitive information.
This is generally referred to as business email compromise (BEC). Targets have shifted to specific industries and businesses, including law firms, accounting firms, and manufacturing companies. What makes such attacks particularly insidious is that they often goes unnoticed until it is too late or are engineered to exploit the urgency of demands and manipulate employees into acting quickly.
“While a robust BEC incident response plan will become all but indispensable for modern businesses, the odds of recovering stolen funds are low,” says Ryan Mer, CEO of eftsure Africa.
“Given the odds, taking the right steps to prevent a BEC attack from being successful is critical, which would include having robust email security measures in place from the getgo,” he says.