Bridging the financial divide for a more inclusive society
• Most SA consumers have embraced emerging digital payment methods in the past year
There has been a noteworthy shift in the payment preferences of Pick n Pay customers over the past year as noncash payments increased, while cash transactions fell 10%, highlighting a continuing trend in the dynamic landscape of financial transactions in SA.
This transformation aligns with the rapid growth of the country’s digital payments market, spurred by increasing adoption of online shopping and mobile payments. The pandemic accelerated demand for contactless payments and a preference for cashless options, with digital wallets gaining popularity. Carrying a wallet or bank card is no longer obligatory, offering a glimpse into the evolving financial habits of South Africans.
According to Mastercard’s new payment index 2022, 95% of SA consumers embraced emerging digital payment methods in the past year, highlighting the diverse ways in which consumers make purchases.
In this era of rapid digital evolution the conversation about transitioning to a cashless society is more pertinent than ever. Beyond the convenience of swiping and tapping, such a shift promises lower transaction costs, heightened security, improved financial inclusivity and enhanced economic efficiency.
However, the realities of the local retail environment must be weighed carefully in this discussion, as social media commentary on another retailer’s transition to a cashless environment in certain outlets vividly underscores. Opinions were divided, with some embracing the idea and expressing minimal reliance on cash, while others were concerned about the potential for financial exclusion in a fully cashless system.
This divergence reflects the reality of many economically active people who remain unbanked or lack access to digital payment mechanisms.
More than 14% of economically active South Africans do not have bank accounts, emphasising the continued role of cash in providing access to goods and services. While Statista predicts that within the next five years about 95% of the population will be banked — a positive trajectory — it’s important that no-one is left behind in the rush to adopt technology that should ultimately be beneficial to all.
For our part, Pick n Pay will continue to accept cash for as long as there is a need.
To bridge the gap between those with access to banking services and those without, the Reserve Bank’s PayShap facilitates digital payments at minimal cost without requiring a bank account. While adoption rates are still low, promoting “pay to merchant” functionalities, and making sure potential users are better informed of the benefits, could accelerate uptake of this digital payment option.
Until every South African, regardless of location, can participate in the digital economy, the risk of financial exclusion will remain. Though smartphone penetration is high, access to affordable or free data remains critical for the widespread adoption of digital payments. Encouragingly, the increase in malls offering free Wi-Fi and the development of fibre-to-the-home in rural areas are positive strides.
Enhancing access to banking and digital payments is only one facet of this evolution. It is equally important to promote confidence in digital systems, particularly among segments of the population that are more comfortable with using cash and exhibit higher trust in it.
For instance, the digitisation of the social grant payment process in SA supports lowincome communities, but many beneficiaries still prefer cash transactions over digital methods. In Pick n Pay stores more than 10% of pensioners and grant recipients withdraw in cash. These are cardholders who still want the security of cash in hand, illustrating how much work must be done to show customers that security is far greater when going cashless.
Despite these barriers, the momentum in our stores towards digital payments is evident across diverse urban and rural communities. We’ve made banking and digital payment options more accessible, and we see the growth in these services as more customers adopt them.
We also pioneered new payment options in the retail space, such as contactless “tap & go” card payments and QR code payments, which have fostered a greater willingness from customers to embrace cashless payment services. After we launched crypto payments in our stores a year ago this option has a growing user base that is greater than 80% month on month.
The unstoppable progress of technology has also given rise to ground-breaking platforms, ranging from mobile wallets to digital credit and buy-now-paylater schemes, which are particularly popular.
PayJustNow, given its zero interest, reported its highest month of sales in our stores over the Black Friday period, with a 70% month-on-month increase.
While the shift to a cashless society appears inevitable, the journey requires collaboration between the banking sector, government and educational institutions, as seen in Nordic countries. Sweden, Finland and Norway took just more than 10 years to go from a GDP comprising over 70% cash to just 2%.
But even in advanced economies cash won’t vanish entirely, as some citizens still opt for it. The Swedish government is looking at legislation to ensure cash can still be used in sectors that care for the elderly and frail so they are not left without basic services if they choose to pay with cash.
While cash will probably remain king in SA for longer, the progress of technology will continue to deliver new digital payment platforms.
As technology develops, Pick n Pay aims to empower choices and serve as a gateway for customers to access these cashless options and embrace the benefits of more convenience, security and financial empowerment.
CASH WILL PROBABLY REMAIN KING IN SA FOR LONGER, BUT TECHNOLOGY WILL DELIVER NEW DIGITAL PAYMENT PLATFORMS