The payments industry often speaks about a cashless society like it’s the Nirvana we should all be striving towards. But, like it or not, cash will remain the backbone of our payments framework – in emerging markets at least – for a good few years. 

Semaphore dialled in for the Payments Association of South Africa’s (PASA) 4th international payments conference (PIPC) to better understand where South Africa stands when it comes to cash. We discovered that our policy makers have provisioned for cash to be an integral part of the payment mix for the foreseeable future, but that businesses can influence the digital uptake, if they offer consumers and merchants a good reason to make the change.  

Here is a synopsis of the panel’s thoughts on where we stand in terms of moving towards a cashless society.  

Despite its downsides, cash isn’t going anywhere. Yet. 

Host of the panel, Tim Tyler, kicked off the session by pointing out that cash not only remains king, but 90% of people receiving social grants withdraw it in its entirety as soon as they receive it. He also went on to contextualise that while most South Africans have a bank account, the use of cash is in fact growing by about 6 to 10% every year. 

He was, however, quick to point out that cash comes with some very real downsides, not least of all the cost to consumers to access it. A slightly dated but oft-quoted Mastercard study estimated that cash costs South African consumers around R23 billion a year, with low income consumers carrying the highest costs, forfeiting around four percent of their monthly income to access the currency. 

After this grim scene setter, Tyler went on to ask whether the SARB’s Vision 2025 has gone far enough to genuinely elicit a move towards better digital adoption and whether this was, in fact, even a realistic goal. 

South African Reserve Bank’s Olaotse Matshane responded by saying that while there is no doubt that digital payments are growing (and quite rapidly), there is still a long way to go before we can even begin to imagine a cashless society in South Africa. This is especially the case considering the many benefits of cash, including that it is immediate, accepted everywhere, does not require a smartphone, and is trusted by all layers of society.   

Digital payments more accessible, but still underused 

Richard Ketley director at Genesis Analysis had a different spin on things, saying he believes the competitively priced technology (cell phones for the consumer and pin accepting devices for merchants) puts digital payment options into the hands of many more consumers. However, Lesego Mashigo of Finmark Trust, while acknowledging that affordability and accessibility is certainly responsible for growth in digital payments, countered his upbeat outlook by sharing results of her organisation’s research. 

According to Mashigo, MSMEs in South Africa not only often pay their employees in cash, but around 60% accept payments in cash and only around 18% have point of sale devices. She says these findings are indicative of the gap in terms of what the industry believes to be true and the reality of what is happening in our communities, particularly in disadvantaged communities. 

The conversation turned to industry developments which could impact the use of digital payments. 

While the local payments industry is still waiting for the Rapid Payment Programme (RPP), little is known in terms of pricing and Ketley says it is competitive pricing that could hold the key to shifting our reliance on cash into digital adoption. He suggested that if the RPP makes it cheaper for people to transact digitally than it is currently, we could see a more radical change in behaviour.  

The power still in the hands of the consumer

Looking at how policy could inform a behavioural shift, Tyler turned to Matshane for more insight from the regulator. 

She reminded viewers that policy makers should be looking to create a monetary framework that is inclusive, fair, resilient and respectful of the privacy of individuals. Creating a level playing field was a big concern of the SARB and Matshane again said that they would ensure that protecting consumer choice would remain the biggest priority and that the regulator would never sanction consumers being forced into a cashless society when they were not ready, or had not chosen to adopt a digital payment lifestyle. 

While not contradicting the SARB view, Ketley added, as a closing remark, that as with all things, market changes are dictated by consumer changes and that when enough consumers ask for digital payment options, merchants will offer them. 

From a Semaphore perspective, the interesting question is how can payment providers educate and influence more consumers to ask for the change they would like to see? 

Work we have done with some of the payment providers in South Africa has shown us that there is potential to drive greater digital adoption by offering merchants valuable consumer insight from payment data attached to loyalty programmes. 

Consumers are also becoming more familiar with digital communication. And so as more people become comfortable with our big messaging platforms, giving them the ability to transact over trusted platforms will also drive more trust in digital. 

Finally, and most importantly, by educating merchants about the value they can derive from digital transactions, they will be more likely to try new digital payments. And so we see our own role – the provision of compelling B2B PR – as a necessary part of the journey towards a more inclusive digital financial economy.