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Can South Africa Go Cashless?

By March 11, 2022Articles

South Africa’s economy has been strongly cash-reliant for, well, basically forever. With close to one-quarter of the adult population having no bank account at all, and a robust and thriving informal work and business sector, South Africans are used to the idea of carrying cash. Even those with bank accounts and credit or debit cards will often carry cash. We know that there are vendors and service providers – taxis for example – who don’t take cards, we need to make sure we have some change for the car guards, we pay casual workers in cash – even some restaurant delivery services allow for cash on delivery. 

In recent years, many of the major banks have made a concerted effort to sign up the unbanked by offering easy-access bank accounts, accounts for community stokvels and more. Those with bank accounts can do a cash send to those without one. But nevertheless, with a whopping nine out of every ten transactions being cash-based, cash is king in SA – but that’s all set to change.

BankservAfrica recently announced that it is working on a Rapid Payments Programme, which will enable South Africans to easily pay vendors and individuals, even those without bank accounts, by simply using their cell phones and whichever app is convenient. This programme aims to simplify payments and move people away from using hard cash, instead using anything from Facebook to WhatsApp, or any number of new fintech applications, to make payments. 

Users won’t be hampered from making smaller payments for fear of paying comparatively massive transaction fees. Payments will be instantaneous, making it easy to access immediate payment for goods and services without cash or cards. Even larger transactions won’t require logging onto banking platforms to add beneficiaries. Just a simple phone number will be enough to send and receive money using a FinTech wallet or whichever app is convenient.

But what does this mean for businesses that are used to transacting digitally? What effect will this have on debit order-based payments and EFTs? Will it complicate things, or will it simplify them? BankservAfrica’s CEO, Jan Pilbauer, believes it will be the latter, saying that even corporate businesses that transact exclusively in the digital space will be able to make use of the new services that are coming.

While paying by EFT and debit order is unlikely to become a thing of the past in the near future, this type of transaction will rather open up new avenues of digital payment for these businesses, offering new options. For example, instead of sending a debit order request to the payer’s bank account, businesses will be able to send a payment request directly to their phone, and the payer won’t have to log into their banking to make this payment. Businesses won’t even necessarily need customer bank information; all they will need is a phone number to request payment.

This is an exciting development in South Africa’s economy, as it will offer people increased security over their money, more convenience in terms of making and receiving payments, and a wider scope for transacting. Whether it will ever fully eliminate cash in our economy remains to be seen, but we believe it will have a significant impact on how people transact. 

How does this change the way that companies like Three Peaks offer services, and how will it affect our clients? For the time being, not much at all. This programme is set to launch later in 2022, and will initially be run on a pilot basis, ironing out kinks and developing the best ways to empower transactions in a cash economy. These kinds of payments are more likely to affect small transactions at first – paying your taxi fare, buying a few small items from an informal vendor, paying individuals.

In the future, however, this shift in the banking arena will be something we and our clients need to address and incorporate into our business. It opens up whole new avenues for payment collection, while at the same time requiring a more intricate payment request process that incorporates debit orders, cash requests and other FinTech developments that offer customers convenience and security while transacting.

Following our recent integration with Xero, Three Peaks is set to embrace any new developments in the digital banking and transaction space. We are closely watching these developments to evaluate which methods, apps and platforms will be best suited to helping our clients take advantage of the digitisation of money in South Africa. 

Need help streamlining your payments process? Get in touch with Three Peaks today.