Kathleen Pretorius | Founder | Stanley House Agency | mail me |

In the heart of South Africa’s vibrant township economy, valued at an estimated R750 billion, a transformative shift is taking place. Small to medium-sized businesses are flourishing as the adoption of cashless transactions grows.

Despite the widespread availability of banking services, with eight out of ten South African adults having a bank account, cash remains the dominant form of payment. According to Statista, 73% of point-of-sale transactions are still conducted in cash, highlighting the need for a significant push towards digital payments.

The reliance on cash is particularly evident in the bustling township economy, where more than 1.8 million informal traders operate. This reliance on cash is driven by several factors, including the immediacy and ease of use that cash provides. Its inclusive nature allows everyone to participate in the economy irrespective of financial standing or status.

Benefits of transitioning to a cashless society

The benefits of transitioning to a cashless society are manifold. Digital payments can significantly enhance safety by reducing the risks associated with carrying and storing large amounts of cash.

Digital payments also offer greater convenience and efficiency, allowing for faster transactions and 24/7 accessibility. Moreover, digital payments can lead to substantial cost savings for businesses by lowering the operational expenses related to cash handling, such as storage, security, and transportation.

In addition to these benefits, digital transactions improve financial transparency and inclusion. Digital payment histories help informal businesses build credit profiles, making it easier for them to access loans and financial services. This, in turn, can drive economic growth by supporting local entrepreneurs and cultivating a safer, cashless society.

Steps to be taken when migrating to a cashless society

As we aim to migrate to a more cashless society, several steps need to be taken:

• Address cost and perception issues

Developing affordable digital payment solutions and launching education literacy campaigns can help dispel misconceptions about digital payments. Improving financial and digital literacy through training programs and community outreach is also essential to ensure that all segments of the population can benefit from digital payment systems.

• Enhance digital infrastructure

Expanding internet and mobile network coverage, especially in underserved areas, and modernising payment systems to support real-time, low-cost transactions will make digital payments more attractive and accessible. Building trust in digital payments is equally important. Ensuring robust security measures and promoting transparency in digital payment fees and processes can help build confidence among users.

• Regulatory support and incentives play a key role

Creating a supportive regulatory environment for digital payment adoption and providing incentives for businesses to adopt digital payment methods will encourage the transition to a cashless society. Finally, promoting collaboration between government, financial institutions, technology providers, and community organisations is essential for developing and implementing comprehensive digital payment solutions.

Despite the dominance of cash, the transition to digital payments is gaining momentum for small to micro businesses. Firms like Yoco, Shop2Shop, Flash and iKhokha are at the forefront of this revolution, providing the tools and technologies needed to pave the way for a safer, more efficient, and inclusive economic environment.

Specifically within the informal market Shop2Shop, Kazang and Flash are the three major players. Each of them offers customers a safer and more convenient way of doing business through card payment machines, reducing the need for consumers to travel in order to get cash.

Traditionally, people living in townships had to catch a taxi or a bus to the closest mall to withdraw cash. Now, thanks to the widespread availability of these card payment options at local community stores, residents can purchase goods directly from nearby shops. This not only supports small entrepreneurs but also saves customers money on transportation costs.

A notable boom in the informal economy

The convenience of cashless transactions has led to a notable boom in the informal economy. More and more people in townships and informal areas prefer to spend small amounts at local shops rather than withdraw large sums of cash. This trend, accelerated by the COVID-19 pandemic, has made shopping safer and more convenient, reducing the need to queue at malls and ATMs.

The success of cashless payments has also benefited South African banks like Capitec and TymeBank. As more customers use their bank cards for transactions, banks are reducing ATM costs and focusing on enhancing digital payment infrastructures. This shift supports the broader goal of financial inclusion, ensuring that all South Africans can participate in the digital economy.

Seemingly ahead of the curve in this cashless transformation is Shop2Shop, whose innovative solutions and agile methods are making a significant impact on small businesses in the informal economy. Their efforts highlight the potential for a broader transition to a cashless society, which additionally reduces the cost and risks of handling cash.

Although a fully cashless society is not necessarily the end goal, by taking these steps, South Africa can make significant strides towards creating more inclusive opportunities for small and micro businesses which are the lifeblood of the country’s economy. Furthermore it bridges the divide between the informal and formal market which stimulates economic growth within the country.

Related FAQs: Cashless payments

Q: What does it mean to move away from cash in South Africa?

A: Moving away from cash in South Africa refers to the shift towards cashless payment methods, where transactions are conducted using digital currencies, debit cards, credit cards and other electronic payment solutions instead of physical cash.

Q: How does the shift towards a cashless society impact small businesses?

A: The shift towards a cashless society can empower small businesses by allowing them to accept digital payments, which can streamline transactions and expand their customer base. Digital payment methods can also reduce the risks and costs associated with handling physical cash.

Q: What are some benefits of digital payment methods for consumers?

A: Digital payment methods offer several benefits for consumers, including convenience, enhanced security and quicker transactions. With options like mobile wallets and contactless payments, consumers can easily buy goods and services without relying on cash.

Q: What role do digital currencies play in the move towards a cashless world?

A: Digital currencies play a crucial role in the move towards a cashless world by offering a secure and efficient means of exchange. They enable users to conduct transactions without the need for physical cash and can facilitate cross-border payments more easily.

Q: By what year is South Africa aiming to shift towards a cashless society?

A: South Africa is aiming to shift towards a cashless society by 2030, which includes increasing the adoption of digital wallets, contactless payments and other non-cash financial solutions.

Q: How can individuals prepare for a cashless future?

A: Individuals can prepare for a cashless future by setting up digital wallets, familiarising themselves with various payment apps like Apple Pay and ensuring they have access to debit and credit cards. Understanding the benefits and security measures of digital payments is also essential.

Q: What challenges might arise during the transition to a cashless economy?

A: Challenges during the transition to a cashless economy may include ensuring cybersecurity, addressing the digital divide among populations and overcoming resistance from those who rely on cash for their daily transactions. Education and access to technology will be key in addressing these challenges.

Q: How do contactless payments work in a cashless system?

A: Contactless payments work by using RFID or NFC technology to allow consumers to make transactions quickly by tapping their debit or credit cards, or mobile wallets on a compatible terminal. This method enhances convenience and speeds up the payment process.

Q: Are there risks associated with adopting cashless payment methods?

A: Yes, while cashless payment methods offer benefits, they also come with risks such as cybersecurity threats, potential data breaches and issues related to privacy. Users should take precautions to protect their financial information and choose secure payment platforms.