Cash still king, but e-payment methods proliferate

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A FEW years ago paying for something meant physically taking your money out of your pocket and giving it to another person for a service or goods. Today, it often means click this or tap that and the transaction is through.

However, according to the managing director of Cash Connect, Richard Phillips, consumers still favour cash as the primary means of payment, with some 84 percent of payment transactions worldwide continuing to be made in cash.

He said cash in circulation locally topped R119 billion last year. This was despite the fact that at the end of 2013 the number of smartphones in use in South Africa was 16 million, equal to almost a third of the country’s population. According to Arthur Goldstuck, an internet and mobile communications expert, the number is expected to increase by at least 2 million this year.

All these figures have got banks and information technology companies jumping and grabbing business opportunities to turn the world into a “cashless” society.

Absa has introduced a “payment pebble”, which allows tradespeople and entrepreneurs, ranging from plumbers, electricians and handymen to small store owners, to accept debit and credit payments anywhere and at any time. This is as simple as having a small plug-in device that turns most smartphones into mobile card machines. This short-circuits the need for fixed premises and internet connectivity. It also cuts time spent in bank queues and eliminates the risk of handling cash for both the customer and the merchant.

Another innovation is the use of near field communication (NFC), which allows customers to simply tap their smartphones or a preloaded card against a credit reading device or a tag that is NFC-enabled to make a payment.

Consumers are already using internet or hand-held paying devices to make payments. With a smartphone in their hands they may never have to carry cash again.

But they may need to invest in a good memory for all those PIN numbers.

Financial wellness

The household financial wellness of South Africans deteriorated for a second consecutive year last year, exposing families to further financial instability.

The Momentum/Unisa household wellness index shows that the level of financial well-being in households declined to 64.06 points in 2013 from 64.77 in 2012. In 2011, households recorded a score of 65.24 points.

Momentum said the majority of households were showing signs of drifting. This implied that although a household’s financial situation was not unwell, it was not stable, which meant the household had a high risk of becoming financially unwell. For example, households that seem to be doing well under the current economic and social climate declined to 21.8 percent last year, from 26.4 percent in 2012.

Other research by credit bureau TransUnion showed the credit health of over-burdened consumers deteriorated in the second quarter. More bad news is that this is expected to worsen amid rising rates, high inflation and a weak economic outlook.

The macroeconomic environment does not support the wellness of households when one looks at things like economic growth, which slowed to 1.9 percent last year from 2.5 in 2012, together with inflation, which has breached 6 percent, and high levels of unemployment.

The Momentum index said households possessed five types of capital: physical capital or money; asset capital; human capital, such as education status; environmental capital, represented by housing status; and social capital. The index noted an overall state of physical, social and asset capital decline, while human capital and environmental capital improved.

It said households earning less than R160 893 a year were most threatened by interest rate increases as their debt to income ratio exceeded 150 percent.

Edited by Banele Ginindza. Contributions from Nompumelelo Magwaza.


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