Pandemic accelerates demand for low-touch, contactless payments
CAPE TOWN - The Covid-19 pandemic has sharply accelerated the move away from buying with cash as customers increasingly demand low-touch or contactless payments, according to new research from Yoco, a financial platform for small businesses.
The survey of 4 386 small business owners, sampled from Yoco’s customer base, investigated how many businesses had elected to go cashless by implementing digital payments such as card machines, online payments, QR codes and electronic fund transfers.
Only 8 percent of the respondents did not accept cash payments at their businesses before March. However, by June, that number grew to 32 percent – a seismic shift that represented a 300 percent increase in businesses going cashless.
“Covid-19 has made people think twice about close contact situations and consumers are avoiding anything that unnecessarily increases touching or contact,” Yoco co-founder and chief business officer Carl Wazen said in a statement. This was in spite of the fact that there was as yet no definitive evidence that handling cash could transmit virus pathogens, he said.
He said that a surge in cashless payments of this size and in such a short space of time was unheard of for an emerging market such as South Africa.
This was even though there had been consistent growth in the adoption of electronic payment methods, as evidenced by Yoco’s growth to about 100 000 customers currently from 50 000 in September last year.
The food, drink and hospitality sector experienced the biggest increase – a 500 percent rise from 3 to 19 percent, with most other sectors reporting a 300 to 500 percent increases in cashless payment acceptance.
Wazen said it remained to be seen whether the cashless payment adoption trend would endure beyond the pandemic, or whether businesses would revert to the use of cash once their customers felt it is safe to do so.
Of the businesses which made the change during the lockdown, 65 percent indicated that they would remain cashless because of the convenience and benefits of electronic and digital payments.
“That would mean a post-Covid cashless rate of 20 to 24 percent, rather than 32 percent during the pandemic, which is nevertheless a (steep) rise from the pre-pandemic level of 8 percent,” he said,
Research showed handling of cash costs small businesses between 5 percent and 15 percent, on average, in the form of time, resources, security, and transaction and deposit fees.
Apart from safer transactions, the digital footprint created by digital and card transactions created access to funding, credit, and other financial services. Many small businesses struggle to secure loans as they lack the verified historical data to do so.