Going cashless – how South African businesses are embracing change
By Katlego Maphai
JOHANNESBURG - It seems not too long ago that we ignited the Yoco mission to make card payments in South Africa accessible to all and not just a few.
We saw the immense market potential in the underserved, untapped and underbanked small business community. If you had asked me in January of this year, how many of those businesses would be entirely cashless by now, my reply would have been single digit percentages.
Covid-19 changed all that. In a few short months, small business owners climbed through the ranks of contactless, online, and mobile payments. When faced with an increasingly cautious consumer base and operating within challenging constraints for doing so, many entrepreneurs opted for radical transformation rather than holding tight to what they knew.
It was in this context that we decided to conduct a cashless study at Yoco. The goal was to dig deeper into a seemingly overnight transition into a society less reliant on cash.
The study surveyed 4 386 merchants from Yoco’s base. It investigated specifically how many businesses had opted to ‘go cashless’ by implementing digital payments such as card, online payment links, QR codes, and EFT, and rejecting physical cash in the form of notes and coins.
Of those surveyed, only 8 percent were cashless prior to the pandemic, much as we expected but in June 2020, that number rose to 32 percent. Effectively, this placed our sample group of South African merchants on par with the cashless behaviour of business owners in more developed nations like the US.
It’s difficult to understate how seismic a shift this is, or how remarkable it is that small business owners made this level of change under immense pressure.
Cash versus Card
According to a recent Euromonitor report on cards and payments in South Africa, cash still dominates the local market, accounting for 60 percentof all payments. However, this figure is closer to 80 percent for small businesses and the informal sector.
Despite there being 130 million cards in circulation in South Africa, card transactions account for just 37 percent of all consumer payments. Holding those numbers in mind gives you an idea of how much of the economy is excluded when we talk about the ability to ‘go online’ or use e-commerce as a means to weather the Coronavirus storm.
But make no mistake, a move away from cash is what small businesses owners require to respond to this pressing consumer need. The response leads to faster growth, sustainability and additional resilience..
The Cashless study found that of the businesses who had opted to go cashless, 65 percent expected to remain that way even once the threat of the pandemic had subsided.
For those businesses, this means a greater formalised sales history and digital footprint that they can actively use to gain access to additional financial products and services like credit and funding. It means that those businesses are able to deliver faster, safer customer experiences and set themselves apart from their peers. And of course, it means that a vast number of previously cash transactions are brought into the formal economy which has benefits for all when it comes to the long term recovery from the pandemic.
South African business owners operate within a very particular business environment with obstacles that are the direct consequence of how unequal a society we live in. It is critical that we close the financial inclusion gap and broaden access to electronic payments for all. It is a key component to rebuilding the economy following the Covid-19 crisis.
To go cashless or die trying?
Going cashless is a daunting prospect for small business owners especially now that consumers are demanding to pay electronically. Fortunately, small business owners now have options to affordably accept electronic payments and the benefits for both merchant and consumer are manyfold. However, there's still a lot of work to be done on a national level to educate and enable access.
And that education must begin with small business owners. Rapid transformation will be detrimental without adequate infrastructure and learning. And small business owners do not have the prerequisite room to absorb more loss right now. So, my advice to you is to respond nimbly to the needs of your customers but think carefully about the impact of change on the needs and interests of you, your business, and your staff.
Going cashless will be meaningless if you fail to prepare your business and community for the change. ‘Accessibility’ after all is not just about the card machine in your hand, it’s about the people on either side of that transaction and what is best for them.
Katlego Maphai is the co-founder and chief executive of Yoco, a financial platform for small businesses. The Yoco Small Business Recovery Monitor in partnership with IOL is a live small business transaction data resource. The index is updated daily with the latest information from over 80 000 Yoco merchants, relating to their turnover by province and industry.