According to the report, the financial services sector in South Africa is undergoing an unprecedented transformation.
“Great progress has been made in increasing access to financial services in the country, with 80 percent of the adult population now banked – up from just 46 percent in 2004,” said Mark Elliot, division president of Mastercard Southern Africa.
This change is fuelled by rapid developments in digital technologies that are both disrupting and enabling change in the previously disconnected sector such as banking, telecommunications and retail.
The "Future of Payments in South Africa" report states that although there's great progress in digital payments, cash continues to be king.
The report highlighted that inhibitors to digitising the informal economy included not only inadequate data connectivity and high data costs, but also a lack of trust in cash alternatives and low levels of financial literacy.
To build a cashless future the report suggests four key interventions that include regulation, interoperability, infrastructure and financial education.
The Future of Payments in South Africa report also highlights data as an area that is seeing substantial growth where advanced analytics and artificial intelligence (AI) are being used to unlock actionable insights to deliver more personalised services to people and in the process better serve them.
“This also has the potential to benefit small businesses and informal cash-based enterprises, as advanced AI and data insights can unlock credit given that these tools help financial services providers better evaluate risk,” said Elliott.
The report notes that there's a continued trend of industry convergence with non-bank players entering the payments landscape.
Large retailers are launching their own payment services and credit cards, using customer data to offer products that meet customer needs.
At the same time, telecommunications companies are also looking to offer a range of financial products to their customer base and have had great success in targeting the unbanked segments in developing countries through mobile banking.
Additionally, fin-tech start-up companies are also entering the landscape with niched products that answer very specific customer needs with great success.
The report concludes by highlighting that in future there will be a convergence in the payments space, which will be further enabled by regulatory change inspired by European and the UK examples of open banking.