This is according to a new Mastercard and Deloitte Africa report “The future of payments in South Africa: Enabling financial inclusion and innovation in a converging world” released on the sidelines of the World Economic Forum on Africa.
The report states that if South Africa is to achieve meaningful financial inclusion, the private and public sectors will have to collaborate to reduce the reliance on cash and encourage the use of digital payment methods and financial services.
“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 Elliott, division president, Mastercard, Southern Africa.
Despite the increase, most consumer payments are made with cash. A key challenge is the lack of digital payment acceptance at small businesses and informal retailers, as well as deeply embedded behaviours and attitudes towards cash.
This in spite of the fact that cash is expensive and carries safety risks. A Mastercard study found that the cost of cash for consumers is R23 billion a year, or 0.52 percent of South Africa’s gross domestic product, with most of this cost borne by lower-income earners.
According to the report, digital technologies have disrupted traditional business such as banking, enabling new entrants such as telecommunications and retailers to play and shape the payments space.
“The convergence of these industries, enabled by technology, is already giving consumers access to a wealth of financial services, such as insurance and remittances, in a seamless and more affordable way. While digital technologies and new distribution models hold tremendous power to speed up South Africa’s journey to a cashless society, a greater focus is needed to deliver payment experiences that add real value to both small businesses and consumers,” said Elliott.
The area where this convergence is most notable is in telecommunications and banking. The combined strengths of financial and cellular services offer the opportunity to provide payments solutions, as well as increased customer utility among the large customer bases of mobile phone operators. This convergence trend is also extending into the retail sector, with retailers moving to offer digitally enabled financial services and social media-driven e-commerce.
It is evident that convergence in the payments space is inevitable and will become further influenced by regulatory change, if European and British examples of open banking are followed.
According to Martyn Davies, managing director: emerging markets and Africa, Deloitte Africa, the convergence across industry sectors requires new partnerships between companies. This presents a whole new layer of complexity to manage but also unrealised opportunities for new models to emerge.
“If the converging industry players can move towards greater interoperability and partnerships, the end result must be an increase in payments offerings and better financial services, which answer customer needs with greater effect. This, in turn, will have the benefit of improving the customer experience and increasing adoption and usage of digital payments and services, thereby reducing cash dependency. Ultimately, this will lead to increased financial inclusion and inclusive growth,” said Davies.
African News Agency (ANA)