South Africans kiss cash goodbye
South Africans are rapidly dumping cash as a method of conducting everyday transactions, and digital payment channels are growing rapidly as banks pour billions into enhancing their virtual offerings.
Cash is still dominant in South Africa, with nearly half of all adults withdrawing all their money as soon as it is deposited in their accounts.
This results in the majority of payments in South Africa being conducted using physical banknotes.
However, this trend is beginning to change, with FNB being the latest major bank to indicate that South Africans are increasingly using digital channels to make everyday payments.
Data from its 8.6 million clients shows that the use of cash for everyday transactions has declined by 87% over the past three years.
The value of transactions using the bank’s digital payment solutions grew 360% in the same period, from R16.8 billion to R77 billion.
FNB’s core banking and merchant services CEO, Daniel Kaan, said this shows that its digital offering is out-competing cash.
“A significant number of transactions across our segments are now digital – largely driven by contactless payments,” Kaan said.
“For example, in the Personal Segment, which is predominantly cash-reliant, almost 90% of transactions are now digital.”
Kaan also explained that industry-wide efforts to reduce the use of cash in the South African economy are bearing fruit.
Since the launch of PayShap, FNB clients have made over R2 billion worth of payments using the platform.
Standard Bank also recently highlighted PayShap’s strong growth, with transactions increasing by 817% year over year.
Since its launch in March 2023, the broader payments industry has processed over 74.2 million PayShap transactions worth a combined R46 billion.
Standard Bank has also seen a sharp rise in the use of contactless payment methods and digital wallets. Over half of the bank’s clients tap their cards or phones at supermarkets, restaurants, and fuel stations.
These payment methods now account for 53% of all bank client transactions, up from 42% just two years ago.

Reserve Bank Governor Lesetja Kganyago said South Africans are over-reliant on physical cash and should transition to safer payment methods.
Kganyago said the Reserve Bank has a target to reduce the use of cash in the local economy by modernising the national payment system and educating people on the benefits of digital payments.
The Reserve Bank’s Digital Payments Roadmap showed that almost half of South African adults withdraw all their money from their bank accounts as soon as it is deposited.
Reasons for this include a lack of trust in banks, fees associated with card transactions, and a lack of acceptance of cards by merchants in the informal economy.
The bank also revealed that there has been little to no growth in the demand for banknotes and coins, which fell by 0.8% in 2023.
Historically, cash growth followed economic growth, but this trend has been broken in the wake of the Covid-19 pandemic.
The informal market, still largely seen as a cash-dependent part of the economy, is gradually shifting towards digital payment methods.
South Africa’s formal financial sector seeks to capture the increasing value available from the billions of rands spent in the informal market.
To do this, many banks are spending millions to encourage individuals in the informal market to use digital payment methods by shifting their perceptions of cash use.
Many participants in this sector prefer cash for its ease and trustworthiness. Some also prefer the immediacy of cash payments.

Research from Trade Intelligence indicates that the use of cash in the informal market will decline as fintechs move into this sector.
Trade Intelligence’s Kerry Elliot said technology has been the largest driver of positive change in the informal retail market of late, promising to create billions in value for companies.
Elliot explained that digital adoption is increasing across all areas of the informal economy, from the supply of stock, to marketing, eCommerce, and payment systems.
As an example, Shoprite now facilitates online ordering and delivery from its cash and carry stores to supply spaza shops with stock.
Spar has also enabled delivery in townships with third-party providers, such as Delivery KA Speed and KasiD.
Trade Intelligence’s data shows that 26% of spaza shoppers order via online platforms, with WhatsApp being the dominant platform, followed by Uber Eats.
Aside from retailers, payment providers have shown particularly strong growth, and online channels are becoming increasingly popular.
There is the proliferation of fintech companies offering cheaper merchant services with often free point-of-sale devices.
This has coincided with growing demand for digital payment methods in the more formalised portions of the township economy including larger cash and carries, independent wholesalers and superettes.
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