Cash is king in South Africa

While trends point to a sharp rise in digital transactions in South Africa, cash remains a crucial part of the local economy, and its use has not decreased over the past decade. 

Much of the rise in digital transactions has been from wealthier South Africans and businesses, with the lower-income majority still mainly dealing in hard currency. 

This has long been identified as an issue for the Reserve Bank, which has identified a lack of trust in banks and fees associated with card transactions as significant hurdles to adopting cashless alternatives. 

What compounds this is merchants’ lack of acceptance of cards in the informal economy, resulting in large amounts of cash still circulating in South Africa. This poses a big security threat.

While the global trend is moving towards digital transactions, cash remains an integral part of South Africa’s economy, said Nthabiseng Mohale, Interbank and Regulatory Forums manager at Standard Bank’s CIB division. 

The latest data from the Reserve Bank shows that cash circulation has remained steady since 2009, with R171 billion still in circulation in 2023. 

Mohale said this data is a strong indicator that, despite the ongoing push for digital payments, cash remains deeply embedded in the country’s consumer psyche. 

Reserve Bank data shows that nearly half of all adults withdraw all their money as soon as it is deposited in their accounts. This results in most payments in South Africa being conducted using physical banknotes.

Despite the persistence of cash, the notion of a cashless society may seem inevitable, given the rising adoption of digital payment methods. 

Digital payments in South Africa—boosted by innovations such as PayShap—have seen a notable uptick, with card payments increasing by 7% since 2023. 

The convenience of these digital options presents a clear value proposition to retailers and consumers alike, especially with the associated savings in the cost of cash handling and processing.

Cash is still dominant 

However, despite PayShap’s strong growth, wealthier individuals and businesses have largely driven the growth of digital transactions. 

Cash still holds significant sway in South Africa, in particular among lower-income individuals and the informal economy. 

Consumers in South Africa remain hesitant to fully transition to cashless solutions, citing concerns around control, trust, and safety. 

Mohale said that for many, cash represents a tangible, familiar method of managing their finances—one where they have direct control over how much they spend.  

This control is particularly important when individuals are wary of hidden fees or unauthorised debit orders. 

Cash is also perceived as a safeguard against unforeseen financial burdens and future obligations, as the transaction is instantaneous. 

This trust issue extends beyond the individual consumer, with many distrusting companies and debit orders. 

A history of challenges with debit order abuse in South Africa and unresolved issues with unauthorised charges has left many cautious about adopting digital payments. 

For instance, the lingering legacy of bounced debit orders and subsequent fees imposed by banks has heightened fears about the safety and transparency of digital transactions. 

Such concerns must be addressed through stronger consumer protection measures, clearer regulations, and enhanced communication between banks and customers.

Despite these challenges, going cashless promises immense benefits, including greater efficiency, safety, and economic activity. 

Mohale said the shift will likely gain momentum once consumers experience the tangible benefits of digital payments, such as reduced transaction times and lower costs.  

Digital transactions, with modern technology, can be processed almost instantaneously with no need for physical handling. 

As the system becomes more integrated and the cost of digital payments decreases, there is a clear opportunity for more people to shift away from cash use and towards digital transactions.

This shift holds particular opportunities for small businesses, including those in the informal economy. 

For example, small traders such as those operating spaza shops, who often rely on cash for day-to-day transactions, can benefit immensely from immediate digital payments. 

If payments are made instantly via mobile or digital wallets, businesses can immediately restock their inventories through online ordering, significantly improving their working capital cycle. 

This increased efficiency can also help small businesses build up a credit history, unlocking access to a wider range of financial services.