South Africa becoming a cashless society

Data from Discovery Bank and Visa shows that South Africa is becoming a cashless society with online spending and contactless payment jumping post-pandemic.

Discovery Bank and Visa conducted a study from 2019 to 2022 to analyse consumer spending habits, collecting data from over 20 billion transactions worth more than $750 billion.

One of the main focus areas was how South Africans spend their money.

How South Africans spend

From 2019 to 2022, South Africans reported an 85% increase in the use of credit and debit cards.

This has been driven by the shift to online spending during the Covid-19 pandemic and the subsequent return to stores post-pandemic.

Spending on eCommerce in South Africa is up 22% from 2019 levels. Hylton Kallner, CEO of Discovery Bank, described this as a “whiplash recovery”.

Online spending grew 13% in South Africa from 2019 to 2022, while nearly two-thirds of all transactions in South Africa are contactless.

This has led to a corresponding increase in the use of digital wallets, with over 50% of all transactions in South Africa using a digital wallet.

The size of digital wallet transactions has skyrocketed by 91% from 2019 levels. Kallner said spending increased by 8% on average after clients began using digital wallets on Discovery Bank’s platform.

What the new normal looks like in South Africa

Discovery Bank and Visa identified two trends: the sustained increase in online shopping and the rapid growth of contactless payments.

These behaviour changes were forced by the pandemic and subsequent lockdowns. However, they are continuing to accelerate in post-pandemic South Africa.

With online spending growing rapidly, consumer habits are changing.

The increase in online spending has been driven by 31 to 40-year-olds. This age group is 70% more likely to spend online than people 50 years and older.

Online shopping also happens earlier in the week, on a Monday, Tuesday, or Wednesday, compared to in-store shopping, which happens later in the week and on weekends.

While these trends are increasing, the developing world, including South Africa, is still behind developed countries when it comes to contactless spending.

In the Netherlands, 99% of all transactions are contactless while, in South Africa, only two-thirds of transactions are contactless.

When asked whether South Africa will become a cashless society, Kallner said that “we are not there yet”, as cash still makes up a high percentage of transactions in South Africa and Africa.

However, the trend indicates that South Africa will eventually become cashless, with transaction costs rapidly decreasing and the safety of such transactions increasing.

Ultimately, it will benefit South Africans and Africans to become increasingly cashless.

The South African Reserve Bank’s interventions, such as PayShap, will accelerate the transition to a cashless society, with payments increasingly made through mobile channels.