Advertise with fastmoving.co.za
 
 

Accelerating the pace of migration from cash to digital and card payments must be a priority for catalysing economic growth.
Accelerating the pace of migration from cash to digital and card payments must be a priority for catalysing economic growth.

Driving mobile and card acceptance among informal retailers holds the key to scaling cashless payments in SA

MARKETING NEWS

By Mark Elliott, Division President of Mastercard Southern Africa - Dec 5th 2018, 09:57

Despite the majority (77 percent) of adult South Africans owning bank accounts, more than half of the total value of all consumer transactions in the country are still conducted in cash. This suggests that being formally banked may not be enough of an incentive for consumers to move away from cash. Accelerating the pace of migration from cash to digital and card payments must be a priority for catalysing economic growth.  

As long as people are trapped in a cash economy, they are locked out of many economic opportunities in the financial mainstream. These consumers represent some of South Africa’s most financially vulnerable people, and yet they are disproportionately exposed to the risks and costs of cash, including high transaction fees, the risk of theft, and the inconvenience of transporting and handling physical money.

Addressing this challenge will take a concerted effort from payments companies, telcos, merchants, banks, governments, regulators, fintech companies and other stakeholders. Over the past few years, we have seen a range of compelling digital payments solutions coming to market – including simple mobile payments – yet many of those initiatives lack the scale to make a real difference.

More cashless payments for the informal sector
We believe the really exciting opportunity lies at the intersection between the informal small and micro-businesses that form the backbone of our economy and the tech-savvy youth. The small business and informal sector accounts for turnover of around R75 billion annually in South Africa alone, which we cannot ignore if the goal is to increase the number of cashless transactions.

Consumers, particularly those who have grown up with mobile phones, are eager to pay using digital channels. In South Africa, 73 percent of banked consumers are ready to pay with their mobile phones, according to the Mastercard Impact of Innovation study. Yet many of the places where people live and work – the spaza store, the hair salon on the corner, the neighbourhood tavern – are not enabled for acceptance of mobile and card payments.

Mastercard research shows that around 90 percent of South Africa’s informal enterprises run as cash-only businesses, even though 51 percent report they have encountered strong customer interest in paying by card. The few that have introduced card and digital payments have reaped the rewards. Merchants that introduced card acceptance reported an average increase in turnover of 50 percent, and those that introduced mobile payment acceptance via Quick Response (QR) codes saw their revenues climb by 10 percent.

Overcoming barriers to adoption
What then are the barriers to adoption of these solutions? Even though many informal enterprises see the ability to accept card payments as a step to increasing revenue, lack of access to formal banking tools and understanding of available payment options limits their opportunity for growth. These businesses also cite the perceived cost of accepting mobile and digital payments as barriers to acceptance, with many unaware of low-cost alternatives to traditional point of sale solutions.

To change this picture, payments companies should help merchants take advantage of high mobile penetration rates by offering them simple solutions to accept mobile-friendly card and digital payments.

Mastercard offers simple solutions designed to help small businesses and entrepreneurs accept digital payments through technologies like Masterpass and in partnership with innovators like iKhokha and Spazapp. Such solutions remove cost and complexity barriers from payments acceptance, including high monthly rentals and transaction costs, and the need for dedicated card payment terminals. All any merchant needs to accept and process payments is a low-cost terminal or an Android or iOS device.

We have also identified the need to educate consumers and merchants about the true cost and danger of cash to join the dots between small merchants and customers who are eager to pay using their mobile devices or cards. However, no single player, sector or government can solve these challenges on its own.

A key element of our strategy is to work closely with fintech innovators and financial services companies to introduce affordable payment and financial inclusion solutions for merchants and consumers that can solve their everyday challenges. We must build bridges between all major mobile and digital payments services in the market to deliver the seamless, on-demand experience consumers expect at every payment point. It is only through collaboration that we can deliver scalable, secure, interoperable and convenient payment systems that will bring us closer to a cashless world.

Bridging the divide between South Africa’s cash-based economy and the digital future will demand a combination of local know-how with global scale, insights and best practices. We have a rare and urgent opportunity to use today’s mobile technology to leapfrog old payment practices, in much the same way as the continent leapfrogged fixed-line infrastructure and went straight to mobile.


 

Related News

Woolworths carves out market share in SA
27/11/2019 - 10:11
In Australia, David Jones's sales declined 2.1%, with the company saying a store refurbishment contributed to the decline.

Push and pull strategies work together to keep consumers coming back for more
26/11/2019 - 10:20
The retail sector is under increasing pressure as consumers have shrinking disposable income in a strained economy. Maintaining share of wallet is critical. Relying solely on a push route to market strategy from manufacturers into retailers is not enough to get consumers buying products. A pull strategy needs to coexist with the push to drive brand consumption. Integrating these strategies requires intelligent and insightful decision-making. This, in turn, requires data generated through smart technology which provides line of sight across the value chain from manufacturer to distribution, retailer to the consumer.

Today’s customers are loyal to speed and convenience, not brands
25/11/2019 - 11:15
Consumer expectations are rapidly shifting as technologies such as mobile, geolocation, social media and increasingly, Internet of Things devices and wearables, connect people to a world of easily accessible information and convenient services. With the ability to browse, compare and order with a few swipes and taps, consumers are becoming trained to value convenience and service above nearly anything else.

Gearing FMCG manufacturing for the red season spike and maximising profits all year round
25/11/2019 - 11:03
As we enter the festive season, demand for Fast-Moving Consumer Goods (FMCG) increases rapidly, often leaving manufacturers scrambling to fulfill orders from their distribution channel. If demand cannot be met, then loss of revenue is inevitable. However, over-production is not an ideal solution either, as it can leave manufacturers sitting with unsold stock that costs money to store.

Black Friday not necessarily a “black & white” decision for small business growth
25/11/2019 - 10:52
Black Friday, once only a North American marketing frenzy, has become a critical entry in the calendars of South African retail business owners.