Cash is here to stay


Cash is here to stay

We are constantly asked the question whether cash use is on the decline, as it is such an old school payment mechanism especially in a world with ever-changing and new digital payment platforms emerging.

The answer to the question must be analysed across several factors including:

  • The numbers
  • The landscape
  • It works

The Numbers:Cash is here to stay

Cash is holding steady at around 85% of all transactions by volume in South Africa. This figured has hardly deviated over the last 15 years.

This means that alternate payment mechanisms are jostling for position in the remaining 15%. A good example of this is where a mobile phone app allows you to load your credit card details into the app and then you use your phone for the payment. In this scenario, the phone has replaced the card and explains the steadiness of the 85% reliance on cash in South Africa.

The Landscape:

Despite a huge surge in recent years by the banks to reach the unbanked in South Africa, 55% of the population above 18 years old remain without a bank account. This means that 55% of the population rely on cash as a means of payment to live and survive.

A recent study showed that of the banked population, only 24% perform more than 3 transactions per month other than a cash withdrawal. This points to low adoption of alternate payment mechanisms by the banked population and again a further reliance on cash.

The taxi industry and informal trade sector are also contributing factors that point to the longevity of cash in South Africa. Withdrawal patterns of social grant recipients show that the full grant is either received in cash or the full amount is withdrawn and used in cash.

It Works:

Cash has several advantages over alternate payment mechanisms which include:

  • Cash is the only legal tender which mean that virtually no merchant or trader will decline a cash payment.
  • Cash allows for commerce to the unbanked population.
  • Cash guarantees the user privacy and anonymity without leaving a digital footprint.
  • Cash is a tangible asset which allows for better control for those battling to manage a budget.
  • Cash payments are not reliant on communications networks or electrical connections in order to work.

Conclusion:

Based on all the evidence before us it certainly seems that cash will remain an important payment platform in South Africa for the long foreseeable future.