While there may be a concerted drive towards digital and electronic payments, the truth is that cash still plays a dominant and valuable role in the South African economy, for both consumers and retailers. This is especially true in the informal sector, where cash is certainly king!
As the leading independent ATM deployer in South Africa, we are uniquely positioned to see the value-add that cash is giving millions of South Africans and the increased demand for cash. Month-on-month, we continue to see growth in transaction volumes and transaction amounts from our estate of over 4500 ATMs across South Africa.
A Health Check on Cash.
Cash usage continues to grow in the South African economy at a rate of 6-10% per annum ahead of inflation.
This growth in cash demand is driven largely by the taxi industry and informal trading in the country. Despite alternative payment mechanisms being introduced into the economy, there are several barriers to entry in the informal sector.
While this trend continues we will see a rise in the demand for cash and cash dispensing devices across South Africa for the foreseeable future.
A blended-payments landscape.
We are of the opinion that the South African economy and the retail sector can benefit from a healthy mix of both cash and digital payment options. Here is why.
- Digital payments exclude many of the country’s marginalized communities.
Anyone can use cash to transact particularly in a country where approximately 11 million people are unbanked. Cash certainly does not discriminate based on whether you own a smartphone, have access to a bank card or have an identity document for FICA.
- Cash is cheaper than digital transactions.
The costs associated with cash transactions are low and affordable, especially for retail merchants. The technology barrier of requiring a point-of-sale device, computer or smartphone to pay and be paid does not exist when transacting with cash.
- Cash is easy to use.
Cash allows anyone to participate and trade in the economy. Cash does not discriminate in any form. In fact, the use of cash allows for immediate financial inclusivity, which is the overarching goals of the South African Government and Treasury.
- Digital payments have privacy risks.
Cash affords consumers privacy and anonymity. One reason financial institutions and Fintech companies are so keen on digital transactions is that it gives them access to a treasure trove of consumer data, which is invaluable for use in ongoing marketing efforts. This practice may soon change with the POPIA Act.
- The risk associated with fraud and cyber-crime payments can be higher than the risk of cash loss.
According to SABRIC, the cost of digital, credit and debit card fraud in South Africa in 2019 was more than R1.35 billion. Cash losses were less than 20% of this value. Digital fraud and cybercrime scams target anyone who has a digital footprint and especially those with a monetary footprint.
Cash has spoken.
In a recently published study commissioned by SARB it was noted that 76% of South Africans preferred to withdraw their money from an ATM than cash back at till or money market counter. 70% of all social grants are received via an ATM.
According to SASSA 95% of beneficiaries prefer to withdraw cash to purchase goods and services as opposed to swiping their SASSA card. While cashless channels have an important role to fulfil in the promotion of financial inclusion, its equally important to protect and celebrate the vital role that cash plays in our economy. The cash withdrawal trends seen across the Spark ATM network supports this view that cash demand continues to grow in South Africa.