New digital payment trends are ushering in the dawn of a cashless future – and a more inclusive financial landscape
South African e-commerce saw unprecedented advancement last year, outpacing all estimates with a growth spurt of 66%, according to a study by tech research giant World Wide Worx. And, with that, payment technology grew in leaps and bounds, says Andrew Springate, CEO of tech and financial gateway service provider PAYM8. “South Africans resisted digital payments in the past because the existing system was so well-entrenched – familiarity, after all, breeds trust. But the pandemic meant more people stayed home and avoided physical retail spaces. Necessity prevailed and they embraced e-commerce, becoming more comfortable with digital payments and financial services.”
And things will never be the same again. “The acceptance of digital transactions will be a permanent shift after the pandemic – it’s safer, contactless and more convenient. We’ve seen mainstream institutions and traditional banks accelerating their digital offering, and the race is on to push forward with innovation.”
Payment trends to come
While cash is still the preferred payment method for the majority of South Africans, digital payments are booming, says Springate. “With the increase in online sales, we’re seeing greater uptake of mobile, QR and contactless payments as well as pre-authorised debit order payments (known as DebiCheck, where debit orders must be authorised by the debtor before processing). We’re inching our way towards a cashless economy – PwC’s Payments 2025 & Beyond report, published this year, says global cashless payment volumes are set to almost double from 2020 to 2025, and triple by 2030.”
The use of social media as a carrier for mobile payment transactions will be especially popular in South Africa, where WhatsApp dominates as the most popular app with 23 million users, according to the latest Statista estimates.
Next year will also likely see the launch of South Africa’s Rapid Payment Programme (RPP), which will allow people to make real-time bank account-to-account payments using an identifier like a cell phone number or email address, without having to wait for the funds to clear.
“Though the pandemic accelerated the digital shift, other reasons will give it staying power in the local landscape. Digital’s contactless nature allows for faster payments and reduced queues – with zero pin exposure or cash-related security risk at checkout. QR code accuracy is also vastly improving.
“When it comes to DebiCheck, consumers were in near-uproar that banks, the custodians of their money, weren’t participating in securing debit orders when abuse of the EFT ecosystem has been such a significant concern in South Africa. DebiCheck preauthorisation will soon be the norm.
“Lastly, but by no means least significant, the ability of messaging platforms like WhatsApp to offer in-app purchasing is making the buying process seamless, with customers no longer requiring a re-direct to a web site to complete a payment,” explains Springate.
Towards an inclusive future
Fintech companies are setting the trends in the race to the digital, cashless future. “Non-bank payment providers are often able to adapt faster to specific customer needs rather than trying to be everything to everyone as banks tend to do,” says Springate. PAYM8, for example, is leading the race in DebiCheck implementation, Enhanced Debit Orders (EnDO), and WhatsApp payments. “DebiCheck will completely replace EDO (AEDO & NAEDO) from 1 November 2021, causing a significant change in the payments collections industry.”
Still, there will likely be some challenges along the way, he adds. “There will be early adopter challenges, while trust in new payment channels is not a given and has to be earned. None of these new solutions will be without regulatory involvement either, with the majority driven by the South African Reserve Bank and Payments Industry Management Body.”
Of course, regulation is essential, and will drive vaster change among South Africa’s diverse population and rural/urban landscape. “Including the unbanked or underbanked and increasing competition amongst financial services providers will be critical to the economic growth the country needs. This financial inclusion will be driven by mobile devices and access to affordable, convenient payment mechanisms, according to the PwC report, with mobile leading the way in the cashless transformation.
“Though any change comes with its challenges, the drive towards a cashless future will form part of the road to inclusivity – and a more equal country.”