How South Africans will make payments in 10 years
18 April 2019
The way people around the world pay for goods and services is constantly evolving, although it is not certain which route consumers will choose.
There has been a global migration away from cash to bank cards and mobile payments, although this has been slower in certain countries.
In South Africa, the acceptance of mass-market digital payments is expected to be slow compared to the rapid pace of innovation in more developed economies – but the evolution is inevitable nonetheless.
MyBroadband spoke to South African banks about what they think consumer payments will look like in 10 years and whether existing payment methods will still be around.
Nedbank card issuing and payments executive Chris Wood said there is a major trend towards digitisation in the payment space.
“The digitisation of payments is accelerating at an eye-watering pace, which, in all likelihood, means that the days of plastic cards may be numbered,” Wood said.
“But using this digitisation trend to justify a belief that credit cards, as such, will not be around for much longer is a somewhat misguided approach.”
He said the popularity of credit card payments is still rising due to the digital nature of its payments and its tangible connection to people’s money.
“The plastic card is the only long-term, physical representation that people have of their relationship with their money,” Wood said.
“Of course, this relationship that people have with their physical credit cards is steadily changing, particularly amongst younger consumers.”
He added that the speed at which the majority of young people have embraced contactless card payments is a good example of emerging customers feeling more at ease with digital payment methods.
“Ultimately, a fast-growing need for mobility and flexibility of payments will drive the evolution of credit payment transactions and lead to the eventual disappearance of plastic cards entirely,” Wood said. “When that day might come is, of course, anyone’s guess.”
“But irrespective of if, or when, plastic credit cards do become obsolete, the onus remains firmly on financial institutions to understand that the concept of credit cards has very little to do with the actual plastic card, and everything to do with the customer need for convenient, secure, and instant payment mechanisms.”
FNB Head of Digital Payments Jason Viljoen told MyBroadband that South Africa’s payment evolution is expected to continue following emerging global trends and best practice.
“Concerning physical purchases at point of sale, we see contactless card/mobile payments technology being prominent as both local and global adoption continues to accelerate,” Viljoen said.
“Contactless is currently the most convenient and frictionless point of sale payment technology backed by an interoperable global standard.”
“However, we also anticipate that the number of payment options available at point of sale will increase, providing customers with more choice,” he said.
Viljoen added that despite the costs and risks associated with cash, cash payments are expected to remain popular in South Africa for some time – although contactless and mobile payments have already started to displace cash in environments such as paid parking, vending, and markets.
“Whilst we are experiencing a continued migration towards digital banking and customers increasingly choose to interact with the bank via our world-class digital platforms, we recognise there will still be a need for a physical presence to adequately service our diverse customer base,” Viljoen concluded.
Absa RBB managing executive Cowyk Fox told MyBroadband that a shift away from cash is a trend which is not expected to slow down.
“Non-cash payment methods will proliferate in formats and popularity – cards, mobile, and contactless payments will become more convenient, secure, and more ubiquitous,” Fox said.
“However, we still envision a future in which card, cash, and EFT payments co-exist for physical purchases.”
“In South Africa, over the next three years the value of cash transactions is expected to grow by 7% per annum, card by 24%, and EFT by 13%. The card growth rate, together with SA’s card penetration currently at 75%, suggests that card will remain a compelling offering in the future.”
He noted that mass adoption of card-based contactless payments has already been reached in certain markets – such as the UK, where contactless has overtaken chip-and-PIN.
“In South Africa, card-based contactless payments are seeing sizeable growth within certain customer segments, but still significantly lag behind leading global markets,” Fox said. “Perceptions of security and customer education remain barriers to adoption.”
Although South Africa is still in the early phases of mobile payments adoption, Fox said that recent research from Deloitte indicates South Africans are beginning to warm to mobile commerce – with 56% willing to use mobile payments.
“Cash will definitely still be prevalent across South Africa for the foreseeable future. Importantly, in addition to the advancement of technology, as a society, we will need to undergo further structural change in order to fully embrace a cashless society.”