Money is good to have, but not necessarily in your wallet or pocket. Steadily, the adoption of digital forms of payment has changed the mindset from always having a bit of cash to pay for small expenses to one of ‘it’s easier to tap than visit a cash machine from time to time’.
Banks confirm that customers prefer digital options, with a growing number of businesses not accepting cash at all.
Cash is dirty and expensive to move around. Big bags of cash attract robbers with AK-47s, and smaller amounts attract petty criminals. It can also get lost or stolen, and it is just too easy to squander.
FNB
Christelle Pretorius, CEO of Personal Core Banking at FNB, says the bank has seen a significant migration from cash and more traditional payment methods to digital payments across both its retail and commercial customers over the last few years.
“The largest movements have been from cash and traditional card swiping or inserting to contactless and real-time payments.
“The value of cash withdrawn has been on a downward trend for the past five years. Over the past 12 months, our retail customers are withdrawing on average 6.8% less than they were in 2021, and a similar trend is seen for our commercial customers,” says Pretorius.
She notes that the decrease in the use of cash is significantly more than the nearly 7% quoted when taking inflation into account and that customers have shifted this cash spend to card and real-time payments.
“Over the same period, we have seen a 37% increase in the number of customers using real-time payments … and a 47% increase in the value of real-time payments. In part, this was made possible with the release of new solutions driving costs down for customers.
“From a card perspective, three years ago, more than 60% of in-store card transactions were by inserting or swiping a card, but this has almost halved to 33% of all transactions. This has shifted towards contactless card and device payments, which now account for 63% of all in-store card purchases,” says Pretorius.
FNB’s analysis of customer transactions show that contactless device payments have increased by nearly 1 300% since 2021.
These channels include FNB Tap to Pay, Apple Pay, Google Wallet, Samsung Pay, Fitbit Pay, Garmin Pay and Swatch Pay.
Pretorius says the payments industry is always evolving and a key objective for FNB has been to modernise infrastructure to make real-time payments possible to and from different platforms.
FNB launched PayShap this year, which provides cost-effective, safe and interoperable real-time payments.
“PayShap will assist with reducing the need for cash to pay businesses or to exchange funds with friends or family members.
“It has the potential to boost South Africa’s ambitions to minimise the use of cash through digital adoption. It also offers a safe and secure alternative to cash with payments of less than R100 being free for FNB customers,” says Pretorius.
She says that FNB also uses the Visa/Mastercard Pay2Card solution that allows FNB and RMB Private Bank customers to make cost-effective real-time payments to family members and friends simply by entering their card number, irrespective of the recipient’s bank.
“Given all the benefits of digital payments and the ever-advancing payments industry, we expect the shift from cash to digital to continue growing exponentially.
“We actively encourage our customers to adopt digital payments. While cash has long been a staple in our society that is universally accepted and does not rely on technology, there are several direct and indirect costs involved in using cash that impact customers and merchants, such as transaction costs as well as handling, distribution and transportation costs of cash.
“Additionally, cash makes merchants and customers more vulnerable to theft and robberies, further increasing the need to move to a cashless society. Digital payments offer convenience, reduced waiting time at retailers, increased security, and transparency,” says Pretorius.
FNB also says that businesses electing not to accept cash is a growing trend, especially among small and medium businesses. “Recently, we have seen a few larger merchants and businesses launch new cashless stores,” according to FNB.
Absa
A spokesperson for Absa says the banking group has invested in technology to stay ahead in the field of global digital payment innovation and trends, with its early involvement in offering Apple Pay, QR Payments, Garmin Pay, Fitbit Pay, Samsung Pay, Google Pay and PayShap.
Read: Apple debuts pay-later service, iPhone updates to developers
“We have seen rapid adoption of these payment methods amongst our customers with exponential growth during the Covid-19 pandemic years resulting in a more than 200% increase in e-commerce levels and debit and credit contactless card volumes,” it says.
“This is underpinned by steady growth in customer adoption of digital channels. More than 70% of the bank’s core customer base now use digital channels to transact.
“We’ve seen high levels of growth, about 20% year on year, in digital banking adoption since 2016, resulting from increased customer confidence in the robustness and security of our digital channels backed up by our market-first Digital Fraud Warranty.
“Our customers have embraced the functionalities of cashless banking such as card-not-present transactions to make payments online and approve these in their banking app seamlessly. Customers also comfortably use digital payment methods to undertake low value and high value transactions,” according to Absa.
However, the bank warns that any environment involving finances requires customers to exercise vigilance and take safety precautions, but generally digital payment methods are considered more secure as they require a PIN or biometric validation for activation.
“In contrast, the personal risk of loss, theft or fraud increases when carrying cash and consequently cash attracts higher handling charges.
“An additional benefit to digital payment methods is that many apps and wallets include retailer loyalty programmes as an embedded feature which further supports convenience,” says the spokesperson.
Absa has noticed a trend in customers using cardless capabilities up to 20 to 40 times per month. It says the increase in digital transactions flowing through customer accounts also generates better data and enhances the customer’s access to other financial services, such as loans, to improve their lives.
“The migration from cash in favour of digital payments further promotes good record-keeping and financial transparency. Absa is poised to embrace a society that is cash-free.
“However, unlike first world markets such as the UK and Sweden where cashless environments are increasingly common, SA cannot fully eradicate cash despite some businesses beginning to shift from accepting cash for payments.
“Formal cash usage is reflecting consistent decline which is aligned to shifting customer behaviours in the post pandemic era. Cash, however, still accounts for a significant share of overall payments in SA.
“Informal cash, which exchanges hands outside of the formal banking system, remains significant and presents an opportunity for the industry,” the bank said in response to questions.
“Absa and other industry players are actively undertaking digitisation efforts through the introduction of affordable electronic payment methods such as PayShap for low value transactions.”
Capitec
Capitec reported in its recent interim results that the number of clients using digital channels for transactions increased to 11.7 million. The number of transactions via digital channels has increased significantly –by 21% to 957 million – and card transactions have increased by 28% compared to the previous year.
The Capitec banking app now represents 83% of all digital transactions, and transactions on this platform have increased by 53% from 515 million in 2022 to 789 million at the end of August 2023.
“Capitec has seen a substantial shift in client behaviour, with more clients adopting digital and card payment methods over cash transactions, aligning with a broader global trend towards digital banking,” according to a spokesperson.
“As clients are getting more comfortable with electronic payments (especially on Apple Pay, Samsung Pay or Google Pay) they are using it for smaller purchases, like a coffee. As a result the average transaction value is declining as expected.”
Capitec says card and digital payments are becoming more popular among higher and lower-income clients, but that cash remains prevalent in informal markets due to its immediacy and the fact that a lot of informal transport, shops and accommodation still want payment in cash.
“Safety and reduced digital transaction fees are considerable benefits of a cashless society. Furthermore, as a leading digital bank, clients’ digital income and transactions allow us to understand their financial behaviour better and offer products tailored to help them live better.
“The advantages of a cashless society also extend to businesses. For instance, small establishments accepting digital payments increase their chances of loan approval, which can aid business growth,” says Capitec.
“An increasing number of businesses are opting out of accepting cash due to the growing popularity of cashless and contactless payments. This shift towards digital payments offers consumers the advantages of more affordable transactions, enhanced safety, and cash-back rewards.
“However, Capitec has observed this trend mostly in more formal urban markets and believe[s] that cash will remain a reality for most South Africans for the next number of years,” according to the bank.