Cash is still king in South Africa, but digital payments are growing and the SA Reserve Bank (SARB) plans to drive this transition further with a Payments Ecosystem Modernisation Programme (PEMP), SARB Governor Lesetja Kganyago announced yesterday.
In an address to the 2024 Payments Conference, Kganyago said that this was “the largest and most ambitious initiative by the SARB, in the payments space, since the launch of the South African Multiple Option Settlement system, or SAMOS, more than 30 years ago.”
At the heart of the programme was the development of a public payments utility that provides digital payments infrastructure.
South Africans can make payments with their phones or even smart watches, but as the SARB payments survey showed recently, cash was still the most commonly used payment method, and was viewed as the most easy to use and as the cheapest payment option.
“But as we noted in our Digital Payments Roadmap, published a few months ago, South Africans are over-reliant on cash. Even though most South Africans have bank accounts, many still withdraw all their money as soon as it is deposited in their account,” Kganyago said.
“This means missing out on the safety and convenience of digital transactions. Cash is simply not as efficient.”
Kganyago said there was also evidence cash dis-empowered women by making it harder to manage the family finances, including child support grants.
However, he said the reliance on cash was changing, as evidenced by little or no growth in the demand for banknotes and coin for several years.
“Last year, banknotes and coin contracted by 0.8%, the largest fall in records going back to 1960. Historically, cash growth has broadly followed growth in nominal GDP, but this trend broke down after COVID-19.”
Kganyago said other countries were further ahead. India's Unified Payments Interface system and Brazil’s PIX allowed instant, low-cost payments using simple tools such as a cellphone number or QR code, instead of an expensive point-of-sale terminal, and these had become ubiquitous payment technologies in these economies
He said the SARB’s programme would have security measures as the recent scandal involving grants being stolen from Postbank accounts was a reminder that safety was a non-negotiable for payments.
Inclusiveness was a major principle of the programme.
“This will be a payment system for all South Africans − rural or urban, rich or poor − not a product for any particular niche,” he said.
“We are not going to be rebuilding everything from scratch – after all, we already have good payments infrastructure in South Africa – but we are living through a paradigm shift in payments, and not every legacy system will be fit for purpose in the future. We also need to find the right balance between bringing everyone on board and moving forward.”
Kganyago said the SARB was in an “interesting situation” of being solely responsible for producing banknotes and coin, but it wished to innovate out of this profitable position.
“And we are not insistent that we monopolise the digital payments alternative. We are just insistent that we, as a country, move with the paradigm shift and reap its benefits,” he said.
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