Anyone can use cash, regardless of age or technological experience, and whether or not they have a bank account. In South Africa, where one in five people are unbanked, this is an especially significant detail, but there’s far more to the story of cash in Africa’s southernmost nation.
According to the PYMNTS Global Cash Index, more than 50 percent of consumer transactions in South Africa are completed using cash. For small business owners, such as taxi firms or spaza shops (informal convenience stores often run from home) that often run on narrow profit margins, transaction fees and other costs associated with non-cash payments can seriously dent their income. Given the significant contribution these businesses make to their local communities, and the livelihoods they provide for micro-entrepreneurs, it is clear to see how important cash is in driving South Africa’s economy.
Cash enables anyone to trade easily, including vulnerable populations such as foreign nationals and communities in rural areas. It also makes it easier for people with low access to ATMs or the internet to track spending and manage their budgets.
Another key feature of cash payments is that they offer consumers privacy. It is no wonder financial institutions and tech companies are pushing people towards digital transactions, which are fully trackable and enable the construction of personal profiles that can be sold and used for targeted advertising, upselling opportunities and more.
In addition to this downside, digital transactions are vulnerable to cybercrime. In August, the world’s largest credit bureau Experian leaked the data of 24 million South African customers and nearly 800,000 businesses after a suspected fraudster posed as the representative of a major client. This challenges the narrative of digital being more secure than physical payments, especially when viewed alongside the theft of South Africa PostBank’s digital ‘master key’ that allowed access to all its customer’s data, home banking access codes, and credit cards.
Digital banking incidents increased by 20 percent in 2019, a number that is set to rise in future as criminals continue to use social engineering tactics to extract personal and confidential information from victims, enabling them to transact on their accounts without authority.
South Africa’s leading ATM provider, Spark ATM Systems, describes a ‘strong and steady’ demand for cash across the nation. They also note there are regular requests for new ATMs in small, rural communities where cash enables financial inclusion, and believes ‘cash demand will remain strong in South Africa for the foreseeable future.’
While cashless transactions have a role to play in the payments landscape, cash remains vital for the equal and inclusive options it unlocks.
Cash is still one of the safest and most trusted forms of value storage. In the industry’s enthusiasm for technology solutions, it should leave no consumer behind, but include everyone and empower consumers with choice and control over their financial lives.