Philasande Sokhela, Faculty Member – Johannesburg Business School, a Faculty of the University of Johannesburg.

The 2019 Future of Payments in South Africa report by Deloitte and Mastercard stated that “although 80% of South Africans have a bank account, most consumer transactions are still cash-based” and that a “relatively high share of consumers (45%) receive cash salaries.”

In the chapter titled, ‘Why does it continue to dominate?’, the report goes on to say, “although rural and township residents were found to use cards for 60% of their transactions at formal retailers, only 4% of transactions were card-based at informal retailers.”

The financial sector can no longer shy away from the reality that there is a significant disconnect between the majority of South Africans and the growing array of technologies that are supposed to facilitate the transition from physical to digital payments. At the heart of this disconnect are societal and development issues, as opposed to the capability of the technology. So much is taken for granted by those who design from the point of privilege, adopting a technological and access perspective as opposed to a consumer point of view.

Something that financial institutions do not engage with enough is how to design or innovate from a societal point of view. A lot of technology in the market is either an iteration of technology from the West being tested within a South African context or is an idea born in a boardroom without an understanding of how the technology will actually be consumed. The corporate might have a beautiful digital payment product, but if the people find it difficult to access the product, it is pointless.

According to the World Bank, South Africa is the most unequal country in the world, out of the 164 countries in the World Bank’s global poverty database. This has caused a significant digital divide between the haves and the have-nots.

Infrastructure meets Ubuntu

For those within a particular class bracket in the country, accessibility is assumed, whether via smartphone, tablet and/or laptop and a decent internet connection. It would seem the financial sector often forgets that access is not a given for a large portion of the population, particularly in peri-urban and rural areas, especially taking the limited ICT infrastructure nationally into consideration. Even when someone has a mobile phone, it doesn’t necessarily have banking features.

When some type of access is available, another challenge is people having the know-how to use the tools available. In a way, those that are always-on are so digitally inclined to sharing information on digital platforms, forgetting that there are many who are offline, needing us to disseminate information in more traditional ways, like through local radio, television, and roadshows.

I am often reminded of this when I visit my family in the rural parts of Msinga in KwaZulu-Natal and have to show them how to, for example, receive an eWallet, taking into consideration the time it takes to withdraw and the need for a pin.

To educate people, organisations need to consider physically showing them how to access solutions using their devices. This can be done by, for example, larger organisations like Telcos, , banks, and other service providers partnering with community radio stations or other local groups in a particular area.

Lack of trust in institutions

Tied to this is the lack of trust between consumers and the financial sector. When people don’t feel seen, their perception of how these institutions do business is often negative. In cases where a banking transaction takes up to 48 hours to clear, or when someone makes a mistake in the transfer, it is often difficult to find someone to help, making it seem simpler and better to just deal in cash.

While banks provide instant payment for inter-bank transactions, there are generally high fees attached to this, which adds further friction to the process. As a result, trust levels decrease even further.

In Deloitte’s 2019 report on Regenesis of Payments in South Africa, it is stated that “in China, instant payments provide an alternative to card payments, with additional cost savings for participants. A mobile app-enabled with instant payment makes electronic payments more accessible to those who either do not qualify for cards or cannot afford them.”

Flipping transactions to make it more cost-effective for consumers to make digital payments as opposed to traditional payments will go a long way in improving the trust in financial institutions.

Fintech the African way

The financial sector also needs to consider how information is packaged and how technology is designed. As an IsiZulu speaker, I should be able to receive information in my native language and process transactions on whichever technology I am using. This technology and language barrier affects the adoption rate of digital payment technologies.

While there are several multi-sided payment platforms that have been launched for SMEs in the last five years, like iKhokha and Yoco, adoption is dependent on the type of business and the environment in which the business operates. Take the typical spaza shop. While they may have people who are inclined to pay with a card, a problem arises when it comes to helping the shop owners manage credit after they allow people from the community to take products and pay later.

The question becomes, how does the technology add significant value when these spaza shops are still handling cash and writing down transactions traditionally? It becomes hard to justify the fees related to having the payment device.

But it isn’t all bad news. The COVID-19 pandemic has pushed the country closer to a contactless or low-touch economy where the preference for transacting is increasing, whether it is tap-to-pay, eWallet, GEO payment or electronic transfer. Also, consumers are becoming more comfortable interacting with bots via platforms like WhatsApp for everything from customer service and checking of balances to actual payment. Also, the pervasiveness of WhatsApp, in particular, has helped.

Opportunity in convergence

In addition, there is greater convergence happening in the financial space, including telecommunications and mobile companies now facilitating financial transactions. The likes of MTN and Vodacom with momo mobile money and VodaPay, respectively, have people using digital payment technology.

I believe that it is imperative that SMEs, especially, take the time to understand how these platforms work and how the underlying technologies, such as Application Programming Interfaces (API) work, to ensure that they don’t get left behind when the inevitable closing of the digital payment gap happens. Financial institutions are using APIs to integrate WhatsApp pay, QR code payments, digital wallets, and tap-to-pay, amongst others, into their singular platforms.

There are companies to assist, like Ukheshe, a digital payment enabler that builds solutions for financial institutions using its Eclipse API, which “is a single platform that allows ‘Tenants’ to access a wide range of payments solutions through one entry point. They recently ran a project with Telkom where users can settle their bills, buy airtime and facilitate transactions on the Telkom app. For Nedbank, they created a solution where customers can check balances, make payments and the like on WhatsApp.

Ukheshe, with the Eclipse API, provides a range of products, including digital wallets, issuing of physical and virtual cards, QR code (Masterpass), cross border remittance, chat banking, merchant management via an admin portal, tokenisation (adding a debit or credit card to Ukeshe wallet) for Whatsapp, bill payments, and tap2pay

As an SME, with a significant number of clients using WhatsApp, there is a benefit to exploring these types of solutions. I recognise that it can be difficult navigating this while also running a business, but this is one of the ways to future-proof one’s business while contributing to bridging the divide, which helps us all.

If people do not access financial platforms, digital or otherwise, they cannot pay and get paid, and they cannot create wealth, which perpetuates poverty and the inequalities that exist within our societies. We have an individual and collective responsibility to ensure sustainable development Goal 17 - which is about mobilising financial resources for developing countries, investments and attainment of debt sustainability.