JOHANNESBURG – There’s been a lot of talk lately about South Africa becoming a cashless society – mostly from banks and technology companies. You can almost feel the collective eye-roll, because as a society, we’re attached to cash, and it’s hard to imagine a life without it.
So, let’s talk about something else instead: consumer choice. And right now, if we look at what South African consumers want, it’s clear that increasing numbers of people love the convenience of paying for things and exchanging money on a device they always have with them – their mobile phones. At the same time, we’re seeing a growing realisation that the costs, inconvenience and security risks associated with cash are becoming prohibitive.
The point is that it’s a change in consumer habits that will drive South Africa’s move away from cash – not the latest technology, or because of some banker said so, or because it’s easier for businesses. People want convenience, safety, as well as better control over their money, and carrying cash just doesn’t tick any of those boxes.
The costs alone are a powerful argument for cashless. If you draw cash four times a month, you could be paying up to R65 in ATM withdrawal fees. That doesn’t sound like a lot, but leave that R65 in your bank account, at 0.5 percent compound interest per month, and after four years you’ve saved R3 516.36. Just because you did not draw cash.
Let’s be clear. The cashless society is coming. We don’t know when. But it is inevitable. In countries such as Sweden and South Korea, the cashless revolution is already upon us. In Sweden, cash transactions will make up less than 0.5 percent of the value of all payments by 2020, and South Korea is targeting to go completely coinless in 2020.
In South Africa, this won’t happen overnight. Our informal economy is far too big for that. But the trend is clear, and we’re already seeing a rapid uptake by consumers in mobile payments, peer-to-peer payments, such as Virgin Money’s Spot and other cashless technologies.
Businesses – and specifically South Africa’s vast SME and micro-SME sectors – are also playing a major role in this trend. These sectors are the growth engine of our economy, and for them, the cost and security risks of handling cash are significant incentives to move towards a cashless system. I’m not suggesting informal hawkers will start offering QR codes, but electricians, plumbers, coffee shops and taxis may well do so.
The bottom line is that in a country where some 70% of the population have bank accounts, the table is already set for South Africa’s transition to a cashless society. It’s high time we ended our long-standing love affair with cash, and moved to any number of safer, cheaper and more convenient alternatives. The people have spoken.
Andre Hugo is the chief executive of Virgin Money.
The views expressed here are not necessarily those of Independent Media.