SA leads African digital payments as card usage rises, says Visa

Global payments giant Visa says SA is leading the charge when it comes to the adoption and use of digital payments in Africa. 

“When we look at the continent, we have a really seen incredible growth, bringing sellers onto the [digital] network. We’ve seen an acceleration when it comes to digital payments,” Lineshree Moodley, country head for Visa SA, told Business Day. 

“When it comes to contactless payments, SA is leading the way across the continent.”

Visa is a US-based financial technology (fintech) company. Mainly working in the financial services sector, the company has operations around the world, including in SA, where its logo is often featured on bank cards, ATMs and point-of-sales machines.

The company — valued at just under $688bn — competes with MasterCard, another US based player, whose market capitalisation of $518bn is smaller by comparison.

Moodley explained that some of SA’s digital payments growth had to do with the various payment methods, such as Apple Pay and Google Pay, now a mainstay in the local economy.

“It also has to do with how point of sale (POS) was rolled out on a large scale. SA is certainly leading the way when it comes to digital payments.”

SA is estimated to have 500,000 POS devices in use. 

“We saw an acceleration through Covid-19, be it e-commerce or contactless payments and we see sustained growth [ahead],” she said. 

According to a new report by the payments group, SA is home to “a thriving digital payments ecosystem”, with 66% of merchants and 59% of consumers showing a strong preference for card payments, “laying a strong foundation for continued expansion”.

An obvious advocate of digital payments, Visa says electronic payments are crucial for local SMEs, helping to boost revenue through a wider, increasingly cashless customer base, improving customer satisfaction with faster payments and reducing operational risks by minimising cash handling.

In addition, digital transaction records also provide valuable data and a track record that can help when trying to access credit or financing from banks and other lending institutions. Increased access to finance can stimulate growth in the economy. 

Research from ratings agency Moody's, shows that the transition to the digital economy can generate 1%-2% annual GDP growth for a nation. A 1% increase in card usage, the research says, generates an average $67bn annual increase in goods and services consumption across 70 countries and territories.

Yet, cash is still king in SA.

According to Bankserv, the region’s largest automated clearing house and payments processor for the banking industry, the value of cash circulating in SA is about R182bn. 

Much of this attributed to the informal sector, a part of the economy that fintech company Lesaka estimates to be worth more than R600bn annually, or more than 6% of GDP. 

“While the overall trend is positive, the research also identifies key challenges that need to be addressed to unlock the full potential of SA’s digital payments landscape. Concerns around fraud and cost persist among some merchants, highlighting the need for ongoing education and targeted interventions,” Visa said. 

The company said streamlining the onboarding process for POS systems was also essential, as 40% of merchants expressed neutrality or difficulty with the experience.

“Addressing concerns about transaction fees and promoting the value proposition of card payments, emphasising security and convenience, will also be crucial to encourage merchants to prioritise these methods,” Visa said. 

Among the informal economy, driven by cash use, are key players such as taxis, which are estimated to carry 6-million commuters daily. With about 300,000 taxis on SA roads, this is still a cash industry that is estimated to generate R90bn per year. 

Moodley said Visa had been working to address that market, partnering with a number of fintech players and organisations on at least three projects to increase digital payments in taxis. 

gavazam@businesslive.co.za