PHILASANDE SOKHELA: The transition to a contactless economy
We have an individual and collective responsibility to ensure sustainable development
In the 2019 Future of Payments in SA report by Deloitte and Mastercard it is 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?,” it 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 that design from a point of privilege, access and a technological perspective compared with from a consumer point of view.
Something financial institutions do not engage with enough is how to design or innovate from a societal point of view. A lot of technology out there 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 necessarily understanding 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, of the 164 countries in its global poverty database, SA is the most unequal country in the world. This has caused a significant digital divide between the haves and the have-nots.
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, in particular, often forgets that for a large portion of the population, in peri-urban and rural areas in particular, that access is not a given, particularly taking the limited ICT infrastructure nationally into consideration. Even when consumers have 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 we are so digitally inclined that we share information on digital platforms, forgetting that there are many who are offline and therefore need us to disseminate information in more traditional ways, such as through local radio, television and road shows. 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 e-wallet, 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, by larger organisations such as Telkom, banks and other service providers partnering with community radio stations or local groups in a particular area. Tied to this is the lack of trust between consumers and the financial sector. When we don’t feel seen, our perception of how these institutions do business will be negative. Transactions are not in real time and when, for example, I make an EFT payment and it takes up to 48 hours to clear, or I have made a mistake in the transfer and it is difficult to find someone to help me, it will seem simpler and better to just deal in cash.
While banks do provide instant payment for interbank transactions, there are generally high fees attached, which adds further friction to the process and, as a result, trust levels decrease even further.
In Deloitte’s 2019 report on Regenesis of Payments in SA 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 payment 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. The financial sector also needs to consider how information is packaged and technology is designed. As a Zulu speaker I should be able to not only receive information in my native language, but to also process transactions on whatever technology I am using, in my native language. All of this affects the adoption rate of digital payment technologies
For SMEs, while there are several multi-sided payment platforms that have been launched in the last five years, such as iKhokha and Yoko, adoption is dependent both 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, it becomes a problem when it comes to managing credit where, often, they will allow people from the community to pay later. The question becomes: how does the technology add significant value when I am 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, e-wallet, GEO payment or electronic transfer. Also, consumers are becoming more comfortable interacting with bots via platforms such as WhatsApp for everything from customer service and checking of balances to actual payment. The pervasiveness of WhatsApp in particular has helped.
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 more.
It is imperative that SMEs especially take the time to understand how these platforms and the underlying technologies, such as application programming interfaces (API) work, to ensure 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, among others, into their singular platforms.
There are companies to assist, such as digital payment enabler Ukheshe, which 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. It recently ran a project with Telkom where users could settle their bills, buy airtime and facilitate transactions on the Telkom app. Nedbank created a solution where customers can check balances and make payments on WhatsApp.
Ukheshe, with 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. It can be difficult navigating this while also running a business, but this is one of the ways to futureproof 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 get paid and pay, 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.
• Sokhela is a faculty member at the Johannesburg Business School.
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