While there is a progressive drive towards digital and electronic transactions, the reality is that cash still plays a dominant and valuable role in the South African economy, for both consumers and retailers.
That’s according to Mark Templemore-Walters, operations director for Cash Connect. He shares five reasons why the drive towards a cashless society is not good for consumers or the retail sector, and how retailers can benefit from a healthy mix of both cash and digital payment options.
Digital payments exclude many of the country’s marginalised people: Anyone can use cash to transact, particularly in a country where approximately 11 million people are unbanked. Cash doesn’t discriminate based on whether you own a smartphone, can get a bank card or have an identity document for a FICA or Know Your Customer process. It allows immediate participation in the economy for all, including people living in rural areas or foreign nationals without South African identity documents or bank accounts.
Cash is still cheaper than digital transactions: Contrary to the popular narrative, costs associated with cash transactions are lower and affordable, especially for retail merchants. What’s more, cash is convenient and universal. The technology barrier of needing a point-of-sale device, computer or phone to pay and be paid doesn’t exist with cash.
For retail merchants, card and digital payment costs range between R0,90 and R4,00 per R100. One of the most popular mobile payments acceptance platforms costs up to R3,00 per R100 in sales.
The costs of accepting cash are significantly lower: consider, for instance, that the cash handling costs for a retail business with cash receipts of R2 million a month, and an automated cash handling system (including a robust, intelligent cash vault and six-day cash in transit (CIT) collection service), comes out at around R0,75 per R100. This underpins the fact that automated cash management has indeed proven to provide retailers with a significant saving of more than 20%.
Cash is easy to use: Cash enables anyone to trade and participate in our economy. Cash does not discriminate in any form, in fact the use of cash allows for immediate financial inclusivity – a goal set out by our very own national development plan.
Digital payments have privacy risks: cash offers consumers privacy and control. One reason financial institutions and tech companies are so keen on digital transactions is that it gives them access to a treasure trove of consumer data that is used for ongoing marketing efforts. They can use this data to target people for cross-selling and upselling opportunities that are not always in consumers’ interests or invade consumer privacy.
The risk of payment fraud and cybercrime can be higher than the risk of cash loss: Digital, credit and debit card fraud in SA in 2019 was more than R1,35 billion, according to SABRIC; cash losses were less than 20% of this value. Consumers are increasingly targeted in digital fraud and cybercrime scams because criminals tend to follow the money. Recent incidences of digital fraud at South Africa’s Postbank and Germany’s Wirecard illustrate that digital is far from risk-free.
Cash is about choice
More than 50% of consumer transactions are completed with notes and coins, according to the Payments Association of South Africa. Taking cash out of people’s hands could harm those as a cashless approach purports to help by restricting choice for consumers and merchants, who often have good reasons for preferring cash.
“While cashless channels have an important role to fulfil in the promotion of financial inclusion, it’s important to protect and celebrate the vital role that cash plays in our economy. In the industry’s enthusiasm for technology solutions, it should leave no consumer behind, but include and empower everyone with choice and control over their financial lives,” concludes Templemore-Walters.
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