Reserve Bank governor Lesetja Kganyago has urged SA to move further away from cash on the road to digital payments.
He noted in his opening address on Wednesday to the 2024 Payments Conference, which dealt with the paradigm shift for future payments in SA, that over the past several years there had been little or no growth in total demand for banknotes and coins.
In 2023, banknotes and coins contracted by 0.8%, the largest fall in records going back to 1960.
“Historically, cash growth has broadly followed growth in nominal GDP, but this trend broke down after Covid-19. If cash were still growing as fast as it did last decade, we would have an extra R60bn or so of banknotes and coins in circulation. This ‘missing money’ shows a changing payments landscape. Cash may still be king, but the crown is slipping,” Kganyago said.
The major reason for the decline in cash payments, the governor said, was the availability of better payment alternatives such as cardless payment technologies involving payment, for example, using a cellphone or watch.
Despite the decline in demand for cash much of SA still relied heavily on cash to make payments.
“As our payments survey reminded us, for most South Africans, cash is still king. People view it as easy to use and as the cheapest payment option available. It is the most commonly used payment method in our survey. Cardless payments were further down the list,” Kganyago said.
Even though most South Africans now have bank accounts, many still withdraw all their money as soon as it is deposited in their account. This means missing out on the safety and convenience of transacting digitally.
“South Africans are over-reliant on cash. Even though most South Africans now have bank accounts, many still withdraw all their money as soon as it is deposited in their account. This means missing out on the safety and convenience of transacting digitally.
“The fact is, cash is simply not as efficient. Whether it is finding an ATM, providing correct change, dealing with transport logistics and security, or fostering payments innovation, cash is more limited than digital payments. A strong reliance on cash is not optimal for society,” the Reserve Bank governor said.
Other countries were adopting digital payments and Kganyago said the Reserve Bank had a “strong preference, as the custodian of the national payment system to reduce reliance on cash”.
To drive this change, the Bank had recently embarked on a payments ecosystem modernisation programme, its largest and most ambitious initiative in the payments space in more than 30 years. At the heart of the programme is the development of a public payments utility that provides digital payments infrastructure and has security measures and fraud prevention at its core. Inclusiveness will also be a foundational principle.
Kganyago noted that in the past SA was a global leader in payments, but structural changes in payment systems in other countries were under way and it was vital for competitiveness that the country stay ahead of these trends, especially in the retail space. Other countries such as India and Brazil were further ahead.
“The most successful retail payment initiatives by central banks have involved new payment systems rather than new kinds of central bank liabilities. Brazil and India did not need central bank digital currencies to develop the world’s two most-used retail digital systems. In these cases, central banks acted as catalysts for change, and this created many opportunities for the private sector to innovate, using the new platform,” Kganyago said.
“I hope we will approach the new payments paradigm as a landmark opportunity to make payments in SA safer, faster, cheaper and more inclusive.”
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