Consumer Goods Council chair Gareth Ackerman has called on the government to introduce a universal digital payment platform to eradicate cash and also reduce card payment fees for shoppers.
Speaking on the sidelines of the council’s summit on Wednesday, Ackerman, who is also the chair of Pick n Pay, said card transaction fees were expensive, and some consumers — especially social grants beneficiaries — end up having less money to spend due to the steep charges.
He cited India’s Unified Payments Interface (UPI) system that offers cardless and cashless payment platforms for all consumers. He said the South African government could learn from this to drive the adoption of digital payment at no cost.
The government-run payment platform in India allows everyone to have a digital bank account that can be operated on a cellphone. Users can link their bank accounts to the app for ease of payments, which has been a shot in the arm for e-commerce.
The platform has become the most popular payment system in India, and is a threat to traditional card payment providers that have seen a decline in transactions. “As we look at the future of retail, we have got to get the cost of electronic card transactions down. This will be really important and I think this is where the government could play a huge role. Look at India, where they launched UPI. Everybody has it and transactions are free (and) as a result it reduces cash [payments].”
He said such a platform would also help social grant recipients, some of whom have to travel distances to do their shopping and still pay card transaction fees — and are charged for withdrawing cash using their bank cards. “It is crazy what people are paying for transactions. One of the big things that the government needs to do is look into creating a system like that adopted in India,” said Ackerman.
In its inaugural Payments Study published last month, the South African Reserve Bank found that cash is still king in South Africa, as it is still a commonly accepted payment method, closely followed by card payments. The bank said the adoption of other payment methods over cash could be made easier by targeted consumer financial education or literacy efforts, ensuring that consumers understand how the payment methods work, the benefits they offer, and the risks they pose.
Business Day reported last week that the Reserve Bank had embarked on a payments ecosystem modernisation programme, which includes the development of a public payments utility that provides digital payments infrastructure and includes security measures and fraud prevention at its core. “The most successful retail payment initiatives by central banks have involved new payment systems rather than new kinds of central bank liabilities,” Reserve Bank governor Lesetja Kganyago said at their Payments Conference last week.
“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 platformI hope we will approach the new payments paradigm as a landmark opportunity to make payments in South Africa safer, faster, cheaper and more inclusive.”
South Africa has seen an immense penetration by smartphones, and consumers who own them are starting to shop online, said Ackerman. Having a universal digital payment platform would also boost e-commerce, which continues to record phenomenal growth.
“We have a long way to go and in the last decade or more we have regressed economically and growth has averaged about 2%, yet we actually need growth of 7%. We need a mindset change in government and to learn from countries such as India which has defined the role of government versus the private sector. Government should set policies and let the private sector implement.”
On whether food delivery platforms pose a threat to brick-and-mortar stores, Ackerman said store visits would remain part of the shopping experience as more retailers move closer to communities. “It’s a community space. People want to shop locally to save costs of travelling (long) distances. The closer they can shop to where they live, the better, which is why you are seeing a rise in some major brands opening stores, although smaller, closer to communities. The spaza shops are also growing.”
Pick n Pay’s Boxer, Spar’s SaveMor and Shoprite's USave are opening more stores closer to township and rural communities.
Ackerman said all those moving into townships and rural communities have to deal with the modern environment, and they need to have the right product and the right quality. “It’s got to be a nice environment for people to shop in. The real danger is around food safety and food quality. There needs to be monitoring to ensure that those non-chain retailers are actually selling the right quality products.”
He expects some consolidation in the food retail market with big independent retailers likely to become franchisees, with more competition expected at the wholesale level. “Some independent retailers have formed a network and are part of a buying group. In that way they are able to get discounted prices when they shop at wholesalers.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.