Digital payments booming in South Africa with more growth potential especially for SMEs

Source: © 123rf 123rf Digital payments are booming in South Africa, with two-thirds of merchants and nearly 60% of consumers prefer card payments, with 78% of e-commerce merchants already onboard

This is reinforced by positive experiences among businesses already accepting digital payments: over 80% of card-accepting SMEs are satisfied with the card acceptance process, and nearly two-thirds report a positive impact on revenue and footfall.

This is according to a new report from Visa, Value of Acceptance: Understanding the Digital Payment Landscape in South Africa which shows there is significant growth potential for digital payments, especially among small and medium-sized business.

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SA’s digital payments momentum

This positive momentum is expected to continue, with 65% of cash-only SMEs stating their intention to acquire POS systems within the next two years.

Furthermore, 78% of merchants selling on e-commerce platforms already accept online payments, demonstrating the increasing importance of a multi-channel approach.

Overall, South African SMEs demonstrate a positive outlook on digital payment investment, with 75% of existing digital payment acceptors agreeing that investing in these technologies will support future business growth.

"The research findings paint a promising picture of South Africa's growing digital payments landscape," comments Lineshree Moodley, country head for Visa, South Africa.

"The increasing preference for digital transactions, coupled with the recognized benefits for businesses and the broader economy, creates a powerful opportunity for growth.

“Visa is committed to working with our partners across the ecosystem to unlock the full potential of digital payments for all South Africans – for individuals and businesses alike."

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Key challenges to unlock full potential

While the overall trend is positive, the research also identifies key challenges that need to be addressed to unlock the full potential of South Africa’s digital payments landscape.

• Concerns around fraud and cost persist among some merchants, highlighting the need for ongoing education and targeted interventions. Visa can help address these concerns by highlighting the importance of robust security measures and clear communication about the safety of digital transactions.

• SMEs streamlining the onboarding process for POS systems is 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.

• For cash-only merchants, highlighting the potential for lost sales due to customers not carrying cash – an issue reported by nearly one in three (29%) cash-only SMEs - offers a compelling argument for adopting digital payments.

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Broader value of digital payment acceptance

The benefits of digital payments include:

• Digital payments are crucial for South African SMEs, boosting revenue through a wider, increasingly cashless customer base, improving customer satisfaction with faster payments, and reducing operational risks by minimising cash handling.

• Digital transaction records also provide valuable data that facilitates access to financing, stimulating growth.

• While cash is still seen as quick and convenient, cards are valued for expense tracking, spending encouragement, and enhanced security.

• Mobile/digital wallets offer an innovative, competitive edge. Promoting preferred methods, especially card payments, is key.

• Beyond direct benefits, digital payment adoption drives economic growth and financial inclusion, connecting the unbanked to the formal financial system and enabling access to savings, credit, and insurance.

Research evidences that the transition to the digital economy can generate 1-2% annual GDP growth - a mere 1% increase in card usage generates an average $67bn annual increase in goods and services consumption across 70 countries and territories.