Cash still king

South Africans show their scepticism over benefits of financial services

Merchants using DPO's platform can accept payments in about 50 currencies. REUTERS/Rogan Ward

South Africans are significantly less confident that financial services can help make the country more prosperous compared with Kenyans and Nigerians, according to the Financial Prosperity Barometer published on November 25 by online payment service provider PayU.

In Kenya, 77% of respondents believe that greater access to financial services increases the country’s prosperity, a view shared by 72% in Nigeria.

That level of positive sentiment fell to just 63% in South Africa.

  • PayU’s global survey gathered 10,500 adult responses in 18 countries in Africa, Asia, Europe, South America and the Middle East.
  • The African countries surveyed were Kenya, Nigeria and South Africa.

Nigerians are often portrayed as being reluctant to adopt financial services, in particular insurance.

In fact, South Africans now take the dimmer view of long-term financial planning.

  • South Africa had the largest minority of people who did not agree with the idea that financial services help people plan for their future prosperity.
  • Just 8% in Kenya didn’t accept this proposition, rising to 15% in Nigeria and 17% in South Africa.
  • Kenyans, buoyed by the success of mobile money, were most likely to agree that financial services had helped them to become personally more prosperous on 74%, followed by Nigerians on 63% and South Africans on 61%.

The figures reflect the disillusionment among South Africans with existing financial-services provision. PayU’s survey echoes the findings of the South African Banking Sentiment Index from BrandsEye.

  • Consumers have become more negative about their banks in 2019, the BrandsEye index found.
  • Their research is based on 1.9 million social media mentions about South Africa’s five major banks, Absa, Capitec, FNB, Nedbank and Standard Bank, for the year August 31.
  • Standard Bank had the highest proportion of customers threatening to leave their bank while citing other banks, BrandsEye found.

Lack of trust

Cash usage continues to grow in the South African economy at a rate of 6-10% per year, faster than inflation, according to The Future of Payments in South Africa from Deloitte in September.

Without solutions that address customers’ needs, “digital adoption will be constrained and the cash reliance cycle will continue,” Deloitte said.

  • Deloitte found that key obstacles to digitising the informal economy included inadequate data connectivity and high data costs, a lack of trust in cash alternatives and low levels of financial literacy.
  • Many South African informal traders believe that their small businesses do not warrant a bank account, or may not qualify for one.  They are also wary of bank charges, Deloitte found.
  • Only 4% of transactions were card-based at informal retailers: Deloitte.
  • Innovation in South African digital payments has often occurred in silos and the lack of collaboration between the banks has stifled industry-wide innovation. The market continues to suffer from a lack of interoperability: Deloitte.

Though South Africa has strong mobile phone penetration, many of the phones in use are feature phones, rather than smart phones, which do not support mobile banking, Deloitte says.

Innovative payment and financial services offerings are needed which use simpler formats for sending transaction instructions, and which can be handled by feature phones.

Bottom Line: More innovative products and better digital infrastructure are needed to shake up financial services in South Africa.