Large rural and unbanked populations are key issues in South Africa, but some banks are stepping up to the challenge. Credit cards are often better value than loans, and other innovative electronic solutions are also being launched
Despite subdued economic growth, payment card use in South Africa is growing at a healthy pace, primarily driven by government financial inclusion plans, the introduction of basic bank accounts, and improved infrastructure such as ATMs and POS terminals.
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Cash, however, continues to be the preferred payment instrument among South Africans, and is primarily used for low-value transactions. This is primarily a result of low public awareness of other instruments,
and limited access to banking infrastructure, particularly in rural areas. In 2014, cash accounted for 75.8% of the total payment transaction volume.
The unbanked – a large untapped market
The South African government is developing programmes to better serve the unbanked, and is pressuring banks to do the same. Many South African banks now see the unbanked as a priority – partly in response to government pressure and partly out of growing recognition of the opportunities presented.
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By GlobalDataSouth Africa’s unbanked population remains high, providing opportunities for banks to launch low-cost products and open branches in rural or remote areas. Banks have introduced a number of products and services for the unbanked. Absa Bank, Standard Bank, First National Bank and Nedbank offer the Mzansi account – a low-cost basic savings account that gives holders a debit card. Applicants only need to provide a valid ID.
Banks are also promoting other lowcost accounts: Standard Bank, for example, offers Access, a zero-balance account with no monthly fee. These initiatives led to a rise in the country’s banked population during the review period (2010-2014).
According to the World Bank Global Findex survey, the share of the South African population aged 15 or above with a bank account rose from 53.6% in 2011 to 70.3% in 2014. Credit card growth despite debt measures. While growing concerns over debt have prompted the South African government to introduce measures to tackle debt, South African consumers, especially the middle classes, still use credit cards to meet temporary credit requirements.
Consumers have, however, now adopted a more cautious approach to spending, mainly as a result of sustained efforts by the government and banks. Consumer preference for credit cards over personal loans has risen, as a result of the
lower interest rates on credit cards. According to the National Credit Act, the maximum interest rate chargeable on a credit card is 22.1%; on a personal loan the maximum rate is 32.1%.
Banks also offer instalment facilities, flexible repayment options and interest-free credit periods; as a result, the credit card transaction volume recorded a review-period compound annual growth rate of 10.82%.
Alternative payments gain prominence
Banks and payment companies have introduced new solutions, including MasterPass, Zapper and FlickPay in July 2014, and Snap-Scan in May 2014. The MasterPass digital wallet was introduced by MasterCard in association with
Standard Bank, while the Zapper, FlickPay and SnapScan m-payment solutions enable users to pay using QR codes and a PIN.
PayPal has also strengthened its presence in South Africa, allowing customers to receive funds from anyone in the world, and enabling buyers to pay for online purchases. In South Africa, 20,000 merchants and individuals have access to PayPal services.
