In the past, cash may have been king, today however, transacting without cash is hastily becoming the norm. People no longer carry around a wallet full of cash. We can transact from our smartphone or smart watches. There is a push towards digital banking in South Africa. The current drivers of a future cashless society are; digital currencies, digital assets, mobile banking, digital banks, and eCommerce.
In society today, we use our smartphones for just about anything – communicating, entertainment, and networking on social media. Our smartphones are however also becoming a replacement for our wallets. A key driver of mobile banking in South Africa is the rapid adoption of smartphones, largely as a result of the influx of mid- to low-cost smartphones resulting in the country reaching smartphone penetration of over 90%.
FinTech has led to new numerous innovations and startups in the mobile banking space. Mobile banking is a service provided by a bank or financial institution that allows financial transactions to be conducted remotely using a mobile device such as a smartphone or tablet.
An example of this is Masterpass by Mastercard which lets you pay quickly and securely by using the Masterpass app to scan any Masterpass, Snapscan or Pay@ QR code.
Mobile smartphone companies have also entered the payments industry such as Apple, Samsung and Google which have released the following services – Apple Pay, Samsung Pay and Google Pay.
These mobile payment apps allow anyone to use their debit or credit card in participating stores and online by making use of Magnetic Secure Transmission (Samsung Smartphones) and Near Secure Transmission (Apple and Google Smartphones).
Digital banks digitalise all the traditional activities and programs that were once only available physically inside of a bank’s branch. It falls part of the broader context for the move to online banking, where banking services are delivered over the internet.
Digital banks may however not replace cash, but central bank digital currency may. Digital banks will enable us as business and commercial customers to make use of this digital currency. Many banks are actively researching digital currencies to replace cash, with Deutsche Bank, the largest banking institution in Germany, expecting central bank digital currencies to replace cash in the long term world-wide.
In South Africa, we have seen a rise of new banks to compete with South Africa’s big banks. These new banks include Discovery Bank, Bank Zero and Time Digital. These banks and “banking” on digital, with all three putting their core focus on delivering a true digital banking experience.
The shift from traditional banking to digital banking in South Africa has been gradual and remains ongoing. FinTechs and new players will continue to shake up the market. Traditional banks are well aware of this too, and as a result we could see a significant increase in deals and partnership activity with new entrants disrupting the payments/services markets.
According to Statista, eCommerce revenue in South Africa is expected to show an annual growth rate (2020 – 2025) of 9.2% and reach user penetration at 53.1% by 2025. This means more people will be transacting online for everything from digital products to their groceries, eliminating the need to visit a physical store, and thus eliminating the need to handle cash.
eCommerce offers a higher level of convenience, boosted by cashless electronic payments. Another reason eCommerce is a driver of FinTech adoption in South Africa relates to the fact that it offers real-time accessibility of ecommerce products which can be accessed from any device at any time.
As digital wallets become more widespread, digital wallet payments may become the preferred method to transact online. Digital wallets can help to ease privacy and security fears for consumers who still view cash as a form of protection from cybercrime. This is because digital wallets holds our card data and keeps us from having to place our trust in multiple eCommerce sites or apps with our banking details.
eCommerce is growing year on year, however still faces a host of issues, including cybercrime, fraud and privacy. Resulting in many people choosing not to purchase goods online, and continue to make use of bricks and mortar shops, where many purchases are still made with cash.
The development of numerous blockchains has brought about cryptocurrencies, security tokens and stablecoins. These digital assets can be used as a medium of exchange, as a store of value or for speculating on price movements. Cryptocurrencies are virtual currencies independent of government control or any central authority, however not all cryptocurrencies are truly decentralised.
With digital assets like cryptocurrency we can hold on to a particular cryptocurrency hoping that it may increase in value in the future. We can make loans, or take out loans in cryptocurrency. Goods and services can also be purchased with cryptocurrencies wherever it is accepted as a means of payment.
One of the best reasons to transact with cryptocurrencies is that you can transfer the funds, depending on the cryptocurrency and its blockchain, instantly, and with low fees, as compared to traditional financial institutions, where transfer of funds could take more than a day. Some cryptocurrencies enable you to transfer funds in under 10 seconds.
Cryptocurrency and blockchain is still in its infancy. Digital assets may become alternatives to fiat currencies like the Rand (ZAR) or to tokenize assets. In South Africa, no legal protection or recourse is afforded to users of cryptocurrencies. As such, and due to many fraudulent activities and hacks, many people steer clear of cryptocurrencies.
Better regulation and better education on cryptocurrencies could be a proponent for the adoption of digital assets, aiding the transition to a cashless society.
Due to financial innovation, securitisation, globalisation and advances in technology – the nature of commercial banking in South Africa is quickly changing. Digital mediums are convenient. No need to spend valuable time of your day looking for an ATM to transact or get cash. A cashless society also makes it difficult for people to avoid paying their taxes. With digital payments, most payments will be traceable and taxable.
So, will cash one day be a thing of the past?
Investing in digital assets is highly risky and speculative. A qualified professional should always be consulted before making any financial decisions. CryptoLive makes no representations or warranties as to the accuracy or timeliness of the information contained on the site. None of the information you read on CryptoLive should be taken as investment advice. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own diligence before making any investment decisions. CryptoLive is not accountable, directly or indirectly, for any damage or loss incurred, alleged or otherwise, in connection to the use or reliance of any content you read on the site.
Get started with just R10
Trade the largest selection of cryptocurrencies available in South Africa by signing up to VALR, and receive a 10% rebate on your trading costs, up to a total of R1,500 using our link. Sign up to VALR
What's Your Reaction?
Leigh Williams is the founder at IXA Media (Pty) Ltd., a digital marketing solutions provider and the publisher of CryptoLive.co.za