Is South Africa ready for cashless?

A study conducted by Visa suggests that while young South Africans are ready for a cashless society – but there may still be quite a way to go to get there.

Visa conducted a study which involved interviews with 5,500 young adults aged 18 – 28 (known as “millenials”) across 11 countries, including SA, looking at their financial and spending habits. Visa interviewed an average of 500 people per country.

Millenials are a generation of people who grew up with the advent of the Internet and rapidly-developming technology, and make up 25% of the world’s population.

According to the results of the study,  68% of all millenials interviewed believe a cashless society is on the way.

Eight in 10 respondents said they expected it would soon be possible to conduct all their shopping and pay all their bills online. 73% believe this would be possible with a mobile phone.

According to the study, South Africans are the top cards-over-cash adopters in the world (along with the Koreans), with 61% preferring to use cards instead of cash.

South Africa’s youngsters also put a lot into gadgets and technology, with 89% saying it would be “impossible” to live without a computer.

Eight in 10 respondents said they could not live without smartphones, while 50% could not live without TV.

“The research also found that while South African Millennials are ardent users of technology, they are also security conscious. 90% said card security is an important aspect to consider when venturing online,” said Paul Jung, head of Visa’s e-commerce division for Asia Pacific, Central Europe, Middle East and Africa.

“We see a long future for mobile phone and other device-based payments as more people, especially millenials, adopt electronic payments around the world.”

Mobile money in South Africa

SA has already had big developments in mobile payments, with a number of financial services and products available for use with mobile phones.

A number of banking apps are available for smartphones (from FNB, Standard Bank and Nedbank) – while Mxit Money, partnering with Standard Bank, has recently launched its own mobile commerce platform.

Near-field communication (NFC) technology has also started making appearances in the country in various forms.

In December 2011, Absa initiated internal trials for NFC-enabled mobile transactions, embedding the bank’s Paypass Tap and Go payment card on handsets.

The bank has since committed to deploying 4,000 NFC-enabled point of sale terminals in retail stores across South Africa by Q3 2012, for use with the system.

In May, a multifunctional payments card (called a Muvo card) – incorporating both NFC and debit card functionality – was launched in Kwa-Zulu Natal, assisting commuters to pay for their bus fare.

Standard Bank is also issuing debit and credit cards that are NFC ready.

Not all smooth sailing

A study conducted by Juniper Research in July found that NFC retail payments would bring in over $180 billion, globally, by 2017.

The report looked at NFC in 2011 and noted a growing trend in the adoption of the technology by almost all handset manufacturers, as well as mobile operators and financial institutions committing to NFC pilots.

However, according to Tim Walter, executive head of marketing at Nashua Mobile, South African banks and retailers are likely to be slow to adopt near-field communications (NFC) technology.

The reason for this, Walter told BusinessTech in April, is due to the high costs of installing point-of-sale terminals and other enabling infrastructure.

“Most of the major handset manufacturers are bringing NFC to market in the latest models of their mid to high-end smartphones,” Walter said. “Yet we are still a long way off from the critical mass that would really justify massive investment in the technology by banks and retailers.”

“With just 30 million NFC handsets sold in 2011, these devices represent a tiny fragment of the overall mobile phone market. The growth is exponential, but even in advanced markets, NFC looks like it could be two to three years away from mainstream adoption,” Walter said.

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Is South Africa ready for cashless?