Digital payment trends in South Africa

by Anupam Pahuja. Digital payments have shown a massive growth trajectory over the last 18 months on account of the pandemic. We have seen accelerated adoption of technology as retail moved from physical to digital. Last year alone, an additional $900 billion was spent on retail ecommerce across the globe. Locally, consumers adopted digital across all aspects of their lives – entertainment, ordering food shopping; pursuing hobbies; health and wellness, to name a few.

In order to survive and cater to the changing needs of consumers, many brick and mortar-only companies took their business digital. Those who were already digital enhanced their capabilities to meet the needs of a larger consumer base.

Experts predict online shopping, which rose exponentially during this time, is here to stay post-pandemic, as newly converted digital shoppers enjoy the convenience of doorstep deliveries and a seamless checkout experience. What does this mean for businesses and merchants? If there is one thing we have learnt in recent times, it is the importance of adopting a growth mindset, and the need to be able to adapt quickly in order to survive and thrive. Below are four digital payment trends we expect to play out.

1. Contactless payments solutions will become mainstream

Payments via apps and QR codes in lieu of cash and physical transactions started gaining momentum last year to address safe distancing requirements. These methods have increased in popularity on account of being user-friendly, easy to implement and featuring low setup costs. With QR codes, customers can view the menu, order and pay for their meals at a restaurant without physically interacting. This process is just as seamless when shopping online, enabling consumers to scan and pay at checkout. As consumers continue to seek convenience and safety above all else, it is imperative that businesses offer a seamless purchasing experience if they want to garner a larger consumer base.

2. Digibanks will revolutionise the banking experience 

We’ve seen countries around the world like China, Japan, the United States, United Kingdom and Sweden issuing digibank licenses, seeing the potential digibanks have in leading innovation and enabling better outcomes for customers and merchants, especially small businesses. With digibanks, there are fewer overheads, and they offer incentives like higher interest rates for deposits and lower fees for financial products. The use of AI and machine learning enables digibanks to deliver services and products with greater speed, efficiency and personalisation over traditional banks. Digibanks will play a pivotal role in supporting SMEs, which have traditionally faced issues getting access to financing options from traditional banks. Their flexible offerings can be tailored to the niche requirements of SMEs and freelancers. This trend is certainly growing in South Africa with two digibanks already in operation and a third expected to launch soon. Most of the traditional banks have also revamped their digital solutions to offer a better service and provide choice to consumers.

3. Flexible payment plans becoming the norm

According to the International Monetary Fund, the global economy shrank by 3.5% last year. In order to rebuild and boost growth,  governments across the globe have launched relief efforts to support companies impacted by the pandemic. However, even with government intervention, the world is unsure of how long the economic slump will continue, with many consumers and businesses remaining conservative about spending, turning to affordable and flexible options like paying in instalments. Compared to credit cards, the perks of 0% interest offered by schemes like buy now pay later (BNPL) have made them a very attractive option at checkout. Given the economic environment and consumer concerns over personal finances, we will see more of these solutions being offered by merchants.

4. Increase in fraud and risk

As digital adoption increases, we are also seeing an increase in fraud as bad actors try to manipulate loopholes. Fraudsters are especially active in retail, classifieds, creating fake courier services, booking apartments or renting a household space which they either do not own or does not exist. The key threats that we are seeing in digital payments include:

• Fraudsters use your brand to create fake websites that take orders and either do not deliver or deliver low quality/ fake products. This results not only in financial losses but in reputational damage as well.
• Fraudsters cause direct financial losses by targeting your infrastructure, money and/or products directly.

Managing risk needs to be the key priority of businesses of all sizes and this can be done effectively by partnering with experts while you focus on growing the business.  We urge merchants to take a technological approach to protection, using the modern capabilities of automated protection and analytics platforms. The cost of fraud is much higher than the cost of preventing it.

Main image credit: Photo by Ivan Samkov from Pexels.   

Anupam Pahuja is Paypal VP, India, South East Asia, Middle East and Africa. PayPal has remained at the forefront of the digital payment revolution for more than 20 years. By leveraging technology to make financial services and commerce more convenient, affordable, and secure, the PayPal platform is empowering more than 400 million consumers and merchants in more than 200 markets to join and thrive in the global economy.

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