Depending on who you speak to, cash is either still king or simply yesterday’s hero. But what everyone agrees to is that the payment system of today is drastically different from what it was 20 years ago and technological innovations are quickly driving businesses and individuals to conduct more of their banking online.
There is something about using cash that makes many people sleep better at night. In fact, global studies by MasterCard have found that even though the world’s population has access to multiple payment options, cash still accounts for 85% of all consumer transactions throughout the world.
Businesses and consumers are quickly realizing that electronic solutions can bring down costs and remove the need to count, transport and store cash, as well as reduce risks like armed robberies, which is still a major problem in many African countries.
Out of Ghana’s population of 25.9 million, for example, a whopping 18.13 million, representing 70% of the population is unbanked. This has propelled
some financial analysts to advise bankers to tap into the 70% unbanked population to increase their cash deposit base andbase and create more credit facilities for businesses.
According to the World Bank, only 7.77million, representing 30% of Ghana’s population have an account, or hold multiple accounts with banks in the country. Some banks are championing the crusade against the handling of physical cash, with the introduction of innovative online and other internet-based banking products.
Even in the most cashless countries like France and the Netherlands, cash was still found to account for 40% or more of all consumer transactions. In many emerging markets, the cashless share of consumer transactions was found to be “effectively negligible”.
Recent reports out of Europe show clearer moves to a truly cashless society. The Independent, UK, for example, stated on May 15, 2015 that Denmark had moved one step closer to becoming the world’s first cashless society. Its government has proposed scrapping the obligation for retailers to accept cash as payment.
The Danish government projects thatprojects that next year, businesses such as clothing retailers, restaurants and petrol stations should no longer be legally bound to accept cash payments.
The proposal is part of a package of economic growth measures that aim to reduce costs and increase productivity for Danish businesses.
It is generally accepted that Scandinavian countries have been leading the pack in terms of moves to a cashless society. For example, four out of five purchases in Sweden are made electronically, according to The Local in Stockholm.ButStockholm. But it is not likely every country is prepared just yet to take a major leap like Denmark has. For now, expect cash to still be a very popular choice on the African continent. It is also likely that the choices made in the future will differ greatly depending on which country you are in. While the Scandinavian countries are making the leap in their use of payments technology, countries like Ghana and Italy still prefer cash.
It seems the main driving force is the willingness of citizens themselves to use smart technology. Almost a third of the population in Denmark uses an official Danske Bank app called MobilePay, for example.
These technological shifts are also catching on in the US and UK and it is only a matter of time before other countries get the scale and traction of Denmark.
Technology in Africa is already allowing people to send money using their cellphones and to make payments by simply tapping their phones on purchase. There is certainly increasing demand for electronic transactions in many African countries, with people in Kenya fully aware of the benefits technology can bring to banking. Banks have been moving in lock-step with this demand and in fact, have already found powerful solutions that will ultimately move most people out of the traditional ATM or bank branch queues.
An important point about the financial system in Africa and South Africa is that a large proportion of the population remains outside of the formal banking system. There is a major drive by governments and the banking sector to attract more people into the formal sector. There is that part of the population that will, unfortunately, continue to be preyed upon by loan sharks and reckless lenders who are only too willing to dish out loans at exorbitant rates without ever explaining the terms.
But strides are being made to root this out and as this happens more and more people will join the electronic transaction ecosystem in Africa. As banks, we are prepared to meet the challenge and provide solutions to consumers across the continent.
Banks will need to continue innovating to keep abreast of customer’s needs and to help drive change. Putting customers at the heart of the solution is the only way the banking system will truly move forward via more efficiency, lower costs, higher levels of security and ultimately, improve savings rates.
Current innovations on the use of wallet technologies such as Masterpass, SlydePay and many more are now enabling customers to pay for parking and other simpler transcations using cards, thereby further removing the need for cash. Contactless payments which also allow you to “pay and go” are making low-value payments much easier and, as more merchants allow this form of payment, many more customers’ lives are being made simpler.
It is envisaged that by enabling and driving innovations of this nature, cash in your pocket may soon be a thing of the past.
By: Vinolan David, Head of Card Issuing at Standard Bank
