By Cat Denoon-Stevens, Head of Product Incubation at Mukuru
Is cash truly dead? With the rapid rise of fintech innovations and digital payment solutions, one might think so. Yet, despite the digital revolution sweeping across African societies, cash remains very much alive—and for millions, it is still the preferred way to transact.
With the massive influx of fintech companies constantly innovating to bring accessible products and services to the underserved and unbanked in African societies, one might be tempted to declare that cash is dead, or that if it isn’t dead yet, it is on its very last legs. However, fintechs that are well-embedded in Africa and other emerging markets will be well aware that cash is, in fact, alive and well. In many instances, it is the primary form of tender.
Rather than spell doom and gloom for fintechs on the continent, it provides a compelling opportunity. By listening to customers and providing the right products and services at the right time, and, importantly, on the right platform fintechs can bridge the gap between cash and digital payments. Essentially, it means providing choice and then walking along the digital journey with customers as they choose to move from cash to digital payment options.
When designing products and services, it starts with understanding the market. Let’s look at South Africa. Around 20 million adults in this country have a preference for cash transactions. This includes banked individuals who still prefer to transact in their day-to-day lives in cash. Despite 80% of South Africans having bank accounts, cash remains the dominant payment method. A striking 94% of adults withdraw cash each month, according to the recent FinScope study. This shows in daily transaction behaviour at retailers on the ground. Statista writes that about 73% of point-of-sale transactions in this country are still conducted in cash. According to a recent estimate in an index tracking digital adoption, the informal economy is estimated to be worth R600-billion to R750-billion.
The point is that there is strong evidence that cash is central to millions of people in our country. Now, as the world digitises and fintechs and other service providers develop even more sophisticated products and services, an important question must be asked: Should these cash-bound consumers be excluded from transacting in the digital economy? Mukuru’s answer is a strong no. It is important for payment providers and fintechs to serve these customers in ways that suit them, and that includes giving them choice of a range of payment options – cash and digital.
But don’t be fooled. While access is important, it would be a mistake to assume that just because someone has a bank account, they will always prefer digital transactions. And so, while we all understand and appreciate the informal economy, there are large swathes of those in the formal economy that also still prefer cash. Many receive their salaries in cash and therefore have to pay with it, while others may receive their income digitally but withdraw it to use cash for payments out of necessity or the added control of holding their funds in their hands.
For fintechs looking to make inroads in this country, and in many others around the continent, the key point is to ensure customers are given a choice to use their preferred payment method, whether that’s cash, digital, or a combination of both.
Let’s take a step back and look at the life of a digitally savvy consumer. While we may make use of apps for online food delivery and conduct all our banking and other transactions digitally, many of us still enjoy physical experiences. Other times we are forced to go with hard currency. What about when you’re on holiday and an informal farmers’ market only operates with cash? Perhaps you’re at a school sporting event on the weekend and the hotdog stand doesn’t have card facilities. It is clear that even digitally savvy consumers may still have a preference, or need, for physical cash-based transactions, and so forcing a digital-or-nothing approach on underserved communities just doesn’t make sense or accurately reflect the state of the world.
If you were born in an era where you walked into a physical bank, filled out a slip and deposited cash to make a payment, do you remember the trepidation you felt the first time you used Internet banking? It takes time to develop trust, and so fintechs, while gently easing cash-based customers into the digital economy, need to place trust front and centre of what they do. Older generations may still be very uncomfortable transacting digitally – made worse by fraudsters targeting everyone, but the vulnerable specifically.
Being able to offer vulnerable customers the option to transact in cash goes a long way towards building a sense of security and trust. When you develop new products and services, customers won’t use them if they don’t trust you.
At Mukuru, we recognise the trend towards digitisation, which is why we continue to develop products based on what our customers need and that offer choice for blended physical and digital access. Over half of the remittance payments made through our platform are done in cash. We are seeing a trend to digital payment adoption, but it hasn’t yet tipped the scales away from this cash majority. Another example is our partnership with Payfast, where we enable cash-based ecommerce transactions through MukuruPay (“MPAY”). Here, we enable customers who prefer cash to gain access to the digital economy. They can shop online at some of their favourite online stores and pay in cash.
In a world rapidly moving towards digitisation, cash remains an essential element of financial inclusion for millions. Fintechs must embrace this reality, offering flexible solutions that meet customers where they are—whether in the physical or digital realm. The path to full digitisation is not a forced march, but a journey we must walk alongside our customers, offering them the trust and choice they need to make the transition.