SARB Governor highlights urgent need for shift from cash to digital payments in SA

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In his opening address at the 2024 Payments Conference, Governor Lesetja Kganyago of the South African Reserve Bank (SARB) outlined a significant paradigm shift in the country’s payment systems, emphasizing the urgent need to modernize and reduce reliance on cash.

Reflecting on the history of South Africa’s payments landscape, Kganyago noted that the country was once a global leader, having pioneered initiatives such as the real-time clearing system in 2006 and the DebiCheck system in 2019. However, he stressed that with the evolving global context, it is essential for South Africa to stay ahead of emerging trends in payment systems to enhance competitiveness.

Read: Government likely to intervene in Eskom’s Proposed 36% tariff hike, says Minister Ramokgopa

Opportunities and challenges

“While South Africa remains committed to maintaining price and financial stability, the retail payment space is undergoing a paradigm shift that presents both opportunities and challenges,” Kganyago stated.

He highlighted a growing reliance on cash among South Africans, despite the availability of digital payment options. According to recent surveys, cash continues to be the most commonly used payment method, often viewed as the most accessible and cost-effective option. “Even though most South Africans have bank accounts, many still withdraw their money immediately, limiting their access to the safety and convenience of digital transactions,” Kganyago explained.

The Governor pointed to a recent decline in the demand for cash, citing a 0.8% contraction in the circulation of banknotes and coins last year, the largest drop since records began in 1960. This trend signals a changing payments landscape, he noted, where cash’s dominance is increasingly being challenged by digital alternatives.

Instant and low-cost transactions

Kganyago also compared South Africa’s payment systems with those of countries like India and Brazil, which have successfully implemented digital payment platforms that facilitate instant and low-cost transactions. He emphasized the need for South Africa to adopt similar innovations to keep pace with global standards.

Looking ahead, Kganyago announced the launch of a Payments Ecosystem Modernisation Programme, the most ambitious initiative in the payments sector since the introduction of the South African Multiple Option Settlement system over three decades ago. The program aims to establish a public payments utility to enhance digital payment infrastructure while prioritizing security and fraud prevention.

“We want to ensure that this new payment system is inclusive, serving all South Africans—rural or urban, rich or poor,” Kganyago asserted. He acknowledged the existing challenges but expressed optimism about the potential for collaboration between public and private sectors to drive innovation.

In conclusion, Kganyago reiterated the need for South Africa to adapt to the evolving payments landscape, framing it as an opportunity to create a safer, faster, and more inclusive payment system. “As we navigate this paradigm shift, it is crucial that we act decisively to ensure that we do not fall behind,” he said.

The conference will continue over the next two days, focusing on discussions around the future of payments in South Africa and the role of various stakeholders in this transition.

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