Cash remains the payments option of choice for most South African consumers—with peak trading periods like the festive season seeing a sharp increase in the cash transactions that retailers need to handle. It’s important that retailers support customer choice by enabling shoppers to pay by card, with smart devices, or notes and coins.
That’s according to Mark Templemore-Walters, Operations Director at Cash Connect, who says that as many as 90% of transactions in South Africa are still settled with cash. Retailers need to continue to support cash transactions to avoid excluding people who don’t have bank accounts or cards, as well as to maximise sales over the festive season, he adds.
According to Bankserv—the banking sector’s clearing partner and official payment system operator—consumer preference for cash is particularly evident over holiday periods such as the festive season. The organisation says that the amount of cash circulating in South Africa is R182 billion, with orders of R84 billion processed during the December period last year.
The role of cash in inclusive retailing
Templemore-Walters says that retailers that go cashless, risk shutting out people who can’t use cards or digital payments because they don’t have a smartphone, or who can’t get a bank account and card as they don’t have an ID or proof of address. These are some of the most vulnerable populations, including those in rural areas and foreign nationals.
According to research from the Bureau of Market Research, commissioned by Capital Connect, around 11% of transactions over the Black Friday and festive season periods will go through informal retailers—the vast majority of which operate on a cash-only basis. Accenture research shows that 80% of South Africa’s population visits spaza shops daily.
In addition, cash costs are low for consumer and merchant alike for many transaction types, particularly smaller payments. “Cash is convenient, universal and works when there’s load shedding. It gives consumers privacy and control,” says Templemore-Walters. “The barrier of needing a card terminal, computer or phone to pay and be paid doesn’t exist with cash.”
Research from fintech company, Stitch, shows that half of consumers favour cash because it’s more convenient, while 41% say it’s safer, 25% say fees for digital payments are too high, and 22% value the anonymity. “Despite the hype about digital payments, cash still clearly has a strong role to play,” says Templemore-Walters.
Supporting consumer choice
Leading retailers should not choose for customers how they pay, but give them the choice of options that meet their needs in terms of cost, speed, convenience, accessibility and security, he adds. Retailers should ensure that shoppers can transact safely and conveniently in-store, whether they want to use cards, cash, or a digital wallet.
Contrary to popular belief, cash acceptance is no more expensive or risky for retailers than card or digital payments, says Templemore-Walters. Retailers that automate cash management can offer a safer trading environment, while reducing operating costs. Today’s solutions save time and money by eliminating manual reconciliations and banking, and counting and double-count supervision.
The business case for automated cash handling in retail
Automated cash handling can deliver a saving of up to 40% in time and money. A robust solution will allow the retailer’s cash to reflect in its bank account on the same day that the cash-in-transit company collects it. Some even offer instant access to cash in the vault. From the moment the cash is deposited into the vault, while in transit to be processed, and until it appears in the bank account, the provider covers the risk.
In an automated environment, cash management may cost a retailer with around R2 million in cash receipts per month and six cash-in-transit (CIT) collections a week as little as R0.80 per R100. Debit and credit card transactions could cost this same retailer between R0.70 and R3.50 per R100, accounting for costs such as device rentals, overnight delays in fund clearance, and processing fees. Use cash for transactions is an economical and cost-effective solution for merchants.
Market leaders such as Cash Connect, a member of the Connect Group, offer automated cash management as part of a wider portfolio of fintech retail solutions. Retailers can Click & Borrow to access working capital up to R5 million in just 24 hours. If they have a Cash Connect retail vault (automated business safe), repayments are deducted in small daily instalments straight from cash in the vault, or daily debit orders from the retailer’s bank account, to limit the impact on cashflow.