In South Africa today, cash transactions continue to dominate the majority of financial activities. Despite a banked population that exceeds 85%, South Africa still has a high reliance on cash relative to some other countries. According to BankservAfrica, nine out of ten transactions in South Africa are conducted using cash. This preference for physical currency is evident in both informal small business customers (95%) and formal business customers (63%).
Cash remains widely used by low-income earners who have limited access to digital payment methods and live in townships or rural communities where digital transactions are not always accepted. Studies done around the world have shown that using cash comes with costs that affect an individual’s financial and social well-being.
While most individuals are aware of the direct costs associated with cash usage, like transaction fees from banks, the indirect socioeconomic costs often go unnoticed. These hidden expenses include the:
- Money spent on travelling to find cash points.
- Time wasted during those trips.
- Opportunity cost of holding cash instead of depositing it in an interest-bearing account.
- The risks of loss or theft.
Unfortunately, these costs disproportionately burden low-income earners, creating a significant barrier to financial inclusion. In a 2017 Mastercard study, it was uncovered that cash put consumers out R23 billion or 0.52% of the country’s GDP in 2015.
For businesses, the management of paper money presents a range of challenges. It necessitates secure storage, vigilant guarding, and accurate accounting practices, while transportation can be challenging and potentially dangerous. SMEs, particularly those operating in rural areas, bear a disproportionate burden of these challenges. These cash-dependent enterprises often lack the resources to implement advanced security measures or utilise cash transport services, which unfortunately makes them more vulnerable to theft.
How is this being addressed?
South Africa recently saw the launch of Payshap, a rapid payments program developed as part of the SA Reserve Bank’s vision to simplify and make real-time payments more affordable and efficient, however, the costs charged remain prohibitive for lower income earners.
In recent years, there has been a number of fintechs that offer financially inclusive products and services, enabling users to transact at little to no cost. One such example is Be Mobile Africa, a neobank focused on improving the lives of the unbanked and underbanked population in Africa by giving them access to basic banking services.
Be Mobile Africa eliminates a significant financial barrier that often prevents individuals without traditional bank accounts from accessing basic banking services. By providing affordable banking services, Be Mobile Africa aims to provide equal opportunities for financial participation and empower individuals who have been excluded from the formal banking sector.
With Be Mobile Africa, users can stay in control of their money, with a choice of over 14 currencies and zero monthly fees. Individuals can apply for a free account from their mobile phone in minutes and use it to make or receive payments, and send money to loved ones back home at a near-zero cost.
By leveraging the power of blockchain technology, fintechs like Be Mobile Africa are able to reach individuals in underserved areas, including those living in townships or rural communities, where traditional banking services may be limited. By providing convenient and affordable banking services, individuals and businesses can make payments, save, borrow and participate more actively in the formal economy.
Fintechs like Be Mobile Africa help to move closer to a future where cash dependence is reduced, financial inclusion is enhanced, and the hidden costs of cash transactions are significantly diminished.