Eight out of 10 SA adults may well have a bank account, but 73% of point-of-sale transactions are still conducted in cash, according to Statista. The reliance on cash is particularly evident in the township economy, where more than 1.8 million informal traders operate.
Township economies are vibrant yet often underdeveloped microcosms of trade and enterprise. These areas are home to thousands of informal small businesses, such as spazas, street vendors, hair salons and taxi operators, among others. While these businesses play a critical role in community livelihoods and the national economy, they face significant barriers to growth and efficiency. One of their most pressing needs is the adoption of modern cashless payment technologies. By integrating cashless payment systems – such as card readers, mobile payment apps or QR code-based services – these entrepreneurs can start building a digital financial footprint. Cashless payment systems can serve as a bridge, bringing informal businesses closer to the formal economy. This integration benefits the national economy through better data, improved tax collection and increased economic activity.
Apart from the security concerns about cash, many informal businesses do not have formal accounting systems, relying instead on simple notebooks. Modern cashless payment systems often come with built-in analytics, sales tracking and inventory management features. These tools help entrepreneurs understand their business performance, track expenses and even forecast trends. Digital records also help business owners legitimise their operations, which is crucial for partnerships, funding applications and scaling up. Streamlining these business processes with technology can dramatically improve productivity and sustainability. When transactions are traceable and verifiable, businesses can more easily comply with tax regulations, register with authorities and engage in more trade with larger more formal organisations.
‘Small, informal businesses are the backbone of South Africa’s economy, yet many operate outside the traditional financial system, lacking access to digital payments, affordable banking, or reliable credit. Many informal businesses cannot accept card or digital payments due to high infrastructure or banking requirements. The need for inclusive, affordable and accessible financial tools is more urgent than ever,’ says Kagiso Mothibi, CEO of fintech at MTN South Africa.
MTN has developed MoMo, a mobile money platform designed to digitise payments. It enables merchants to receive MoMo Pay payments instantly via QR code, merchant ID or payment request, for a transaction fee of 0.5%. Merchants can also diversify their revenue by selling airtime, data, prepaid electricity, DStv, Lotto, bus tickets and other value-added services directly through the MoMo app, earning commission on every sale.
‘Over the next 3–5 years, we can expect to drive mass financial inclusion by digitising even the smallest businesses. Micro-entrepreneurs will not only accept payments, but we can help them become service hubs, earning commissions and building local trust. Our digital ecosystem is growing [and] as usage expands, new products like microloans, savings, and insurance can be layered in, creating a full digital finance experience and opportunities for these small merchants. Empowered merchants mean stronger local economies, job creation and a more dynamic informal sector,’ he says.
Consumer behaviour is evolving globally, and SA is no exception. Increasingly, township consumers own smartphones and are becoming comfortable with digital transactions, especially as banking apps, mobile wallets and platforms such as SnapScan, Yoco and Zapper become more widespread. By accepting digital payments, informal businesses meet customers where they are. This not only enhances customer satisfaction and loyalty but can also drive transaction volumes. Customers are more likely to make impulse purchases or spend more when not limited by the cash they carry. Meeting modern payment expectations can, therefore, drive higher sales and profitability.
By investing in cashless payment infrastructure, informal businesses also become more resilient to future shocks, whether from pandemics, natural disasters or economic downturns. This preparedness is vital for long-term sustainability. Digital payment platforms are also often gateways to broader technological ecosystems. Once a business is equipped with a cashless payment device, it can explore other digital tools: online ordering, delivery apps, customer loyalty programmes and digital marketing, to name a few. These technologies allow township businesses to innovate, differentiate and compete – not only within their local area but in regional and even national markets.
In January, eight of SA’s largest non-bank digital payment providers launched the Association of South African Payment Providers (Asapp) to ‘promote fair access to payment infrastructure, reduce the wholesale cost of digital payments, and enhance transparency and customer mobility within SA’s payment ecosystem for individuals and businesses’. It says it aims to create more opportunities for financial inclusion by advocating for increased support for and participation of non-bank payment providers in the payment ecosystem.
‘We see cash as being the most dominant form of payment for many consumers, micro-merchants and small businesses in townships, villages and city centres across the country. This is not sustainable. We need to digitise our economy. We need to open up our payment system, make it more modern and inclusive, so that more merchants, small businesses and consumers can participate in a modern payment environment,’ says Asapp president Lincoln Mali, CEO of Lesaka Technologies.
The Asapp founding members – Altron, Hello Group, iKhokha, Lesaka, Network International/Payfast by Network, Peach Payments, Shop2Shop and Yoco – represent a large portion of the country’s non-bank payment ecosystem.
Mali says ‘working in collaboration with regulators and industry stakeholders, Asapp will contribute to addressing challenges and explore innovative opportunities to unlock a more inclusive digital payments future’.
‘Globally, non-bank entities are driving the future of payments. In just more than a decade, non-bank and fintech disruptors have gained substantial market share, transforming the industry. South Africa is following this trajectory, with non-banks positioned to play a significant role.’
He says Asapp wanted a payment system that was ‘democratised and digitalised’.
‘The cost of transactions is prohibitive to the small business and to the consumer, and that’s why they end up using cash, because the alternatives look expensive and they don’t look viable. What we need to do is to show viable alternatives to cash.’
It goes without saying that promoting collaboration between government, financial institutions and technology providers is essential for developing and implementing comprehensive digital payment solutions across the informal sector.
In 2023 Accenture performed a detailed analysis of the informal supply chain market by interviewing 400 spaza store owners across Gauteng and the Western Cape. ‘In the informal sector, for example, trade activity can be supported by visionary fintech solutions and complementary products and services that help spaza shops source effectively, reach their customers and grow,’ says Sheetal Patel, retail management consulting principal director of Accenture in Africa, who headed the study.
‘Banks, telecommunications companies, retailers and CPG [consumer packaged goods] suppliers are all scrambling for a share of the pie. Non-traditional players like fintech are rising and offering informal business owners safe and convenient payment solutions. Yoco and iKhoka, for example, offer easy-to-set-up point-of-sale devices that can be operated through a cellphone, using the signal of the user’s mobile network, or built-in 4G cards that provide uncapped internet access. The entire onboarding experience is paperless, remote and at minimal cost to the vendor. This technology is simple, scalable and safe.
‘Research reveals that South Africans, particularly in the informal sector, believe banks overcharge on transaction costs, offer little protection against scams, and money takes too long to clear on the trader’s side – affecting cash flow. With the development and introduction of digital payments, more and more traders are using an array of new digital payment facilities to make payments for stock bought from suppliers. Traders have also introduced other options for shoppers to pay for groceries at the spaza shop. These digital facilities also offer value-added services for shoppers to purchase at their convenience, for example, airtime/data, electricity, water, money transfer and Lotto tickets.’
However, despite the vast opportunities in this market, Accenture says retailers need to challenge the existing behaviours in this sector to deliver an optimised, tailored value proposition to the audience. ‘Those who partner with the informal sector must demonstrate clear value to shift behaviours.’
Image: iStock
