In the heart of South Africa's vibrant township economy, valued at an estimated R750bn, a transformative shift is taking place. Small to medium-sized businesses are flourishing as the adoption of cashless transactions grows.
Despite the widespread availability of banking services, cash remains dominant, and collaboration between private and public stakeholders is essential to address perceptions, drive down costs, and increase the uptake of digital payment solutions.

According to research by Statista, while eight out of ten South African adults have a bank account, 73% of point-of-sale transactions are still conducted in cash, highlighting the need for a significant push towards digital payments.

The reliance on cash is particularly evident in the bustling township economy, where more than 1.8 million informal traders operate.

This preference is driven by several factors: the inclusive nature of cash allows everyone to participate in the economy irrespective of financial status, while physical currency also offers immediacy and ease of use.

Digital payments can enhance safety by reducing the risks associated with cash while offering greater convenience through faster transactions and 24/7 accessibility.

Beyond providing a layer of financial transparency for merchants, digital transactions and payment histories will now help these informal businesses build transactional profiles, making it easier for them to access loans and financial services.

This, in turn, can drive economic growth by supporting local entrepreneurs and cultivating a safer society.

However, in order to drive the adoption and usage of cashless transactions among informal businesses, several steps still need to be taken by private and public sector stakeholders:

Address cost and perception issues


Developing affordable digital payment solutions and launching education literacy campaigns can help dispel misconceptions about digital payments.

Improving financial and digital literacy through training programs and community outreach is also essential to ensuring that all segments of the population can benefit from digital payment systems.

Enhance digital infrastructure


Expanding internet and mobile network coverage, especially in underserved areas, and modernising payment systems to support real-time, low-cost transactions will make digital payments more attractive and accessible.

Building trust in digital payments is equally important. Ensuring robust security measures and promoting transparency in digital payment fees and processes can help build confidence among users.

Regulatory support and incentives play a key role

Creating a supportive regulatory environment for digital payment adoption and providing incentives for businesses to adopt digital payment methods will encourage the transition to a cashless society.

While the South African Reserve Bank (SARB) is busy with a digital payments strategy to try and promote digital payments more broadly across the country, cost-sensitive consumers in townships will continue to rely on cash until certain regulatory fees (such as interchange and other bank transaction fees) are addressed.

Finally, promoting collaboration between government, financial institutions, technology providers, and community organisations is essential for developing and implementing comprehensive digital payment solutions.

Digital payments gaining momentum

Despite the dominance of cash, the transition to digital payments is gaining momentum for small to micro businesses.

Firms like Yoco, Shop2Shop, Flash and iKhokha are at the forefront of this revolution, providing the tools and technologies needed to pave the way for a safer, more efficient, and inclusive economic environment.

Traditionally, people living in townships had to catch a taxi or a bus to the closest mall to withdraw cash. Now, thanks to the widespread availability of these card payment options at local community stores, residents can purchase goods directly from nearby shops.

This not only supports small entrepreneurs but also saves customers money on transportation costs.

The convenience of cashless transactions has led to a notable boom in the informal economy. More and more people in townships and informal areas prefer to spend small amounts at local shops rather than withdraw large sums of cash.

This trend, accelerated by the Covid-19 pandemic, has made shopping safer and more convenient, reducing the need to queue at malls and ATMs.

The success of cashless payments has also benefited banks like Capitec and TymeBank. As more customers use their bank cards for transactions, banks are reducing ATM costs and focusing on enhancing digital payment infrastructures.

This shift supports the broader goal of financial inclusion, ensuring that all South Africans can participate in the digital economy.

Seemingly ahead of the curve in this cashless transformation is Shop2Shop, whose innovative solutions and agile methods are making a significant impact on small businesses in the informal economy.

To further support cashless transactions, firms like Shop2Shop offer digital vouchers, which can be used for payments. Their efforts highlight the potential for a broader transition to a digital society, which additionally reduces the risks and costs of handling cash.

Although a fully cashless society is not necessarily the end goal, by taking these steps, South Africa can make significant strides towards creating more inclusive opportunities for small and micro businesses, which are the lifeblood of the economy.

Furthermore, it bridges the divide between the informal and formal markets, which stimulates economic growth within the country.

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