FINTECH AFRICA | How Digital Payment Systems Like PayShap Are Driving the Cashless Economy in South Africa

According to the South Africa Reserve Bank (SARB) Digital Payments Roadmap, nearly half of South African adults withdraw all their funds from their bank accounts immediately after they are deposited.

This behavior is driven by factors such as a lack of trust in banks, transaction fees linked to card payments, and limited acceptance of cards by merchants in the informal economy. The bank also noted minimal growth in the demand for banknotes and coins, which decreased by 0.8% in 2023.

Traditionally, cash usage increased in line with economic growth, but the pattern shifted following the Covid-19 pandemic.

Reserve Bank Governor, Lesetja Kganyago, says that South Africans rely too heavily on physical cash and should shift to safer payment methods.

That said, South Africans are quickly embracing cashless payment methods, including credit and debit cards, as well as new systems like PayShap. The Reserve Bank also aims to transition the country’s economy toward a cashless future.

Local banks, through the Rapid Payments Programme (RPP) dubbed PayShap, are driving the growth of cashless payments.

Launched in March 2023, PayShap is a low payments mobile system with nine banking participants, namely:

• First National Bank
• ABSA
• NedBank
• Standard Bank
• Discovery Bank
• Capitec Bank
• Tyme Bank
• Investec and
• Sasfin Bank

participate in PayShap.

Standard Bank, South Africa’s largest bank by size of capital and assets, reported an increase in instant payments fueled by the increasing adoption of PayShap.

Over the past year, the number of Standard Bank clients registering for PayShap grew by 9%, while the active use of ShapID for transactions surged by an impressive 817% year-on-year.

“This data clearly shows that consumers are increasingly seeking more convenient payment solutions. They want their transactions to clear instantly,” said Rufaida Hamilton, Standard Bank’s Head of Payments in South Africa.

“Even our other immediate interbank transactions, beyond PayShap, have continued to rise, highlighting a growing preference for instant payments among our customers.”

The average PayShap payment has decreased to R498 ($28.30), down from R594 ($33.75) in the first quarter of 2024. Hamilton highlighted that this drop reflects a shift toward using PayShap for micro-payments indicating that the platform, intended for quick, low-cost everyday transactions, is serving its purpose.

Since its launch in March 2023, the broader payments industry has processed over 74.2 million PayShap transactions, totaling R46 billion ($2.64 billion).