South Africans’ heavy reliance on cash, instead of using advanced digital payment rails, costs the economy more than R30-billion/year.

This is according to Tim Masela, head of the National Payments System at the Reserve Bank, whose commentary in the Payments Association of South Africa’s (Pasa’s) annual report notes that positive strides taken to digitise the payments ecosystem have been overshadowed by South Africans being slow to adopt digital payment methods.

“In collaboration with the payments industry, the Sarb has advanced the provision of seamless, safer, convenient, affordable and faster digital payment offerings,” Masela said in the report. “While it is encouraging to see somewhat of an increase in PayShap volumes, the overall adoption of new digital payment channels and the utilisation of existing digital payment options in South Africa remains slow.”

Cash can be expensive to produce, but the bulk of cash-handling costs relate to storing and moving it around securely. The Reserve Bank is responsible for making sure cash gets to where it needs to be across South Africa. It keeps cash in secure vaults at its branches and other cash centres across the country. These facilities require top security, which does not come cheap.

The Bank works together with commercial lenders to distribute cash to ATMs wherever it is needed. Armoured vehicles, armed guards and real-time tracking systems are just some of security measures used to keep cash secure while in transit, thus making it expensive.

The costs of handling cash are not exclusively borne by the Reserve Bank and the commercial banks. Retailers who receive cash from their customers also pay to keep it secure while it is on their premises. Cash moves out of the businesses either to go to the bank or to pay suppliers, and the safest way to do this is by paying for secure cash-handling services. Over and above these costs, all these cash handling entities in the economy pay insurance to cover the risk of it being stolen.

Inflationary

For consumers, the impact of cash’s cost burden on the economy is not felt directly. This is because the cost of cash is woven into their bank charges and the prices they pay for goods at the till. Therefore, a rise in the cost of either producing or moving cash around has a silent inflationary effect across the entire economy.

Masela cited rapid payments platform PayShap as one of the key initiatives aimed at providing alternatives to cash. Other initiatives aimed at driving the adoption of digital payments are the introduction of contactless payments and “quick response” (QR) codes.

Read: Why South Africans still cling to cash

Among the challenges hampering the adoption of these innovations are high transaction costs, fragmentation “that is embedded” in various consumer-facing digital payment systems, and financial exclusion in underserved and disadvantaged communities, which are compounded by financial and digital illiteracy.

Other factors, such as the lack of sufficient digital infrastructure and low smartphone penetration rates, are beyond the scope of the Reserve Bank’s mandate.

“Slow modernisation of legacy systems, restricted access to essential infrastructure such as the internet and Wi-Fi, and a general lack of trust in digital payments further hinder progress,” said Masela.

Not all of these issues are external to the financial system. According to Masela, industry stakeholders including the banks and PayShap developer BankServAfrica have been slow to add “crucial use cases” to the rapid payments platform, which are viewed by the Reserve Bank as drivers for the adoption of digital payments.

Read: Debit cards are rapidly replacing cash in South Africa

“I remain optimistic about the future developments and am confident that Pasa and the broader payments ecosystem stakeholders are ready to play their meaningful roles in this journey. The uptake of new functionalities, such as the ‘request to pay’ feature in our real-time retail payments offering, has been promising, and we anticipate higher transaction volumes as we continue embedding further innovative use cases within the system,” said Masela. – © 2025 NewsCentral Media

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