From cash to cloud

Sculptor Boniface Chikwenhere started selling his creations on the side of the road in Somerset West about 10 years ago. People liked his art – which he creates using driftwood, found-wood and mineralised wood – but only being able to accept cash saw him lose sales.

Out of frustration, the Cape Town-based founder of Unique Driftwood Creations decided to make use of a portable card payment machine. However, this proved difficult. Getting a traditional card payment machine from a traditional bank requires a lot of documentation, and they are expensive. 

“I used to lose out on a lot of money because I did not cater for card payment customers and banks required a lot of paperwork,” he says.

Multiple steps for a single sale

For determined customers, this meant considerable inconvenience. “I would ask customers to go and deposit the money in my account and they would have to come back at a later stage to collect their sculpture after I had seen the payment reflect in my account,” Chikwenhere says.

Chikwenhere knew this was not a feasible way of ensuring the growth of Unique Driftwood Creations, so he bought a portable card payment machine from Yoco.

He says his revenue increased drastically. “I was selling a lot more sculptures after I bought the [card payment] machine. I would even make a sale of R10 000 with just one customer.” 

Unique Driftwood Creations now earns R150 000 worth of sales through card payments monthly.

It has a store at the V&A Waterfront in Cape Town, and eight employees. Its African inspired artworks are also available at art galleries across the country, and occasionally at pop-up markets too.

“I never thought that I would make a living out of this, let alone have employees,” he says.

From cash to card …

Chikwenhere is not alone. Gone are the days when payments could only be made in cash. The financial sector is undergoing rapid change and payment choices now range from cash, card and debit orders to mobile payments and real-time online internet payments.

When it comes to innovation, fintech start-ups have been at the forefront, challenging traditional banks and providing more affordable card payment machines – and merchants are reaping the rewards.

Visa country manager Aldo Laubscher says small businesses are increasingly benefitting from the cash-to-card move, with research showing that accepting digital payments increases revenue for small businesses by as much as 40%.

“This is a key compelling reason for SMEs [small and medium-sized enterprises] to adopt digital payments,” he says.

Laubscher adds that the growth of fintech is playing a key role in bringing financial services to SMEs, with more card propositions being brought to market to assist small businesses.

South Africa’s fintechs include iKhokha, which has over 45 000 merchants, and Yoco with 50 000.

More than just payments

Laubscher says small businesses can also gain access to funding and improved working capital when making use of fintech.

“These card and mobile offerings are not just digitising general payments, but with tokenisation, contactless [payments] and other technologies, access to online supplier orders, discounts and convenient on-the-go payments [for things] like fuel and repairs becomes much simpler and frictionless.”

Laubscher adds that the move to cashless benefits the economy as it increases merchants’ contribution to GDP. It also results in a decrease in the shadow economy.

“A Visa study shows that more than 23% of the world’s economy annually [over $10 trillion] is conducted out of sight of governments,” says Laubscher. “Digitising payments can help reduce this undeclared output and improve GDP.”

The evolution 

Laubscher says though cash is still frequently used in sub-Saharan Africa, and many parts of South Africa, there is an evolution toward more card-free forms of payment.

“When you look at the growth rate of e-commerce, it is all card-based but not with actual cards – and that’s growing much faster than the rate of retail, where people may be actually swiping or dipping a card,” Laubscher says.

He says sub-Saharan Africa remains a hotbed for mobile money services. “Last year there were 395.7 million registered mobile money accounts in the region, representing nearly half of total global mobile money accounts. The region is now served by more than 130 live mobile money services, many of them led by mobile operators, and a network of more than 1.4 million active agents.

“The time horizon for a cardless future is uncertain, but ultimately we are going to be in a position where you don’t need a physical element to carry around with you to provide the information you need to pay.”

Laubscher believes consumers should prepare themselves for a time when information is stored on a mobile phone, a wearable device, or a combination of devices.

“It’s going to take time just because people are very used to cards,” he says. “But that is going to change dramatically.”

The rise of digital wallets and cyber crime

Laubscher says smartphones and fast mobile data connections have given rise to digital wallet adoption significantly. Consumers find digital wallets convenient because they are freed from the burden of currency, coins, and last-minute trips to the ATM.

“We believe that anchoring the future of digital wallets – in our case, Visa Checkout – directly in consumer needs and reducing payment friction will drive digital wallet development and use,” says Laubscher.

Security is often a major concern for shoppers. South Africa has the third-highest number of cyber victims, according to a report by the South African Banking Risk Information Centre earlier this year. 

It showed that from January to August last year, cyber and digital banking saw losses totalling R183 million, while mobile banking crimes increased by 100%. Online banking scams account for the biggest e-commerce loss, at more than R89 million.

However, Laubscher believes e-payment machines offer consumers a “safe and seamless way to pay”.

“Further education is key so that local consumers can understand the security benefits of electronic payments,” he says. “For example, Visa contactless cards are built on secure EMV [Europay, Mastercard and Visa] chip technology, which has proven effective at reducing counterfeit fraud.”