South Africa kissing cash goodbye

South Africans increasingly use their mobile phones to pay instead of physical wallets, with adoption rates matching or surpassing those of cities in other emerging markets and developed economies.

This was revealed in Discovery Bank’s SpendTrend24 report, compiled in collaboration with Visa.

The report used data from Discovery Bank’s clients in South Africa and data from over 60 million Visa cards worldwide and over 3 billion transactions.

In the 2024 edition of the report, Discovery Bank and Visa also took a deeper dive into the spending habits of South Africans across the country’s three major metropolitan areas – Joburg, Cape Town, and Durban.

This was then used to compare how South Africans spend their money in these cities with their global counterparts in emerging markets and developed nations.

Despite a challenging macroeconomic environment, South Africans proved resilient in 2023 compared to their global peers, with spending growing slightly.

In particular, spending via digital wallets, such as Apple Pay, grew sharply in South Africa, increasing by 9% in 2023 versus 2022.

According to the 4Sight Digital Banking Behaviour Survey, more than 60% of South Africans prefer digital wallets because this technology eliminates the need to carry a physical wallet. They also offer easy payment tracking and convenience in shopping and making payments.

Digital wallets remove the risk of physical theft or loss linked with carrying a physical wallet because they safeguard your financial details behind layers of electronic authentication.

Mobile wallets use biometrics, encryption and tokenisation to verify each transaction, making them safer for payments than cash or physical cards.

Compared to the national average, Joburg residents use digital wallets for in-store purchases at 1.75 times more than the typical South African.

Capetonians followed this at 1.5 times. Meanwhile, Durban residents have an adoption rate of 1.3 times that of typical South Africans.

Interestingly, South Africa’s growth in spending and frequency of using digital wallets for payments outpaced that of all global cities where digital wallet data is available. This is shown in the graphic below.

Compounding the shift away from physical payments, South African spending online grew five times faster than in-store spending in 2023.

South Africans increasingly shop online, surpassing other emerging market cities and keeping pace with developed peers.

According to a survey by 4Sight, 82% of South Africans made an online purchase in the past year.

Despite this trend, Euromonitor’s research indicates that South Africans still value physical shopping experiences, enjoying visits to shopping malls and browsing in stores, even if they don’t intend to buy anything.

Many South Africans also compare prices online regularly but prefer shopping in-store for the immediacy of purchase.

Online grocery shopping is emblematic of this trend and has become increasingly popular. Between 7% and 15% of grocery spending now happens online.

Furthermore, spending on groceries online grew by 10% in 2023, compared to only 2% for spending on groceries in-store.

Online grocery spending is now spread more evenly across the week as consumers embrace same-day delivery services to buy groceries when needed.

Interestingly, clients spend more per purchase when buying groceries online, with an average of 29% more spent per transaction than in-store grocery purchases.

Digital payments will become more dominant as people increasingly use contactless payments through smart devices and online transactions, Discovery Bank CEO Hylton Kallner said.

This shift is driven by convenience, security, and the growing availability of digital payment options.

Both in-store and online purchasing will see balanced growth as retailers integrate omnichannel sales strategies.

Consumers increasingly expect a seamless shopping experience that combines the immediacy of online shopping with the tactile experience of in-store shopping.