The South African cards and payments channel has grown well over the last few years and is expected to continue. Payments on the African continent have been historically difficult, although less so in SA, and there is high demand for a system to solve the very real payments problems. CI examines how the country will develop over the next few years
The South African card payments channel registered growth during the review period (2009-2013). The number of cards in circulation recorded a review-period CAGR of 17.60%. The country’s positive economic outlook, the demand for more sophisticated prepaid and charge card products and the growth of online shopping supported the growth of the card payments channel. Over the forecast period (2014?2018), the channel is expected to increase at a CAGR of 7.60%, as consumers move away from cash payments.
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The South African cards and payments channel has growth potential
During the review period, the South African card payments channel grew in both volume and value terms. In terms of the volume of cards in circulation, debit cards accounted for the largest channel share of 58.0% in 2013, followed by prepaid cards with 26.0%. The main contributor to the growth of prepaid cards was a rise in demand for open-loop prepaid cards among the unbanked population.
In value terms, the card payments channel grew from ZAR856.6 Bn (US$101.5 Bn) in 2009 to ZAR1.4 Tn in 2013, at a CAGR of 12.07%. The card payments channel is expected to reach ZAR1.9 Tn in 2018, representative of a forecast-period CAGR of 7.07%. Growth is expected to be driven by demand for prepaid cards, regulatory improvements, and electronic and mobile commerce (e-commerce and m-commerce).
The increased adoption of contactless payments drove the growth of the card payments channel
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By GlobalDataWith the increasing adoption of smartphones, handset manufacturers are promoting near field communication (NFC) technology. However, retailers and banks in South Africa require clearly defined security benefits and cost-reductions before they will adopt NFC on a large scale.
In December 2010, Absa Bank carried out South Africa’s first live user trial of NFC technology on mobile phones. The bank collaborated with MasterCard to embed the Paypass Tap and Go Payment Chip on mobile handsets, allowing users to load money onto their phones via the Absa website or at ATMs. The bank plans to charge a minimum fee of 2.5% for each reload and is the first institution in South Africa to apply NFC capabilities with a Europay, Mastercard and Visa (EMV) card payment application.
Growth in internet banking will support the prepaid cards category
The emergence of internet banking is a landmark in the history of South African banking services. The country has a well-developed and fast-growing internet banking system. Internet banking has been successful since 1996 because of its cost advantage and convenience.
There has been a steady increase in the number of internet subscribers and penetration level. The growth of internet banking will have a positive influence on the prepaid cards category. Prepaid cards have become increasingly become popular among the younger population, as it is very difficult for them to obtain credit cards due to financial instability. Younger consumers use prepaid cards to purchase movie tickets, pay petrol bills, or perform other transactions. The younger population is expected to support the future demand for prepaid cards.
Modernization in payment systems and supporting infrastructure
Technological advances in payment systems and infrastructure include mini ATMS, wireless POS terminals, NFC and contactless technology. These technologies have significantly reduced processing times and strengthened security measures, saving consumers and retailers both time and money. Growth in the South African card payments channel is based on the adoption of advanced technology which will increase card usage on various transactions.
