THERE was still an enormous opportunity to close the gap between those who are currently benefiting from the digital economy and those who do not, and in the process, economic growth would be accelerated according to financial services corporation Visa.
Lineshree Moodley, Country Manager for South Africa told the Business Report that digital payments were a booming industry, having attracted more investment than any other financial-services sector and delivered the highest returns and growth in the sector over the past decade.
“If there is going to be a digital payments revolution, it could not be limited to large businesses. In a recent Visa survey, three quarters of small businesses indicated that accepting new forms of digital payments was essential to their growth with 90% saying that pivoting to e-commerce helped them survive the pandemic,” Moodley said.
According to the Statista Market Forecast, total transaction value in the digital payments segment was projected to reach US$15.41bn this year. Total transaction value was expected to show an annual growth rate (CAGR 2023-2027) of 11.55% resulting in a projected total amount of US$23.86bn by 2027. The market's largest segment was digital commerce with a projected total transaction value of US$11.26bn this year.
In solving the challenges for this segment, the corporation said South Africa needed to address the complexity, drive lower costs and innovate to create more frictionless ways for SMEs to begin accepting payments.
With this in mind, it said it launched Tap to phone in a few markets in the region (including South Africa) with more pilots to come. Along the way they said that they learnt that internet infrastructure was key since one could not launch mobile Point of Sale (POS) systems in a vacuum, connectivity and the related costs needed to be factored for.
Integration with other business management systems was also important as the trend towards integrated services was not only a consumer driven trend, but one also required by more businesses. “As we build the next generation of POS devices, we need to continue to drive costs down and integrate other services that drive stickiness with our customers,” Visa said.
The business said that it had a positive outlook on the sector driven by continued preference for digital transacting, consumer demand for better experiences and demonstrating their purpose through innovation, partnerships, and investment.
Moodley said that last year, innovation did not stand still, and the payments sector was no exception. She said that rapidly evolving technologies, such as Artificial Intelligence (AI), open banking and biometric authentication benefited their clients, merchants, and consumers as they drove progress towards seamless payments. “According to a 2022 report by McKinsey, Africa’s electronic-payments market is expected to grow by 152% from 2020 to 2025. South Africa is likely to represent a smaller share overall while remaining the biggest e-payments market in Africa in 2025, with $5bn in annual revenues,” Moodley said.
She said that last year, digital transformation continued to accelerate across all sectors, and e-commerce has been no exception. “Online and offline, spending has been transformed. Businesses of all sizes have had to evolve and adapt to the increasing shift towards digital payments. We see this in the rapid shift to eCommerce. We also see it in contactless, which was non-existent five years ago, and now represents almost half of all transactions in Africa. As a company, Visa has continued to be part of the solution that unleashes the opportunity of the digital economy.”
The financial service corporation said the current economic climate remained one that they approached with a healthy mix of optimism and pragmatism. It said that while some degree of uncertainty and unpredictability had characterised the past couple of years, one thing was clear: the future of money is digital. “At Visa, we’re setting ourselves up to unlock the potential of digital money for economies and businesses the world over. Reshaping payments and commerce more broadly will only further accelerate growth in South Africa. We are very bullish on South Africa and Visa is excited about playing a role in shaping the future of the country.”
Visa said its strategy was to strengthen its presence and expand the digital payments ecosystem in South Africa. It said that as a company that was guided by its purpose to uplift everyone, everywhere by being the best way to pay and be paid, they were focused on making a positive contribution to South Africa by building a truly local business.
The company said that it would continue to focus on driving engagement by connecting with cardholders, driving innovation, and creating customised solutions, including expanding Tap to Pay, and Tap to Phone that was allowing more small businesses than ever to accept digital payments through a mobile device. It said it believed there was tremendous opportunity to bring more people into the financial ecosystem.
It said it would achieve this by continuing to partner with relevant institutions to invest in businesses, expand access to the financial ecosystem for millions of under-served people through partnerships with traditional banks, financial technologies (fintechs) and mobile network operators (MNOs) that would expand access to digital payment credentials, planned to deliver products and solutions that made it easier for all businesses, regardless of their size, to accept digital payments through a mix of technologies like contactless and Quick Response (QR).
Visa said its continued partnerships were critical, and they were exploring how they could add value in helping to shape South Africa’s cashless agenda and making financial services accessible to everyone. It said all this was underpinned by a healthy pipeline of engagements with clients and partners that would yield long-lasting outcomes.
The company said that this year, the demand for digital payments would increase, shaped by the demand. “As technology and consumer demand continue to disrupt markets and prompt new approaches by financial institutions, fintechs, and merchants, we believe that 2023 will be another year of large-scale change. With further positive disruption across commerce and money movement, innovation will continue to thrive in an open environment, which will truly unlock the power and potential of digital money. We’ve seen some of this potential first-hand through partnerships all around the payment’s ecosystem,” Moodley said.
BUSINESS REPORT