The commercial environment in South Africa’s townships, rural, and peri-urban areas is experiencing significant changes due to the increasing use of card payment machines. This increase in card usage demonstrates a significant change in consumer habits and marks a crucial stage in the digitization of payments in the nation.
Martin Wright, CEO of Kazang, a company that offers prepaid value-added services (VAS) and card acquiring services under the NASDAQ and JSE-listed fintech Lesaka Technologies, highlights the significant changes in the micro-merchant industry due to accessible card acceptance. Merchants and consumers are adopting the ease and effectiveness of card transactions due to the affordability of card acceptance solutions.
Companies such as Kazang Pay are leading the way in transforming the industry, offering appealing transaction fees and giving free terminal hardware to small retailers who reach a minimum transaction limit monthly. The availability of card payments is attracting more small and informal sellers, leading to the use of digital payment options in communities that had been overlooked before.
Wright points out the various factors that lead to the increased use of card payments, such as the convenience of opening bank accounts and the popularity of SASSA debit cards. This coming together has spurred notable advancements in digitalising the informal sector, promoting inclusion and economic growth in communities previously isolated from the financial mainstream.
Based on the Lesaka Informal Economy Digitalization Index, Kazang has undergone a significant change, with 42% of its monthly transactions totalling R2 billion now using cards between 2021 and 2023. Debit cards make up more than 90% of these transactions, showing a significant change in how merchants and consumers are moving towards digital payments.
The investment made by fintech companies in expanding card acceptance terminal penetration is essential for this transformation. For example, Kazang runs about 90,000 value-added services (VAS) devices, with 50,000 terminals set up for card payments, handling around 3 million transactions every day.
Director of Kazang Pay, Ashley Naidoo, notes a significant pattern among merchants, with the mean transaction amount being R100. Micro-merchants have become central points for everyday necessities in townships and rural regions, meeting the varied requirements of local populations and stimulating economic engagement in the vicinity.
The ease of accessing important services nearby is especially noticeable on SASSA grant payment days, causing a noticeable increase in transactions for merchants. By providing free cash withdrawals to customers, businesses improve customer convenience and effectively handle their cash flow.
Card transactions lower the risks and expenses related to cash handling and allow merchants to grow their customer base, boost the size of customer purchases, and simplify financial management. Digitalization efforts, like connecting digital wallets to card terminals, improve merchant abilities, enabling immediate settlements and streamlining supplier payments.
The expansion of card usage among small businesses in South Africa promotes financial inclusion and empowers communities, leading to increased prosperity for underserved areas.
Listen to the full interview on The Daily Round Up with Moulana Junaid Kharsany and Ashley Naidoo here.
