Post the Covid-19 pandemic and with digital technologies growing, the world is fast moving towards the digital space, and small businesses that are not participating risk being left behind.

The pandemic pushed South Africa closer to a contactless or low-touch economy where the preference for digital transacting is increasing, says Johannesburg Business School faculty member Philasande Sokhela.

Amid the rise of the cashless payment ecosystem, many banks are leveraging application programming interfaces (APIs) to integrate WhatsApp pay, QR code payments, digital wallets and tap-to-pay, besides others, into their singular platforms that can be used on most smartphones.

Further, greater convergence is seen in the financial space, with telecommunications and mobile companies now facilitating digital financial transactions such as MTN’s Mobile Money or Vodacom’s VodaPay.

Consumers are also increasingly becoming more comfortable interacting with bots through platforms like WhatsApp for everything from customer service and checking of balances to actual payments.

“The world is not going to revert back to analogue. It is fast moving towards the digital space,” Sokhela warns, adding that business owners do not want to be left behind.

However, becoming digital, and relying on digital for business growth, is a challenge in South Africa, particularly for small, medium-sized and microenterprises (SMMEs), township and informal businesses, as well as individuals that may have a smartphone but not have banking features – or an understanding of technology.

While 80% of South Africans have a bank account, most consumer transactions are still cash-based and about 45% of consumers receive cash salaries.

“Even with these types of statistics, we cannot deny that digital transformation will eventually affect all sectors of the economy.”

The adoption of digital payments has many benefits for businesses.

It can increase an entrepreneur’s profitability by making financial transactions with customers, employees and suppliers more convenient, safer and cheaper.

Connecting to a digital payment device allows small businesses to automate financial processes while monitoring and controlling finances and tracking financial performance.

“I believe that it is imperative that SMMEs, especially, take the time to understand how these platforms work and how the underlying technologies, such as API, work to ensure that they do not get left behind when the inevitable closing of the digital payment gap happens.”

One challenge is information dissemination to the business world – people do not have the know-how or understanding of the tools available to them or how to use them, and banks and other service providers need to do more in terms of how they disseminate the information and knowledge to society.

To educate people, organisations need to consider physically showing them how to access solutions using their devices.

He cites the language barrier as one factor that can impact the uptake of digital payment technologies if information is not disseminated in a person’s native language, along with the ability to transact in one’s home language.

There is also a need to consider how information is packaged and how technology is designed from a societal point of view.

Among the challenges of digital and financial illiteracy is a disconnect between the majority of South Africans and the growing array of technologies that are supposed to facilitate the transition from physical to digital payments, he says.

Further, there is a need to disseminate information in more traditional ways, including local radio, television and roadshows, as the new technologies are not reaching people that do not have access to online platforms.

Accessibility is not always a given for a large portion of the population, particularly in peri-urban and rural areas, where there is limited information and communication technology infrastructure.

Even when someone has a mobile phone, it does not necessarily have banking features.

Further hindering uptake is a lack of trust in the banking system, in view of data breaches and cybersecurity attacks on banks. People also perceive the banking sector as lacking transparency.

“When people do not feel seen, their perception of how these institutions do business is often negative. In cases where a banking transaction takes up to 48 hours to clear, or when someone makes a mistake in the transfer, it is often difficult to find someone to help, making it seem simpler and better to just deal in cash.”

While banks provide instant payment for inter-bank transactions, there are generally high fees attached to this, which adds further friction to the process.

Making transactions more cost-effective for consumers to make digital payments as opposed to traditional payments will go a long way towards improving trust in financial institutions.