How digital wallets grew to own 20% of South Africa’s online payments market

Today, because of advancements in digital technology, we don’t even have to use physical currency anymore. Image: Supplied.

Today, because of advancements in digital technology, we don’t even have to use physical currency anymore. Image: Supplied.

Published Feb 24, 2024


By Hayley Hopwood

Since time immemorial, human beings have assigned value to specific items and exchanged these items for goods and services.

From the use of grain and salt as currency all the way to paper money, the payment landscape has been steadily and constantly evolving.

Today, because of advancements in digital technology, we don’t even have to use physical currency anymore.

The payments space has made huge advancements in a range of areas including cashless payments, seamless card transactions, and contactless payments. Advancements in secure payment connectivity have also allowed for businesses to offer customers convenience, speed and ease in their transactions.

Driven by changes in customer expectations within the retail space especially - as technology has revolutionised the way the industry operates, switching the power from retailers to consumer - businesses have needed to adapt to the ever-connected society we live in by adopting new technologies. The simplest way that retailers could take their first step into digital transformation was by diversifying payment options for customers.

Now, the demand for digital payments is on the rise. And, while the world was already moving towards a more contactless payment environment, this shift was rapidly accelerated by the COVID-19 pandemic.

According to research by the GSMA, digital payments were expected to reach an annual transaction value of US$ 4.4 trillion in 2020 with a 17% compound annual growth rate (CAGR) through 2024. Meanwhile, data from Statista shows that in South Africa the total transaction value in the Digital Payments market is projected to reach US$ 17.22 billion in 2023 while total transaction value is expected to show an annual growth rate (CAGR 2023-2027) of 12.88% resulting in a projected total amount of US$ 27.96 billion by 2027.

Developments in secure payment methods in recent years have included the adoption of Point of Sale (POS) devices (which have moved from dial-up to the cheaper GSM payment system) as well as emerging technologies such as biometric and contactless payments, increasing retailers’ ability to attract a growing market of customers who no longer carry cash, and also helping them to improve stock management while better understanding customers by providing insight into purchasing behaviour.

The biggest impact currently being made in the digital payments space has been made by mobile wallets which allow individuals to store card payment information on an app such as GPay, Apple Pay, SnapScan, and Zapper, and pay using their mobile devices.

As a leader in consumer adoption of digital, mobile, and online payments on the African continent, with mature payment behaviour due to a fast-growing population and increasing internet penetration, South African online shoppers use digital payment methods in nearly half of all transactions, with e-wallets owning around 20% of the market and almost 50% of online purchases being made using a mobile device.

A frictionless payments landscape

Providing a convenient way to make payments both online and offline, as well as manage finances without even needing a bank account, digital wallets are helping to make the shopping experience easier for South African consumers (and also maybe even a little safer). Now as consumers no longer need to carry around cash or cards to make payments, all they need are their smartphones, they can make payments from anywhere, at any time - even if they’ve left their wallet behind.

For those businesses who give their customers the option to pay with digital wallets, they’ll not only enable a better experience for their customers by making paying for goods and services as fast and convenient as possible (and encouraging customers to pursue a transaction), but also be able to access real-time customer data that allows them to create a more personalised shopping experience through targeted ads, customer loyalty rewards, and improved engagement.

The more that card payment technology and secure payment connectivity improves, the more attractive factors such as speed and convenience improve, resulting in the progressive growth of the retail sector. But, better connectivity infrastructure will be key to supporting the effective adoption of these technologies that can help small vendors scale and grow. Further improvements in payment connectivity will only make the least enjoyable part of the shopping experience simpler, straightforward and effortless.

Hayley Hopwood is the Head of Revenue at Paystack.

Hayley Hopwood.