Consumer perspectives in South Africa: industry deep dives

Across the world, demand for more seamless, secure payment experiences continues to take hold. South Africa is undergoing a significant shift in the way consumers transact and shop online, across sectors from retail, to gaming, to travel and insurance. 

From direct bank APIs to the growth of omni-channel retail, to innovations in recurring payment solutions, the online payments landscape in South Africa is evolving rapidly to meet the demands of its growing digital consumer base.

From a global perspective, and across emerging markets, South Africa remains a unique market. Its high banked rate and fast adoption of new technologies is juxtaposed by a continued and significant reliance on cash.

We know, for example, that e-commerce and contactless payments are growing rapidly, but we also know that cash remains the most popular payment method overall. A majority of people withdraw a large proportion of their earnings as hard currency to spend on day to day transactions, rather than always opting for digital payment methods. But at the same time, more and more are experimenting with online transactions as new options emerge, such as Capitec Pay.

We wanted to understand how consumers are thinking about online transactions today across sectors, including how they choose where to shop, how they prefer to pay and whether there’s indication of increased spend in the future. To find out, we commissioned a series of surveys, each looking at South Africans’ attitudes, preferences and current behaviours in different areas of their financial lives.

What we looked at

Our research focused on a few key sectors, each with its own unique spending behaviours and challenges, including:

E-commerce: Online shopping has grown significantly in South Africa in recent years, with recent analysis from Statista placing the penetration rate at 34% in 2023. Our findings indicated that e-commerce is continuing to grow, not only when it comes to new customers spend money online for the first time, but also as those already online increase the amount of money they spend shopping via online platforms or branch into new categories.

However, a new way of shopping brings new ways of running retail businesses. Selling online means disregarding many of the old rules about how retail should work. What should customer service look like in a world where people research, find, buy and consume items without speaking to another person? And as the rules change, what can businesses do to stay ahead?

Travel: Like e-commerce, the travel space has seen huge growth over the last few years, driven in part by more accessible and convenient travel options, but also in response to Covid lockdowns, which has increased the desire to travel and experience the world more.

The travel industry faces unique challenges from a payments perspective, which are often reflected in consumer preferences and drivers. For instance, travellers are often forced to cancel or refund part of their trips due to factors outside of their control, leading to significant complexity around holding deposits and making sure money can be returned if needs be. Travel is also typically a large expense that happens infrequently, which creates a need to offer payment options such as buy-now-pay-later to help consumers manage the cost.

Insurance: South Africa has the highest overall insurance adoption rates on the continent, with growing incomes and greater levels of education only likely to push this continually higher in coming years.

Running a modern insurance offering is a deceptively complex task: the vast majority prefer to set and forget their insurance, paying with debit orders and remaining with the same insurer for years at a time. However, any difficulties in the claims process or delays in payouts are enough to drive customers away, while the proliferation in different payment methods means customers are demanding more flexibility than ever.

Gaming: Sports betting and other forms of online gaming are a part of everyday life in South Africa, with significant numbers of people betting for fun or to increase engagement with sports. But while people love to use gaming and casino platforms, they need to feel they are in control of their own money.

This places significant pressure on gaming platforms to offer maximum flexibility to customers in the way they deposit and - more importantly - how they withdraw their money from the platform.

Gaming is another area of the economy that has seen spending move from in-person to online (or in-app). With that comes some of the same challenges e-commerce providers face: how do you maintain high customer satisfaction in a completely new retail environment?

Consumer behaviour can take a long time to fully catch up with technology, which leaves businesses facing a question: if the future of cash is uncertain, how do you build a payments stack that works for the present and tomorrow?

What we learned

Our research provided insight into what is happening across the payments landscape in South Africa. For each area we looked into, we have created a standalone report that can be downloaded here:

• E-commerce consumer report
• Travel consumer report
• Insurance consumer report
• Online gaming consumer report

However, despite the differences across sectors, a number of common themes emerged that held across the board. Here are some that we noticed:

New payment methods are gaining traction

Though cash retains a stronghold, consumers are eager to try new payment methods, provided they meet their requirements for convenience and security. We can see this in the rapid increase in adoption rate for various newcomers to the space, such as Capitec Pay.

You can see a strong example of this in our e-commerce report. We asked consumers what payment methods they prefer for online shopping and, while card was the clear winner (as might be expected), other options are quickly gaining ground.

Consumers are warming up to options such as Pay by bank and Capitec Pay, no doubt drawn by their improved convenience and security. The growth in Capitec Pay is perhaps the most notable, as it shows the method captured more than a quarter of the market within less than a year of its launch. Things can change very quickly in the world of payments.

This is further demonstrated by some of the findings in our cash report, which show a strong intention from customers to move towards greater digital payment adoption over the coming year:

People want to use new payment methods, it seems. They are just waiting for the right opportunities and levels of familiarity before doing so. Not to mention, use of cash vs digital is never polar. If this indication is true, we will see a gradual move toward more digital transactions over the coming year, while cash remains in play.

Attracting customers requires a balance of convenience and trust

As we have already alluded to, consumers are looking to adopt smarter digital payment methods, but the relative unfamiliarity of much of online commerce is causing them to hold back. By definition, most people are not early adopters.

By contrast, once people are comfortable with new payment methods, their priorities shift quickly toward convenience. The initial hurdle for adoption is trust, but the key to retention is ease.

We saw these two themes play out again and again throughout our research. For example, here’s a look at the top responses to this question from our e-commerce report:

Customers said the defining attributes of a good digital payments or e-commerce checkout experience were that it was:

1. Fast and easy
2. Safe and secure

This played out again and again across our research, whether through consumers' desire for fast, frictionless withdrawals from gaming platforms or automated but transparent insurance payments. 

Flexibility is key to a good customer experience

A competitive online payment offering requires businesses to straddle two different customer groups. Early adopters want to be able to use the latest payment methods as soon as they launch, while mainstream consumers (sometimes referred to as ‘laggards’) want trust and reassurance.

The only way for businesses to meet the needs of both groups is through flexibility. Again and again through our research, we found that consumers wanted the ability to pay using a range of methods. Businesses that allow people to pay with cash when they want, or bank transfer, buy-now-pay-later or even crypto, get the benefit of both. 

How Stitch payment solutions can enable businesses to meet consumer demands across sectors

At Stitch, we work hand-in-hand with all of our clients to craft a full payments solution that can best position them to meet the demands of their customers and remain ahead of competition. We work consistently to improve conversion, user experience and security, enabling fallbacks in the case of failure, working closely with banks and networks and continually adding new methods and solutions to our stack.