The potential for Cash at ATM payments in South Africa

The continued dominance of cash payments is somewhat of a paradox in South Africa - online forms of commerce are booming, but many people still have a strong preference to pay for day-to-day transactions in cash.

One way businesses can begin to bridge the gap and reach more customers that prefer cash payments with online goods and services, is through innovative payment methods like Cash at ATM. This solution offers the potential to bring more customers into the digital economy while offering them a payment method they prefer, and beginning to build their trust in online commerce.

What is Cash at ATM?

Cash at ATM is a payment method that allows customers to pay for online goods and services by depositing cash at the nearest ATM or bank branch, rather than paying digitally through an online payment gateway. It can be used as a way to pay for online purchases or to top up digital accounts or wallets with physical currency. To ensure the deposit is allocated correctly, the customer enters a unique reference code at the ATM. Funds can be allocated once the payment has been made thanks to notifications sent to the merchant, and the goods or services can then be rendered.

Cash at ATM can be used as a payment method for deposits into digital wallets or accounts, such as P2P wallets, online gaming platforms or trading platforms. It can also be used for e-commerce purchases, and recurring debt or insurance premium payments.

Cash payments remain significant in South Africa

As we have written on a number of occasions in the past, cash remains a dominant payment method in South Africa. Even with a huge increase in bank account adoption in the country over the past 13 years, and steady growth in adoption of online payment methods such as card and Pay by bank, the majority of South Africans still withdraw most of their money every month to spend on day to day transactions.

This was clear in our upcoming research report on cash, which found that more than half of South Africans indicated they would like to pay for online purchases with cash.

This is of course not a binary preference - those that have a preference for cash payments may still on occasion opt to use digital methods. For example, our research also indicated strong adoption of new payment methods such as Pay by bank and, increasingly, Capitec Pay. Businesses that will be able to best serve this population are those that can accommodate all preferences as trust in online commerce continues to grow. 

South Africa’s ATM network is among the best in Africa

A heavy reliance on cash can be an indicator of limited payments infrastructure, as people do not have the option to access payment cards or other methods that rely on robust banking infrastructure. But this is not the case in South Africa.

Data from the World Bank shows that South Africa has 43.55 ATMs for every 100,000 adults. This is better than most countries, placing it ahead of the global average of 39.49 and considerably ahead of the average for sub-Saharan Africa, with just 6.94. On the African continent, only Cabo Verde and Namibia have a higher penetration.

This means South Africans have access to a strong network through which they can withdraw - and crucially, pay into - the payments system. While salary payments must be made into bank accounts in South Africa, our research found that 65% of South Africans still withdraw at least half of their monthly income in cash via ATMs, on a regular basis.

Cash at ATM leverages existing customer behaviour

Though research shows 75% of South Africans pay with cash at least weekly, it should not be assumed that those consumers are inaccessible to online businesses. Cash at ATM offers a way to bridge this gap.

As we saw in our recent report on consumer preferences in e-commerce, trust remains a barrier when it comes to making a purchase online in South Africa. But we would expect this to improve as people get more experience transacting online. In time, it seems logical that they would grow comfortable with e-commerce and begin opting for more convenient digital methods.

Below are some qualitative responses from our research indicating why some consumers still prefer to make many payments in cash.

In the meantime, Cash at ATM can be a solution to help build trust in the online commerce space. If customers can pay for online purchases using physical cash - if they can see the payment automatically attributed to their digital account, or see the physical goods arrive after placing an order online - it reinforces the idea that they can trust online systems.

Customers can also opt to pay cash at retail tills for online purchases where such partnerships exist, but this has some distinct disadvantages for online businesses. For one, payment times are limited to the shop’s opening hours and, more importantly, paying at a till pushes customers to visit a different retailer in order to pay, allowing that business to begin building a relationship instead.

How to offer Cash at ATM

Businesses in South Africa can offer their customers Cash at ATM or branch as a payment option with Stitch.

To pay, customers simply select “Cash at ATM” as a payment method when checking out. This will surface instructions for initiating a cash deposit. The customer can then deposit cash securely at their nearest ATM or bank branch using a unique reference code. Merchants receive a notification when cash is deposited, allowing funds to be attributed in their digital account or goods dispatched automatically, with no need for manual bank account reconciliation.