“In some parts of the world, cash is in decline. But Africa is not ready to go cashless because digital payments don’t yet work for everyone. The consequences to society and individuals of not having a viable way of paying for goods are potentially severe. Consumers need a guarantee that they can access and use cash for as long as they need it. This requires us to radically review our cash infrastructure – something that is now pressing, as cracks in the system are showing. At the same time, we need to ensure that digital payments can eventually become a choice for everyone.”
Sleepwalking into a cashless society will leave millions behind. Action is needed now.
Ten years ago, six out of every ten transactions were in cash. Now it’s three in ten. And in fifteen years’ time, it could be as low as one in ten. Small business associations are concerned about the growing challenges of handling cash: the closure of bank branches and rising charges make it more expensive and riskier to handle cash. Rural communities see an increasingly digital world that only works for those with broadband and mobile connectivity. And the commercial players supporting the cash infrastructure are questioning how a model built for a high-cash economy can be economically viable when most payments are made digitally.
The convenience of digital payments has made them the first choice of payment for many. New technology is making digital payments even easier, but there are some areas of society where cash payments still dominate. A straight-line trajectory of current trends would see an end of cash use by 2026. However, I believe that cash will still be here in 15 years’ time, but potentially accounting for as few as one in every ten transactions.
In the same vein, it’s hard to discuss cash without addressing its role in the grey (informal) economies. There is clear evidence that cash plays a large role in facilitating transactions. On the other extreme, some proponents of a lower cash society go further to argue that lost tax revenue from cash-in-hand payments is damaging society, and that digital payments would bring such payments back into the tax system. I don’t disagree with these points and believe that a cashless society has many benefits, including the reduction of crime. There are undoubtedly benefits from the reduction in cash in terms of lower crime and higher tax revenues, but we must not demonise those who operate in cash when many have no choice. Solutions adopted by other countries, such as Sweden, to bring the grey economy into the formal economy through tax breaks and peer-to-peer payment technology, thereby isolating the “grey” economy to attack it more directly, might be an option but not a decision to be taken lightly and one for policymakers to consider.
Undoubtedly, digital banking has been a game-changer for many Africans, offering them improved access to financial tools, literacy, and freedom. Here’s how digital banking has transformed the financial landscape for everyday Africans:
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Increased financial inclusion: Digital banking has made financial services accessible to a wider population in Africa. Many Africans previously had limited access to traditional banking services due to factors like physical distance, high costs, and lack of documentation. Digital banking has bridged this gap, allowing individuals to open accounts, make transactions, and access a range of financial services using their mobile phones or computers.
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Convenient and affordable banking: With digital banking, Africans no longer have to travel long distances to physical bank branches, saving time and transportation costs. Mobile banking apps and online platforms enable Africans to perform various banking activities conveniently, such as checking balances, transferring funds, paying bills, and even applying for loans. As a result, financial services have become more affordable and accessible.
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Enhanced financial literacy: Digital banking platforms often provide educational resources and tools to improve financial literacy among users. Everyday Africans can access information on budgeting, savings, investment options, and other financial topics through these platforms. This helps individuals make more informed decisions about their money, improve saving habits, and plan for their financial futures.
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Mobile money revolution: Mobile money has been a significant component of digital banking in Africa. Services like M-Pesa in Kenya and EcoCash in Zimbabwe have revolutionised the concept of “cashless” transactions. Africans can now send and receive money, pay for goods and services, and even receive their salaries directly onto their mobile phones. Mobile money has particularly benefited those lacking formal bank accounts, creating opportunities for entrepreneurial activities and economic empowerment.
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Access to credit and savings: Digital banking has expanded access to credit and savings products for everyday Africans. Through digital platforms and apps, individuals can access small loans, microfinance services, and savings accounts. This opens opportunities for individuals to start businesses, fund education, or deal with emergencies, fostering economic growth and stability.
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Financial empowerment of women: Digital banking has played a crucial role in empowering women in Africa. Women who may face cultural or practical barriers in accessing traditional banking services can now utilise digital platforms to have control over their finances. Mobile banking apps enable women to independently manage their accounts, make transactions, and even access insurance and investment products, enabling them to contribute financially to their households and communities.
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Innovation and entrepreneurship: Digital banking has spurred innovation and entrepreneurship in Africa. Fintech start-ups have emerged, offering innovative solutions to everyday financial challenges, such as peer-to-peer lending platforms, digital wallets, and investment apps. This has created opportunities for Africans to engage in business activities and access capital, stimulating economic growth and job creation.
