The landscape of commerce in South Africa’s townships, rural, and peri-urban areas is undergoing a profound transformation fuelled by the growing presence of card acceptance devices. This surge in card acceptance signifies a pivotal shift in consumer behaviour and represents a critical milestone in the digitalization of payments within the country.
Martin Wright, CEO of Kazang, a prepaid value-added services (VAS) and card acquiring business under the NASDAQ and JSE-listed fintech Lesaka Technologies, underscores the transformative impact of affordable card acceptance on the micro-merchant sector. With the availability of cost-effective card acceptance solutions, both merchants and consumers are embracing the convenience and efficiency of card transactions.
Companies like Kazang Pay are at the forefront of reshaping the sector by offering attractive transaction fees and providing free terminal hardware to small retailers that meet a modest transaction threshold each month. This accessibility has made card payments increasingly appealing to micro and informal merchants, driving the adoption of digital payment solutions in previously underserved communities.
Wright highlights the confluence of factors contributing to the widespread adoption of card payments, including the ease of opening bank accounts and the prevalence of SASSA debit cards. This convergence has fuelled significant progress in the digitalization of the informal sector, fostering inclusion and economic growth in communities traditionally marginalized from the financial mainstream.
According to the Lesaka Informal Economy Digitalization Index, Kazang has witnessed a remarkable transition, with 42% of its R2-billion/month transaction volumes being card-based from 2021 to 2023. Debit cards account for over 90% of these volumes, indicating a substantial shift in merchant and consumer behaviour towards digital payments.
Key to this transformation is the investment made by fintech companies in expanding card acceptance terminal penetration. Kazang, for instance, operates a network of approximately 90,000 value-added services (VAS) devices, with 50,000 terminals enabled for card payments, processing around 3 million transactions daily.
Ashley Naidoo, Director of Kazang Pay, observes a notable trend among merchants, with the average ticket size being R100. Micro-merchants have emerged as hubs for daily essentials in townships and rural areas, catering to the diverse needs of local communities and fostering economic activity within the neighbourhood.
The convenience of accessing essential services locally is particularly evident on SASSA grant payment days, where merchants experience a surge in transactions. With the ability to offer free cash withdrawals to shoppers, merchants enhance customer convenience while efficiently managing cash flow.
In addition to reducing the risks and costs associated with handling cash, card transactions enable merchants to expand their customer base, increase basket sizes, and streamline financial management. Digitalization initiatives, such as digital wallets linked to card terminals, further enhance merchant capabilities, facilitating instant settlements and simplifying supplier payments.
As card acceptance continues to proliferate in South Africa’s micro-merchant sector, it not only fosters financial inclusion but also drives economic empowerment and community development, ushering in a new era of prosperity for underserved communities.
