Fast-growing adoption of E-wallet services and digital supplier payments among micro merchants and informal retailers such as spaza shops is helping to reduce security risks, costs and inefficiencies associated with cash payments right across the value chain.
Jonathan Thomson, head of supplier payments at Kazang, says that “digitisation of supplier payments is an important element of creating financial inclusion for micro merchants in townships, peri-urban areas and rural areas.
“Most micro merchants in Southern Africa still pay for most of their inventory using cash,” says Thomson. “This not only exposes them to the safety and security risks associated with cash, but also increases their operating costs, and makes it more complex to track transactions and stay on top of cash flow.”
“Furthermore, they can vastly reduce bank deposit fees as the vaults and card terminals we deploy are exceptionally low-cost, in fact often costs are fully covered by alternative revenues they enable, or rewards merchants earn through them.”
The proliferation of affordable card acceptance terminals from fintechs such as Kazang , M-Pesso, and Orange Money in Africa, is an important catalyst for the digisation of supplier payments. Kazang reports that it has more than 90,000 VAS devices processes around 3 million transactions daily at micro merchants in markets such as South Africa, Namibia, Botswana, and Zambia.
Retailers and informal traders use the terminals to sell services such as prepaid electricity, prepaid airtime and data, DSTV subscriptions, bill payments and gaming vouchers thereby generating additional renevues. Kazang also enables merchants to accept card payments on these terminals with a low transaction fees and can offer their customers cash withdrawals via the point of sale.
Rapid uptake
“We have seen a dramatic increase in card usage across rural areas and townships, providing the option for end-consumers to use a bank card for their daily goods at their local stores, where that was never possible before” says Thomson. “The uptick in card acceptance in these markets is greatly complemented by Kazang’s cashless payments systems that allows merchants to pay around 700+ FMCG suppliers instantly and free of charge.”
Card payments are settled into the wallets in real time, meaning that merchants have instant access to the money when they need to make a payment – this is vitally important in FMCG value chains.
In the background, Kazang has built complex integrations with FMCG suppliers’ business systems to facilitate smooth digital payment flows. Major FMCG companies have come on board, recognising an opportunity to dramatically improve efficiency as well as vastly reduce their exposure to crime.
Thomson concludes: “Micro merchants and their suppliers face a range of challenges in their reliance on cash transactions. Initiatives like ours to digitize supplier payments addresses these pain points head-on, fostering a safer, more efficient, and more inclusive financial environment.”
