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The Cards and Payments Industry in South Africa: Emerging trends and opportunities to 2020
South Africa is a cash-based society, with the main use of cash for small-value retail transactions. This is due to the lack of adequate banking infrastructure, limited awareness of electronic payments, and low acceptance at retailers. In 2016, cash accounted for 67.7% of total payment transaction volume. However, use of payment cards in South Africa is growing at a healthy pace, with a review-period (2012-16) compound annual growth rate (CAGR) of 18.6% in terms of transaction value. Uptake is primarily being driven by the government's financial inclusion plans, the introduction of basic bank accounts, improved banking infrastructure, and a steady fall in interchange fees.
Debit cards dominated the payment card market in terms of transaction volume and value during the review period. This growth was supported by the increased banked population, the availability of low-cost banking accounts, consumer awareness of the benefits of debit cards, improved banking infrastructure, growing awareness of debt control, and continued migration of low-value cash payments.
South Africa has one of the region's fastest-growing credit card markets, following decades of limited access to credit facilities. South African consumers, especially the middle classes, use credit cards to meet temporary credit requirements. Consequently, the frequency of credit card use was 81.3 transactions per card in 2016 - increasing from 55.7 transactions per card in 2012.
Although e-commerce penetration in South Africa is comparatively low by international standards, the e-commerce market posted a review-period CAGR of 26.2%, growing from $1.0bn (ZAR14.3bn) in 2012 to $2.6bn (ZAR36.2bn) in 2016. The growth can be accredited to high mobile penetration, rising consumer confidence in online transactions, and secure online gateways. Individuals prefer traditional payment instruments, including payment cards and credit transfers, as the mode of payment for online transactions.
Consumer preference for credit cards over personal loans has risen as a result of lower interest rates on credit cards. According to the National Credit Act (NCA), the maximum interest rate that can be charged on a credit card is 18% (repo rate plus 12%), while on an unsecured loan it is 27% (repo rate plus 21%). Banks also offer installment facilities, flexible repayment options, and interest-free credit periods of up to 55 days, as a result of which credit card transaction volume recorded a review-period CAGR of 10.6%.
The report "The Cards and Payments Industry in South Africa: Emerging trends and opportunities to 2020" provides top-level market analysis, information and insights into the South African cards and payments industry.
In particular, this report enables the following -
- Current and forecast values for each market in the South African cards and payments industry, including debit, credit, and charge cards.
- Detailed insights into payment instruments including credit transfers, cash, cheques, direct debit, and payment cards. It also, includes an overview of the country's key alternative payment instruments.
- E-commerce market analysis and payment methods.
- Analysis of various market drivers and regulations governing the South African cards and payments industry.
- Detailed analysis of strategies adopted by banks and other institutions to market debit, credit, and charge cards.
Companies mentioned in this report: Absa Bank, Standard Bank, FirstRand Bank, Nedbank, Capitec Bank, First National Bank, Visa, Mastercard, American Express, Diners Club.
- Visa and Mastercard have introduced their own payment solutions to push electronic payments in the country. In July 2014, Mastercard launched the Masterpass digital wallet in South Africa, in association with Standard Bank. Masterpass users can shop online without giving payment and shipping information with every purchase. Meanwhile in September 2016 Visa launched Visa Checkout. The new service requires a username and password to make a payment, as opposed to credit card details and an expiry date for each transaction.
- Banks and regulatory bodies are implementing new technology to curb card fraud. In July 2016, the Payments Association of South Africa (PASA), in association with Visa and Mastercard, introduced a new specification for biometric authentication for card-based payments. The framework facilitates open interoperability solutions and allows a range of biometric solutions such as fingerprint, palm, voice, iris, and facial biometrics. Eventually all transactions will be biometric-authenticated, which includes confirmation of transactions through customers' fingerprints. In line with this, Mastercard and Visa designed a framework for biometric authentication of transactions.
- To control growing consumer debt and payment defaults, the South African government amended the NCA in May 2014 to include new measures that card issuers need to follow while offering credit facilities. The measures were implemented from March 2015. Banks are now required to analyze customers' income and take all monthly debt repayment obligations into account before offering credit facilities. However, the measures had little impact on the fast-growing credit card market, as consumers are increasingly using credit cards as a temporary source of disposable income. Low interest rates in comparison with personal loans, installment facilities, flexible repayment options, and long interest-free credit periods are some of the factors driving credit card growth.
Reasons to buy
- Make strategic business decisions, using top-level historic and forecast market data, related to the South African cards and payments industry and each market within it.
- Understand the key market trends and growth opportunities in the South African cards and payments industry.
- Assess the competitive dynamics in the South African cards and payments industry.
- Gain insights into marketing strategies used for various card types in South Africa.
- Gain insights into key regulations governing the South African cards and payments industry.