How Small Businesses Can Go Digital – and Why They Have No Choice

Today, businesses of all sizes, from roadside traders to large corporates, can no longer afford to not accept digital payments, says Zunaid Miya, Managing Director of local fintech Hello Pay.

Mastercard’s New Payments Index 2022, published late last year, found that 95% of consumers in South Africa used at least one emerging digital payment method in the last year, with usage expected to increase further. The 2021 iteration of the same survey found that more than half (57%) of South African consumers would avoid businesses that do not accept electronic payments of any kind.

An overwhelming 97% of those surveyed at the end of 2022 indicated that they are likely to use a digital payment method in the next 12 months, with account-to-account payments (86%), digital money transfer apps (81%), instant payment services (80%), and digital credit or debit cards (78%) topping the list.

Yet many merchants, especially small or informal traders, still prefer or even rely on cash payments. There are many reasons. Some believe they need to be a certain size or have a certain level of income to qualify for a machine that can process digital transactions. Others are concerned about the costs of transacting on such a machine. And some are, quite simply, used to doing things a certain way and resistant to change.

For now, they might still be keeping their heads above water. Most consumers today are highly banked and avoid carrying more than R300 in cash for safety reasons, but the fact remains that they do still carry some cash for small transactions.

The bigger challenge is that these businesses are hampering their own growth. Not only are they likely to lose out on bigger transactions, but they’re not part of the formal economy – a system that gives them access to business funding, insurance, digital services, and online stock procurement.

Furthermore, none of the reasons for avoiding digital payments are as challenging today as they were just a few years ago. There are options available to small merchants, and these options are easier to understand and use than ever before. By partnering with the right provider, small businesses can enhance their offering, offer safer payment options for customers and benefit from previously out-of-reach digital banking services. Hello Pay is one of few organisations servicing this important sector, allowing customers to buy a machine once-off, with the option to receive payments every day, including weekends and public holidays.

Smaller merchants are beginning to see the value of being banked and being part of the formal economy, but there’s still a way to go. The biggest challenge remains the transactional fees charged by banks. Should these fees be reduced, even by a small margin, it would open up the sector and in turn help the economy flourish as these businesses grow.

But waiting for banks to change their tune before joining the digital revolution is not an option. Consumers are demanding cashless transactions now, and merchants who refuse will lose out.