Digital wallet usage becomes ‘habit’ for SA consumers

Digital wallet payments in South Africa are now a habit, with consumers preferring to use contactless payments.

So said Lineshree Moodley, Visa SA country manager, unpacking the results of the SpendTrend24 report in Sandton, this morning.

A Visa and Discovery Bank compilation, the report is based on data from 2019 to 2023, consisting of over 13 billion transactions made on more than 60 million credit cards from 14 cities around the world. The cities included three from South Africa, five other emerging market cities, and six from developed markets.

The report aims to identify and understand changes in consumer spending patterns in 2023 compared to 2022 and pre-pandemic 2019, for Discovery Bank clients, the broader South African population, and from selected other cities. It also aims to highlight the growth in online and digital transformation in retail  and banking.

The report found that SA benchmarks well against global counterparts, with a nine percentage point increase in digital wallet usage for the country, over the last year.

Moodley noted the surge in use of digital wallets is driven by services such as Apple Pay and Samsung Pay, which are available in the country.

“In the South African market, we still see the majority of spend – from a contactless perspective – is where consumers tap their cards at the point-of-sale,” she said.

“In the case of digital wallets, we see that they are growing exceptionally fast and believe they will become more prominent as time goes on.”

According to her, a key driver for the use of digital wallets is the ease and convenience which they bring, adding that more consumers are likely to adopt them.

“When we talk about security  and consumers having comfort using these types of payments, biometric authentication that’s built into them, the tokenisation services as well as the authentication, give consumers the comfort to actually use this type of payment.”

When compared to international counterparts, such as emerging or developed nations, SA’s growing use of digital wallets outpaces those countries, Moodley said.

Looking at the other trends, Moodley said consumers are embracing digital. “Given the proliferation of smartphones, consumers are using their smartphones for everything across their shopping journey. This ranges from looking up what’s available online, discounts, coupons, access to reward programmes, and everywhere from originating that transaction to paying with mobile at a point-of-sale – consumers are using their smartphones.”

Referencing a 2023 Visa study, the country manager said 85% of people from the Central Europe, Middle East and Africa region expect digital to be integrated into the shopping experience when they visit a merchant.

Similarly, the SpendTrend24 report shows South Africans are shopping online more frequently, with online spend per average card outpacing face-to-face growth by five times. “Online growth was 10% versus 2% in-store.

“South Africa still has a strong mall culture, so people will typically do research online, look for the best discounts, and where the specials are. They still do want to go into the mall and make purchases.”

Moodley indicated that online cross border spend is also on the rise, saying this is mainly being driven by e-commerce, entertainment and streaming services. “We’ve seen that during the pandemic, consumers turned to this as a form of entertainment and we’ve seen steady growth over the last couple of years as well.

“It’s interesting to note that the third most visited e-commerce platform in South Africa is the US version of Amazon. This is interesting because we have a really good local option. Music streaming subscriptions have the potential to grow to $1.1 billion by 2027, and we’ve also picked up that there’s been a 30% year-on-year growth in revenue when it comes to eSports.

“A lot of good growth is being seen in the online space and we believe that South Africa is going to continue to grow in this space.

In terms of predictions when it comes to spend trends for 2024, Hylton Kallner, CEO, Discovery Bank, said digital payments will become more dominant as people increasingly use contactless payments through smart devices and online transactions. “This shift is driven by convenience, security, and the growing availability of digital payment options.”

Other predictions include:

  • As the impact of high interest rates persists, people will keep shifting towards value-based spending. Consumers will continue to prioritise getting the most value for their money, preferring products and services that offer a good balance of quality and cost. This is likely to increase the use of rewards and loyalty programmes, especially in travel.
  • Interest rate reductions by central banks will reduce pressure on consumers and encourage more spending. This will result in higher disposable income for consumers with existing credit obligations and easier access to credit for others.
  • Both in-store and online purchasing will see balanced growth as retailers integrate omnichannel sales strategies. Consumers increasingly expect a seamless shopping experience that combines the immediacy of online shopping with the tactile experience of in-store shopping.
  • The entertainment industry will continue to thrive, with more people engaging in mobile gaming and online betting. Global players will offer high quality content to attract a wider audience, while regulators adapt to keep up with innovation.