Walking out of a supermarket on a busy and colorful Johannesburg street, a man corners me and stretches out his arms for a hug. It’s a strange gesture but it’s a hug so I extend the one arm not holding grocery bags to return the embrace.

From behind hands reach into my jacket pockets.

It all happened so quickly, too quickly for me to react, and forward momentum pushed me out onto the sidewalk as the two men turned and walked the other way.

With nothing in my pockets but a lighter, I’m not so much angry as I am enlivened that I’ve experienced a side of Johannesburg many people warned me about but I hadn’t seen yet in the Disney-like area I was in.

Bloomberg News
Concerns over crime could spark a move away from cash payments in South Africa.
Bloomberg News

In light of this incident, I started noticing mobile payment options everywhere, and wondered if my experience was common enough to put people off of using cash altogether.

Crime, including murder and assault, remains a problem in South Africa despite recent declines. Several people I met said they had been mugged at knifepoint, although they didn’t think the attackers wanted to hurt them.

“South Africa definitely does have a high incidence of robberies. It’s often in areas which are not well-policed and particularly in targeting commuters on paydays,” said Barry Cooper, technical director at the Center for Financial Regulation and Inclusion (Cenfri) based in Cape Town, South Africa. “It is dangerous to carry cash in South Africa.”

And there is certainly momentum behind the shift to digital payments. Although South Africa ranks slightly below average on Mastercard's mobile payments readiness index, the card brand notes consumers are keen to use mobile for P-to-P payments. Data compiled by Statista predict an annual growth rate of 71.6% from 2017 to 2021, or a rise from US$322 million in transaction volume to US$2.8 billion in 2021.

Having said that, Cooper explains that the risk of theft isn't necessarily the primary motivator of mobile payment adoption, particularly among those at the lower end of the socioeconomic spectrum. “Poor people seem to be more sensitive to the transactional costs than to the threat of crime despite a high prevalence of being robbed,” he said.

This behavior could be changing some as young, tech-savvy individuals see both benefit in the convenience with the added security of mobile money. According to Sandi Madikiza, CEO of eWallet solutions at First National Bank, one of South Africa’s big four banks, “Going forward, one of the biggest growth drivers for eWallet will come from digitally savvy millennials between the ages of 16 and 36.”

About 60% of this demographic already uses FNB’s Banking App which, according to Madikiza, the mobile version accounts for 66% of the money sent to recipients via eWallet monthly.

But it's not just the brazen pickpockets and muggers mobile could guard against. Card skimming is another risk that the increased security of mobile wallets could protect against.

“People are concerned about credit cards getting skimmed if paying at a restaurant. It has happened,” said Trevor Sproat, business development manager for Zapper, a mobile payment company founded in South Africa in 2012. “The likelihood of that happening paying with mobile, though, is zero,” Sproat said.

Although there are many instances of theft of mobile devices in the country too, if the phone is locked and encrypted, its value to muggers is only in the resale of the hardware that may not work after it is reported stolen.

“As the integration and use of mobile phones continues to increase among consumers, so is the adoption of mobile payment solutions into their daily lives,” said FNB’s Madikiza. “Consumers are increasingly taking advantage of the convenience and simplicity of mobile payments.”

In the past 12 months, more than 4.6 million new eWallets have been created at a rate of about 380,000 per month, according to data from FNB. The eWallet allows users to receive and send money even if the recipient doesn’t have an FNB account; withdraw money from ATMs; buy airtime, mobile data and electricity; and purchase goods at participating retailers and websites.

Third-party wallets are also competing heavily with banks. Zapper courts merchants by digging into their customer data so the retailers can advertise to them directly, Sproat says. And through the use of beacon technology, retailers can know when customers are close to their stores.

Supermarket chain Nisa, a Zapper client, recently announced it’d be expanding the use of Zapper throughout its stores only three months after trialing the service. According to an article in TalkingRetail.com, consumers spend 35% more on average when using Zapper.

Zapper has been downloaded one million times and more than 3 million transactions have taken place through the application, three-quarters of which have been in South Africa specifically, according to Sproat. The application is available in 14 other countries as well.

Besides Zapper, SnapScan was one QR code-based mobile payment method I saw frequently when checking out at retailers. SnapScan is delivered by Standard Bank, another big four bank in South Africa.

But even these mobile payment initiatives have hurdles to overcome in the quickly developing market. According to Cenfri’s Cooper, fees associated with using a mobile device to transact and with high data or unstructured supplementary service data (USSD) airtime charges can sometimes hinder adoption.

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