The rapid use of digital supplier payments by micro-merchants and informal retailers, such as spaza shops, is changing the way business is done in these industries. This change is helping to decrease the security risks, expenses, and inefficiencies associated with cash payments throughout the value chain. Leading fintech businesses’ digital wallets are driving the payments digitalization revolution.
That’s according to Jonathan Thomson, head of supplier payments at Kazang, a prepaid value-added services (VAS) and card acquiring business within JSE-listed fintech Lesaka Technologies, who emphasizes the importance of digitizing supplier payments in promoting financial inclusion for micro-merchants in townships, peri-urban areas, and rural communities. “Most micro-merchants in South Africa still pay for most of their inventory using cash,” Thomson adds. “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.”
Digitization through wallet systems such as Kazang allows retailers to reduce the quantity of cash on hand, lowering the risk of physical currency loss and susceptibility to cash-related crimes. This feature is especially significant for folks who don’t have easy access to a bank branch to make deposits. Kazang’s extremely low-cost vaults and card terminals can greatly lower bank deposit fees, which are often entirely offset by alternative revenues or benefits retailers obtain through them.
Fintech companies like Kazang are greatly accelerating the digitalization of supplier payments with the widespread availability of reasonably priced card acceptance terminals.
More than 90,000 VAS devices from Kazang conduct almost 3 million transactions every day at microbusiness locations in South Africa. Retailers can offer services like DSTV subscriptions, prepaid power, prepaid airtime and broadband, bill payments, and gaming vouchers using these machines. Additionally, Kazang permits retailers to provide their consumers with cash withdrawals at the point of sale and take card payments on these terminals for a minimal transaction fee.
Boosting digital transactions
“With 50,000 (and counting) of our VAS terminals now enabled to accept card payments, 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 payment systems, allowing merchants to pay over 700 FMCG suppliers instantly and free of charge.”
Merchants can immediately access their funds because card payments settle into their wallets in real-time when they need to make a payment. This is crucial in FMCG value chains since the ability of merchants to complete a sale frequently hinges on their cash on hand at the time of purchase or delivery. Kazang also offers safe vaults for retailers who handle large amounts of cash. The digital wallet instantly displays cash deposited into the vault, removing the possibility of loss for retailers.
According to Thomson, this implies that small businesses operating informally can benefit from digital transactions’ ease of use and security, just like big stores do in shopping centers. It helps the merchant tighten cash flow management, lower cash expenses and risks, and give their consumers a safer trading environment.
Kazang has developed intricate connections with the business systems of FMCG suppliers in order to enable seamless digital payment processes. Big FMCG firms have realized there is a chance to cut their vulnerability to crime and increase efficiency significantly. On their delivery rounds in a township, a driver for a large beverage company could have to collect more than R30,000 in cash. Because of their money, they become a target for criminals, who might threaten or use force. to rob them. Eliminating cash will increase driver safety while reducing cash losses for suppliers.
Aside from the crime risk, cash might be lost due to mismanagement and theft. It incurs significant deposit fees and causes delays in bank account settlements. Keeping accurate records of cash transactions and reconciling payments is an administrative headache. Going digital lowers expenses, boosts cash flow, and increases visibility.
Thomson concludes: “Micro merchants and their suppliers face a range of challenges due to their reliance on cash transactions. Initiatives like ours to digitize supplier payments address these pain points head-on, fostering a safer, more efficient, and more inclusive financial environment.”
