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Twenty years from now, could the next generation of South Africans look at a bank note like an archaeologist curiously examining a newly discovered artefact of days gone by? If South Africa is to take its place at the forefront of the Fourth Industrial Revolution, this may be a scenario we should welcome.

The fact is, the world has already evolved rapidly with the introduction of contactless payments and more accessible tools to assist the ‘unbanked’. Over the last two unprecedented years, the need to social distance and safeguard our health has also accelerated the growth of digital payments.

According to the BCX Innovation Report 2022, as social distancing became the new normal, e-commerce continued to boom with goods and services being provided online, raising the share of global retail from 14% to 17% in 20201.South Africa’s leaders responded to similar trends locally by placing a heightened focus on their digital strategies. Could a pandemic have fast-tracked South Africa to a digital revolution, designed to transform how we view cash as a currency?

The BCX Innovation report notes that South Africa is unlike many countries where access to bricks and mortar is ubiquitous to all. We are therefore in a unique position to upscale to connect customers and businesses, using digital currencies and agile financial tools. A digitally enabled, customer focussed strategy is expected from consumers and enterprises in the South African banking industry. With 70% of South Africans classified as millennials or younger, providers will have to be as comfortable as their customers switching between devices and channels, communicating seamlessly and providing a consistent experience.

“2020 was a year of disruption that forced businesses and industries to innovate and think outside of the proverbial box.  Businesses had to reinvent and reimagine their services and products within very challenging socio-economic conditions to unlock greater customer value. We may reap the benefits of this for years to come,” said Jonas Bogoshi, CEO of BCX.

Although South Africa is frequently slow to adopt new technologies, the South African banking industry is regarded as one of the most digitalised and advanced in the world. This is a good place to start if one is to transform an industry over a short space of time, but it also raises expectations. Consumers and enterprises in the South African banking industry expect a digitally enabled, customer-focused strategy.

The BCX Innovation Report shows that banking penetration is approximately 80% in South Africa, which is high compared to its African peers, as South Africa is in the top four ‘banked countries’. However, a large proportion of that 80% is still greatly underserviced, posing a huge opportunity for innovative players and possibly new entrants. Only 30% of South Africans who hold a bank account make more than three transactions a month. In addition, a significant proportion of the South African economy is still cash based and will be so for the foreseeable future. This requires physical and digital finance systems to integrate well to ensure that digital innovations do not drive further financial inequality.

A starting point is understanding the current state of digital innovation at both a macro and a micro level: expanding the soundbite boardroom discussions around innovation and transforming them into fact-based knowledge that encourages South Africans to innovate for local solutions. At a macro level, national policies provide direction and focus.

South Africa is widely recognised as having some of the most advanced policies and institutions. What we require is the impetus to accelerate the implementation of digital innovation if we are to derive the benefits of this digital revolution. The socio-economic challenges that we face as a country are the very areas in which we should be encouraging innovation.

Some of the recent winners of the BCX Digital Innovation Awards are incredible examples of local companies transforming how we view and use cash. This includes FinChatBot, a fintech start-up, which was founded in Cape Town by two passionate French entrepreneurs, Antoine Paillusseau and Romain Diaz, to help financial service providers acquire and retain customers using artificial intelligence-powered conversations. Ozow Revolution, another South African innovation, is leading a drive toward digital inclusion for all. Ozow Revolution was created to make digital payments available to everyone and create greater opportunity to participate in the digital economy.

According to Mandisa Ntloko-Petersen, BCX Chief Marketing Officer, “We need to transform society economically by utilising technology. We need to help them transition to take part in the economy from where they are. Digital innovation needs to be adaptable to all environments in South Africa.”

The retail sector reflected this willingness to evolve to counteract national lockdowns and social distancing, which shifted consumer habits. Large supermarket chains doubled down on digital shopping and delivery, as the demand for online ordering skyrocketed. It even introduced some level of competition, leaving Shoprite, Pick n Pay and Woolworths as the most prominent retailer delivery applications throughout the pandemic in the form of Shoprite’s Checkers Sixty60, Pick n Pay’s Bottles, which was rebranded to Pick n Pay ASAP, as well as Woolies Dash by Woolworths.

Shoprite is currently trialling a concept that uses AI to allow customers to walk out of the store without checking out in the traditional way, by monitoring what is taken off the shelves and billing bank cards on exit. This concept, known as Checkers Rush, is one of several experiments the retailer is looking into to reduce physical contact and meet consumer expectations. Shoprite realised that increasing its digital presence is likely to remain a requirement as consumers are armed with smartphones and technology that is moving at a rapid rate2.

Fortunately, the financial services sector in South Africa has also been undergoing extraordinary transformation. Ongoing modernisation and rapid developments in digital technologies are disrupting the sector, as well as enabling change in previously disconnected sectors, such as banking, telecommunications and retail. This has given rise to new market entrants and solutions actively shaping the payments space. As noted in the BCX Innovation Report 2022, we must reimagine how to utilise frontier technologies to provide access to services and the economy, while accelerating investments into the infrastructure required to achieve this.

The boost in digital innovation adoption creates the potential for significant economic growth as well as the opportunity to positively impact our society. South Africa needs to respond by focussing on supporting the key macro and micro enablers to allow digital innovation to thrive across all sectors as we secure our place in the global digital ecosystem.

“Cash may still be king, but it’s clearly a time for a digital revolution. When a technology becomes readily available and affordable, it changes fortunes of nations,” concluded Bogoshi.