According to the World Bank, the majority of South Africa’s urban population resides in townships and, with an 18% contribution to GDP, the informal sector within it is one of the most important parts of the economy, both as a means of employment and how millions of people obtain goods and services.

Amid this significant amount of trade where cash still dominates, Zunaid Miya, MD of local fintech company Hello Pay, says digital payments have the potential to drive a multitude of new businesses and solutions in the kasi economy.

“Townships, and the many informal traders and businesses within them, make up a crucial, vibrant and entrepreneurial part of the broader economy,” says Miya. “The trends, challenges, and opportunities with respect to payments in this sector serve as a useful economic barometer.”

Financial inclusion is named as one of the main priorities of the South African Reserve Bank’s (SARB) Vision 2025. Electronic, digital, and mobile payments are highlighted as critical elements of financial services in the coming years.

Miya says it is abundantly clear that the financial inclusion challenge is far from being solved as financial service providers look for ways to make inroads into the 11-million unbanked and underbanked in South Africa, according to World Bank estimates. “Kasi traders and consumers are looking for digital payment solutions that are as cost-effective and convenient as they are seamless,” Miya adds. “The roadblocks to digital adoption need to be well-understood before the reliance on cash comes to an end.”

The common perception that card machines are expensive and difficult to operate and maintain suggests that there is much to be done to educate township merchants about the risks of cash and the benefits of electronic payments. “Digital alternatives to cash need to be able to offer the same features and benefits to gain traction in the informal economy,” says Miya. “There is ample opportunity for mobile transactions to become completely trusted, simple to use, easily understood as well as immediate, and affordable with no hidden fees.

“Spaza shops, hawkers, pavement sellers, street vendors and various other micro-enterprises erroneously believe their business simply won’t qualify for a bank account or that using card machines or mPOS (mobile point-of-sale) comes with high fees and requires high levels of digital literacy.”

While there are numerous challenges facing township communities, a number of fledgling businesses are making their mark such as local fashion brands, food delivery alternatives, as well as entrepreneurial barbers, beauticians and even services like Internet cafes and laundromats.

“The township market represents substantial spending power,” says Miya. “As the number of smartphones in this market rises, so too will familiarity and comfort with digital payments which has the potential to unlock a host of exciting opportunities for informal sector businesses and their customers. We’re proud to be at the forefront of providing fast, affordable and convenient products and services to this sector in order to drive financial inclusion.”