Designing a cashless future: Why South Africa’s informal economy cannot be an afterthought

Financial inclusion efforts today are increasingly built around digital systems. By 2035, the South African Reserve Bank envisions an economy where the majority of transactions are conducted digitally. QR codes, e‑wallets and contactless cards are gradually replacing physical currency. Yet this vision, while compelling, prompts a fundamental question: can a digitally driven economy succeed if the underlying systems are not designed for the financial realities of the majority?

South Africa’s informal economy contributes around 5% of GDP yet supports livelihoods for up to one‑in‑four workers, including around 3 million engaged directly in informal enterprises and a further 2 million informally employed within formal or semi‑formal settings. It operates primarily in cash. With approximately 1.8 million informal enterprises active across townships, peri‑urban areas and rural centres, over 90% remain cash‑reliant. Just 12% use formal banking infrastructure for daily transactions. This segment is neither marginal nor temporary — it is foundational.

The digital payments ecosystem is expanding rapidly. South Africa’s prepaid‑card and digital‑wallet market is expected to grow from $11.8 billion in 2024 to $21.2 billion by 2029. Uptake is driven by fintech innovation, smartphone penetration and private‑sector‑led financial‑inclusion models. Platforms such as Yoco, SnapScan and PayShap offer speed, traceability and modernised point‑of‑sale convenience.

However, systemic constraints remain. Approximately 43% of adults are either unbanked or underbanked. Internet penetration in rural areas remains below 70% and mobile data costs account for up to 10% of monthly income for low‑income households. In 2024 alone, South Africa experienced over 12000 megawatts of unplanned power outages, further compromising the reliability of digital systems. These factors underscore a significant concern: the digital‑payments agenda is progressing faster than the enabling infrastructure.

While end‑user tools dominate public discourse, the back‑end infrastructure of payments is equally critical. The global financial system largely relies on the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, a secure messaging protocol linking over 11 000 financial institutions for cross‑border transactions. It is centralised, formal and integrated into banking architecture — including South Africa’s. Emerging in parallel are blockchain‑based systems which offer decentralised, near‑instantaneous transaction capabilities. Several countries, including Nigeria, Brazil and China, are piloting central‑bank digital currencies via distributed‑ledger technologies. These alternatives promise greater transparency, faster settlements and lower transaction costs — at least in theory.

Notably, even SWIFT is adapting. In 2024, it launched pilot integrations with blockchain platforms, signalling that a convergence of models is likely. For South Africa, the question is not whether to adopt blockchain or retain SWIFT, but how to ensure that future payment infrastructures are inclusive by design. If next‑generation digital rails reproduce the barriers of the existing system — device dependency, cost layering or financial literacy gaps — then exclusion may persist, albeit through more modern mechanisms.

Digital finance introduces benefits, but its implementation is not neutral. There is a growing risk that a dual‑speed financial system could emerge: one optimised for the digitally fluent and formally banked, and another constrained by access limitations, cost and literacy.

For many small‑scale traders, a 3% transaction fee on a low‑margin sale is prohibitive. Access to WiFi, reliable electricity and digital hardware remains inconsistent, particularly in informal settlements. This creates an operating environment where adopting digital payments may not be financially viable. Moreover, financial exclusion is not solely economic it is also relational and cultural. Roughly 40% of households continue to use stokvels and informal savings schemes. These institutions are built on social capital and cash familiarity. Their persistence reflects not resistance to innovation, but a rational response to limited trust in formal finance — often shaped by historical exploitation, unauthorised debit orders and poor consumer‑redress mechanisms.

Kenya’s mobile‑money success is often cited as evidence of the potential for digital transformation. With over 75% of adults using M‑Pesa, the narrative of digital inclusion is compelling. Yet the South African context differs. Here, the financial sector is more formalised and less agent‑distributed. Moreover, a high percentage of bank accounts remain passively used, primarily for grant withdrawals or salary receipts with limited transactional behaviour.

Blockchain and digital‑currency advocates argue that future rails will lower costs and enhance access. While this is a valid prospect, the operational realities remain complex. Distributed‑ledger systems are still evolving and face implementation hurdles including regulatory clarity, interoperability and trust deficits. Even domestic innovations such as PayShap and e‑vouchers, while promising, have struggled to reach informal traders at scale. High onboarding costs, limited public awareness and continued dependence on mobile data inhibit uptake.

If digital payment systems become mandatory or crowd out cash alternatives, the result could be a measurable decline in informal‑sector earnings. Daily‑wage workers, car guards and micro‑enterprises that depend on spontaneous cash‑based trade could face liquidity shortages. This is particularly significant in an economy where unemployment remains above 30%. The informal economy also plays a social‑stabilising role. It supports income for those excluded from formal employment and provides goods and services at localised, accessible scales. Exclusion from digital payments may inadvertently erode this safety net.

South Africa has an opportunity to design a hybrid payments model, one that retains the flexibility and accessibility of cash while extending the reach of low‑cost digital tools.

Policy and industry action can include protecting the legal status of cash to ensure it remains an accepted medium of exchange; subsidising data access and expanding zero‑rated apps to reduce usage costs in low‑income areas; developing open‑access interoperable digital‑payment infrastructure, especially for low‑volume transactions; embedding informal‑sector representation in fintech design and consultation processes; and monitoring global blockchain and digital‑currency experiments to assess viability, regulatory safeguards and adaptation potential. Such a model would not delay innovation. It would enable a broader and more resilient base of participation.

The direction of digital finance is not in question. It will expand. But whether it expands in ways that serve all participants equitably remains a choice. South Africa’s informal sector presents not only a policy consideration but an economic design challenge and opportunity.

The real question is no longer whether the cashless economy is coming. It is whether South Africa will architect inclusive systems from the outset or seek to retrofit fairness only after structural exclusion has already taken hold.

Nomvula Zeldah Mabuza is a Risk Governance and Compliance Specialist with extensive experience in strategic risk and industrial operations. She holds a Diploma in Business Management (Accounting) from Brunel University, UK, and is an MBA candidate at Henley Business School, South Africa.

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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