Guide to understanding debit order disputes and resolutions
August 22, 2024
The only guide to online payment methods you’ll ever need (2024)
August 26, 2024Disclaimer:
This blog offers general guidance based on information available at the time of publication. For the most up-to-date details, please contact Netcash or other service providers directly.
South Africa’s online shopping industry is booming, with 2024 being a breakthrough year for eCommerce. There are currently 32.55 million eCommerce users in the country, which is expected to increase by 6.38 million users this year.
So, clearly, there’s no better time for businesses to start selling online and, as a result, offer internet payment methods to their consumers. If you’re looking to expand into the eCommerce space or simply want to know the best way to purchase online, then keep reading.
This guide covers why online payment methods in South Africa are important, a breakdown of the top payment options, and a few FAQs. Before we get into the nitty-gritty, you might also want to know how to set up online payments for small businesses.
Why should you provide online payment options?
Firstly, online shopping and banking are growing steadily in South Africa, with more than 70% of the population shopping online. All trends point to a steady increase in SA eCommerce, ranging between 20-35% annually. It’s predicted that 47% of offline shoppers could shift online within the following year.
With so many promising trends and statistics, businesses should be running at the opportunity to provide South African consumers with online payment methods right now. Besides that, contactless and cashless payments are taking the market by storm as they are safer and more convenient than cash.
Have a look at the following benefits of online payments:
Improved satisfaction
Digital payments are more convenient since they can be made at any time from any location, which is faster and safer. All these factors lead to improved satisfaction for online shoppers. The risk of human error, unsatisfactory customer service, and long waiting lines common to brick-and-mortar stores are lowered or eliminated.
Faster checkout
One thing about an electronic payment method you can’t deny is how fast it is, especially compared to traditional methods. With a swift click of a button, you can make an instant payment. From a business perspective, this instant clearance can improve cash flow since outdated methods like cheques take several days to clear.
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Higher conversion
Thanks to the efficiency and convenience of digital payment options, your business can say hello to higher conversion rates. This is a result of an overall improvement in your cash flow, allowing you to plan your finances better. For example, choosing the right online payment options targeted to your shoppers can improve your conversion rate by up to 30%.
Greater sales
Digital payments make it easier for consumers to purchase goods and services using their preferred method of payment, which leads to increased sales. Also, new online payment methods, such as Buy Now, Pay Later (BNPL), allow customers to buy goods that they normally wouldn’t pay for once-off due to affordability and budgeting.
Lower costs
Electronic payments are generally less expensive than traditional ones. They lower the need for postage costs, reduce the use of materials such as ink and paper, and decrease labour costs and bank fees. The costs of processing invoices are grossly underestimated, and this is where your business can save money by using digital payment plans.
Also read: Payment gateways in South Africa (2024).
Most popular online payment methods in SA
With all the reasons why electronic forms of payment are better than traditional methods, let’s look at the top ones used in South Africa.
1. Credit cards
As of January 2024, credit cards have been the most common payment method for online shoppers in South Africa. 43% of all online purchases were completed using a credit card.
Credit cards are payment cards issued by the bank which allow you to purchase items using pre-approved money that you can spend from the bank. You then repay the bank with monthly instalments (with interest fees).
They allow consumers to pay for purchases at any time (so you don’t have to wait for your salary) in a convenient and secure way, making it a well-liked electronic payment method.
2. Debit cards
Debit cards are just as popular as credit cards, allowing fast and easy payments directly linked to a bank account. So, instead of spending the bank’s money, you will be using their own capital to purchase goods on the internet.
Although many South Africans use their debit card for online payments (58% as of March 2023), it’s still not as safe as credit cards when shopping online. If a criminal gets hold of your PIN or account information, they can very well empty your account.
Nevertheless, it remains a common digital payment method among South Africans with generally lower processing fees than credit cards.
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3. Bank transfers
Bank transfers (also wire transfers or EFTs) allow you to move money from one account to another. These are usually instant and can be done via mobile or online banking or in the branch.
Bank transfers are one of the safest online payment options thanks to watertight security measures put in place by financial institutions. These include two-factor authentication and fraud detection algorithms.
While bank transfers are safe from fraudsters and cybercrime, they’re not shielded from human error. If you’re not diligent in checking the bank account details several times, you may end up paying the wrong person or entity. However, it is still a convenient and easy method to complete online orders, with 22% of South Africans using bank transfers to shop online.
4. E-wallets
The use of e-wallets in South Africa shows no signs of slowing down. It has become a habit for consumers to use this form of contactless payment. Also known as a digital wallet, this payment method is a type of financial transaction app that runs on connected devices.
Some of the most popular e-wallet apps in SA are SnapScan, MasterPass, FNB eWallet App, Standard Bank Mobile Banking App and Nedbank Money App. 20% of online shoppers in South Africa have been using e-wallets since January 2024.
5. Prepaid cards/vouchers
Prepaid cards or vouchers allow you to put money into a card account that you can spend from. It’s not linked to bank accounts like debit cards, so these are popular with cash customers who don’t have bank accounts. Also known as stored-value cards, these can be purchased from stores and online.
Vouchers are often distributed on an app (such as prepaid gift cards on banking apps) or printed as a till slip type of physical voucher. These offer various prepaid services, such as gaming top-up vouchers, money transfers, airtime, data, lotto tickets, and electricity.
You can deposit money directly from your check account or another prepaid card/voucher. Since these cards are not linked to personal banking accounts, they won’t earn interest and are prone to several miscellaneous fees. Most prepaid vouchers like 1Voucher allow you to pay and shop online without a bank card or bank account.
6. Instant EFT payments
Instant EFT payments allow consumers to pay for goods and services electronically via internet banking. This online payment method is often offered by third parties in partnership with eCommerce stores. Ozow Instant EFT and PayFast are excellent gateways for immediate EFT payments in South Africa.
With 57% of South African internet users shopping online, it’s no surprise that many are choosing to pay with instant EFT as it’s straightforward and rapid. It’s also a secure way to pay online, as your bank will send you an OTP (one-time-pin) or mobile authentication to verify payments.
7. Buy Now, Pay Later (BNPL)
Buy Now, Pay Later (BNPL), also called a “point-of-sale loan,” is a short-term loan that allows you to pay for goods online, usually in monthly installments. Apps such as Payflex, PayPal, and PayJustNow are examples of platforms that offer this service. Thanks to these online payment options, consumers can purchase something immediately and then pay in instalments.
This is great for many South Africans who may not have the means to purchase something pricey immediately, such as furniture, fashion items, and other expensive luxuries. One thing to look out for is the hefty penalties you’ll be charged for late fees and insufficient funds.
However, due to the rapacious interest rates demanded by the credit industry, BNPL products have become popular and continue to grow in South Africa. This growth is also driven by digitalisation, an increasing working-age population, and its appeal to Gen-Z and millennials.
Furthermore, South Africa’s BNPL market is set to expand at a cumulative annual growth rate (CAGR) of 35.1% between 2022 and 2027.
8. PayShap
PayShap is one of the latest digital payment solutions, allowing you to pay and get paid in an easy and fast manner. You can receive immediate payments straight into your bank account from anyone, regardless of the bank they use. With its initial roll-out on 13 March 2023, PayShap is quickly gaining recognition among South Africans for its convenient and immediate online payments and real-time services.
You need to register for a ShapID before making any transactions, and these can take place between Absa, Capitec, Discovery Bank, FNB, Nedbank, Standard Bank or TymeBank. So, it can be used by anyone who owns a bank account, which likely contributed to its rapid uptake since its launch. To put that into perspective, PayShap managed to process nearly ten million transactions to a value of over R6.6 billion in such a short time.
There are currently over two million active ShapIDs in the country and this is expected to increase.
9. Cryptocurrency
Cryptocurrency continues to act as a viable means to pay for goods and services. As for South Africa, there are about six million (or 10%) of its population who own a crypto asset. As such, this digital payment method will likely grow in popularity, and its market is predicted to grow by 7.86% annually between 2024 and 2028.
More and more online retailers and brick-and-mortar stores are starting to accept cryptocurrency as payment. Transactions made using crypto are only possible through a cryptocurrency wallet. Wallet applications are installed on your computer or mobile device, allowing you to access your crypto.
You can pay from anywhere with fewer fees, anonymity, and a reduced need for third-party involvement. Note that once you pay via this method, it cannot be reversed. Also, cryptocurrency is not regulated; its value changes over time, and there’s a risk of loss.
10. QR code payments
A Quick Response (QR) Code Payment is a contactless payment method made possible by scanning a QR code from a mobile app. For this type of payment to process, you’ll need a smartphone with a camera and internet access. One security concern is that this method may be vulnerable to phishing scams if not encrypted.
South Africa is no stranger to the growing trend of using QR codes. Scan to Pay is currently the largest QR ecosystem in the country, facilitating an average of 12 million transactions per month. SnapScan, Zapper, and Netcash Scan to Pay are other excellent options for the payment method.
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FAQs about the best online methods of payment in SA
If you’re still curious about a few more things, hopefully, the answers to these frequently asked questions will bring you some clarity.
Credit cards are, by and large, the most secure way to shop online. They provide a level of safety that debit cards and cash could only dream of — fraud protection. You can alert your bank immediately if your credit card has been stolen to prevent any transactions from occurring. Payment apps are also very safe to use online, as they offer multi-factor authentication, facial or fingerprint recognition, and other smart security features. Additionally, most major banks allow you to create a virtual card that can be linked to any of your transacting bank accounts. With these visual cards, the CVV number changes constantly, making it an even safer method to pay online. In South Africa and beyond, the most preferred online payment methods are Visa and MasterCard credit cards. As mentioned earlier, 43% of South African eCommerce transactions were completed through credit cards. Both payment methods offer a high level of security with similar protections and features. However, PayPal does have a slight upper hand thanks to its built-in purchase protections (which is not always the case for credit cards). South African consumers rely on digital payment methods for almost half of all transactions. Here’s a closer look at the payment method breakdown in SA:
Top online payment platforms in South Africa: Wrapped up
This guide has shown that having virtual payment options on your eCommerce website (or online store) is crucial for your business’ success. The benefits are too good to pass up. You can save money, improve cash flow, increase sales and security.
The best part? Now you know what the most popular online payment methods are in South Africa, so you can cater to your customer’s needs and preferences.
You can get started today with Netcash. We offer multiple digital payment options for your eCommerce endeavours, including Payflex, Credit Card, Instant EFT, Scan to Pay, and 1Voucher.
Author:
Candice Sergeant
Product Manager
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Candice Sergeant is a digital dynamo at Netcash, where she’s on a mission to help South African businesses level up their online game. As an eCommerce Product Owner, she’s got her finger on the pulse of the latest trends and technologies, constantly seeking out ways to boost sales and streamline operations. With a knack for spotting opportunities and a passion for innovation, Candice is your go-to guide for taking your e-commerce business to the next level.
