Exchanging bank notes and coins are increasingly seen as risky business, as noted by Thomson Reuters in an article on the rise of digital money transactions.
The COVID-19 pandemic may speed up the global move towards digital-only payments. Apart from the more widespread use of payment apps, electronic funds transfers and cryptocurrencies, the idea of digital currencies is gaining currency. Countries including China, the USA, Sweden, Japan and Russia are considering the creation of digital currencies. How these currencies are regulated remains to be seen. China’s approach seems to involve the government being able to monitor payments, thus hampering money laundering schemes. However the risks of cyber-attacks and privacy concerns are significant.
A digital currency could be based on a blockchain system and if governments issue a digital wallet to all citizens, the payment of social grants and other relief may become easier.
But in countries like South Africa where many are unbanked or have no access to the necessary technology, the move to digital-only payments recedes into the future. Our large informal sector often requires payment in physical money.
Promisingly, our regulators launched the Intergovernmental Fintech Working Group (IFWG) Innovation Hub on 7 April 2020 to respond to changes in the financial sector driven by fintech. The IFWG seeks to promote responsible innovation in the sector. Support from our regulators for new financial technologies may help to speed up the rise of digital payments, even in South Africa.