Gen Z's digital takeover of SA's payments industry
A wallet filled with cash and loyalty cards feels about as relevant as a phone booth for Gen Z shoppers. They're swapping physical payments for smartphones, buy-now-pay-later options, and loyalty apps.
Gen Z has a low tolerance for obstacles. The moment a checkout process starts to drag– a form to fill, a password to remember – their patience runs out and their shopping cart is abandoned.
According to the Online Retail in South Africa Report for 2024, online shopping is most prevalent among 25 to 34-year olds, closely followed by the 15 to 24 age group.
Future trends of payment offerings seem to be dictated by the younger generation, and by 2030, they will be the greatest spending force across sub-Saharan Africa.
Goodbye wallet
The leather wallet your dad carries and your mom's heavy handbag filled with loyalty cards are quickly becoming artefacts of a different era.
'Today, everything's on your phone, your cards are on your phone,' Jonathan Spencer, brand head at OneDayOnly, said. 'All of your buy-now-pay-later options are also on your phone. You can check everything on your banking apps on your phone.'
OneDayOnly, the South African daily deal site, has lived through this shift first-hand. Launched in 2010, the platform made its name by offering discounts on a number of different products each day.
Spencer said that the way the site has kept up with evolving payment technology – by adding methods, removing friction and keeping data secure – keeps younger shoppers clicking.
South African Reserve Bank data shows that digital payments (such as mobile wallets, tap-and-go and QR codes) are used by 53% of the youth in the country.
Checkers has also kept its digital payment ecosystem a step ahead. When ordering online through the Sixty60 app, users are redirected directly to their banking apps for verification.
'Today's retail environment is defined by increasingly diverse customer needs and preferences. Convenience, flexibility and accessibility are central to what customers expect,' the retailer said.
Breaking big payments into bite-sized chunks
Many young customers also prefer using buy-now-pay-later (BNPL) payment options as it offers a budget-friendly option for a generation who are keeping a tighter grip on their purse strings.
Gen Zs are more cognisant of the fact that credit comes with a lot of interest, Spencer said, adding OneDayOnly's BNPL option, Payflex, has grown a lot over the past year, along with instant EFT platforms such as Ozow, one of the retail site's biggest partners.
In South Africa, BNPL is projected to become a $1.3-billion (R23-million) industry by 2030, growing roughly 13.6% annually.
On Takealot's platform, the BNPL model is experiencing 'significant growth' among young consumers using Payflex, particularly in the 23–29 age demographic, the online retailer said.
Its revolving credit service lets shoppers pay in instalments and earn 1% back on purchases, which offers a flexible solution for those with irregular income or limited savings.
Providing options at a cost
Adding more payment methods come at a price which merchants need to absorb.
Spencer said that transaction fees associated with these platforms are a convenience charge but can become costly.
'The general public don't really understand that when we take on these payment partners, there's a fee per transaction that's involved in it for us as a company and those fees vary per partner,' he said.
The future is (still) mobile-first
In future, payments will become even more flexible.
'I think we'll start seeing some sort of cryptocurrency coming in,' Spencer said. 'That's something people are starting to think about and how we would start working that into our business and start taking it as payment.'
South African retailers such as Takealot and Pick n Pay already accept crypto payments and according to the South African Revenue Service, more than 5.8 million South Africans hold a crypto asset.
Loyalty programmes, such as banking rewards and student discounts, remain a powerful way to attract and retain young shoppers.
An example is Varsity Vibe, a discount app that can be used only by students and offers special promotions and discounts when shopping at stores such as H&M.
Takealot's loyalty service, TakealotMORE, plays directly into this preference. With plans starting at R39 a month, members can get free delivery across Takealot, Mr D, Takealot and in-store Pick n Pay orders.
The online retailer said young shoppers appreciate services that integrate smoothly into their lifestyle.
Quick and convenient
Gen Zs expect their smartphones to do it all: carry their payments and loyalty points without needless complexity.
To better serve a younger demographic, Takealot advocates integrating shopping directly into social media platforms, where young people already spend so much of their time, and adding user review and content from their peers to aid purchasing decisions.
'We know that the world is leading mobile first,' Spencer said. 'Businesses need to start thinking through that lens: How can I get this quickly and conveniently through my phone?' DM
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