Latest news with #SpendTrend25
The Citizen
27-05-2025
- Business
- The Citizen
Dipping into retirement funds could cost more than you think
Early withdrawals shrink your retirement savings and prevent them from growing, which can leave you financially short in the future. It's close to the end of the month. Bills are stacking up, and your bank balance is low. Maybe the car needs urgent repairs, or an unexpected medical bill has thrown off your budget. In these moments, many South Africans have found themselves asking: should they dip into their retirement savings to make ends meet? Unfortunately, this has become a growing reality for many, according to the SpendTrend25 report, a collaborative study by Visa and Discovery Bank, that takes an in-depth look at South African consumer spending habits. The two-pot retirement system allowed South Africans to withdraw a portion of their retirement savings, resulting in 1.9 million applications and R35 billion in withdrawals by November. By January 2025, the South African Revenue Services reported that about two million South Africans withdrew from their savings pots, with a total gross lump sum of R43.42 billion paid out. While this system was designed to assist people with life's emergencies and encourage them not to use all the funds on changing jobs, the decision to withdraw even some of it can come at a much higher cost over the long term. Impact on long-term financial security The SpendTrend25 report, including data from Discovery Corporate and Employee Benefits retirement fund members, shows the following: 24% of retirement savings were withdrawn to cover home or car costs 21% of withdrawals were used to pay short-term debt 20% went towards school fees, and 11% was used for other daily expenses. This reveals how people are using money intended for long-term savings to cover immediate costs, even as inflation eases. But this shift from saving for retirement to spending money on immediate expenses can result in retirement funds not growing as fast and financial strain during later years when these savings are needed. Withdrawing from long-term savings is not sustainable financial behaviour, which makes education on long-term financial management crucial across all income groups. The burden of taxes on withdrawals Despite warnings that accessing funds from the savings pot is costly, many South Africans were shocked to find that taxes were levied on their early withdrawals. Retirement fund contributions are tax-deductible, so any withdrawal, whether at retirement or before retirement from your savings component, is taxed as income. This highlights the need for more awareness regarding the implications. Missed opportunity for financial growth By withdrawing from retirement funds prematurely, individuals decrease the overall growth of their retirement savings over time. Contributions to retirement accounts typically benefit from compound interest or from earning interest on interest, which accelerates growth. Early withdrawals shrink your retirement savings and prevent them from growing, which can leave you financially short in the future. Financial tools and education can help to plan for the future To combat this issue, Vitality Money, Discovery Bank's behaviour-change programme that rewards people for managing money well, offers a solution. The platform helps clients track and improve their financial habits, making it easier to build emergency savings, manage short—and long-term debt, and have all the necessary types of cover to help manage all financial commitments. 'Discovery data shows a clear link between financial behaviours and retirement savings preservation. Higher Vitality Money statuses generally indicate better financial habits. For example, Discovery Retirement Fund members with a higher Vitality Money status are less likely to withdraw from their retirement savings,' says CEO of Discovery Bank, Hylton Kallner. While higher earners might seem less likely to dip into their retirement savings, the data shows a different trend. Withdrawal rates were higher among high-income earners with a low Vitality Money status than among lower-income earners with a higher Vitality Money status. This highlights a key insight: Smart financial habits matter more than income when it comes to protecting long-term savings. Financial tools and education can play a critical role in helping individuals manage their finances to avoid relying on retirement savings for short-term needs.
The Citizen
27-05-2025
- Business
- The Citizen
SpendTrend25: Why South African wallets are shrinking
In response to increasing financial strain, many turned to their retirement savings, such as the two-pot retirement savings system, to provide relief for essential expenses. Consumer spending on credit cards was muted, despite lower inflation, according to the SpendTrend25 report, a collaborative study by Visa and Discovery Bank. The report analyses credit card spend data across South Africa between 2019 and 2024, spanning 12 million credit cards and 2.6 billion transactions. Discovery Bank CEO, Hylton Kallner, says, 'Our latest comprehensive report identifies shifts in financial behaviour for practical insights into how much people spent, what they spent on, and how they spent it. We've also supplemented the analyses with detailed consumer survey data to gain a deeper understanding of the drivers of the trends that we're observing.' In 2024, inflation fell from 6% to 4.4%, yet consumer spending in South Africa remained flat. While we would expect lower inflation to mean more money to spend, the reality is far different. The SpendTrend25 report reveals a clear trend: many consumers are still feeling the pinch, and with less money to spend, spending habits are shifting. Here's how… Rising costs and less disposable income Although inflation has dropped, interest rates reached 11.75% and remained high for most of 2024. The cost of everyday essentials such as groceries, fuel, and utilities also continued to rise. This is putting a large portion of South Africans' budgets under pressure, leaving less disposable income for other purchases. According to the Euromonitor Voice of the Consumer, 86% of South Africans surveyed feel that the cost of everyday items is rising, which demonstrates the widespread impact of inflation and why it's harder for consumers to afford the things they need. Turning to retirement savings for relief In response to increasing financial strain, many turned to their retirement savings, such as the two-pot retirement savings system, to provide relief for essential expenses. By January 2025, the South African Revenue Services reported that about two million South Africans withdrew from their savings pot with a total gross lump sum of R 43.42 billion paid out. The SpendTrend25 research among Discovery Corporate and Employee fund members found they are using their retirement savings for expenses such as home or car costs, paying off short-term debt, school fees and daily expenses. Among Discovery Bank clients, two-pot withdrawal rates were inversely correlated with Vitality Money status. There were higher withdrawal rates for high-income earners with a low Vitality Money status than for lower-income earners with a higher Vitality Money status, highlighting the importance of smart financial habits and sound financial planning. The shift toward value-based spending As consumers become more cost-conscious, value-based spending is gaining traction. 'We've seen a material shift to digital payments in our spend data, this is backed up by consumer preferences whereby over 80% of South Africans surveyed are choosing cards or digital payments over cash whenever they can, and the same percentage engage more with their credit card rewards and benefits than they did a year ago as they focus on value-based spending,' says Kallner. According to the Euromonitor Voice of the Consumer survey included in the SpendTrend25 report, up to 41% of local shoppers now buy more from stores where they have a loyalty card or store credit. The rising uptake and use of these benefits show that consumers want maximum value and offset rising prices by earning rewards or discounts. Discovery Bank has seen that one of the key motivators for clients to adopt healthy financial behaviours with its Vitality Money programme is the ability to book discounted flights and accommodation with Vitality Travel and pay less than the average consumer. Subscriptions to generate value Another shift in consumer spending is the rise of subscriptions. As people face financial pressure, whether from high living costs, interest rates, or stagnant incomes, they have to make careful choices about where to spend their money. Subscription services were once dominated by streaming. By 2024, they have now expanded to include artificial intelligence, sports bookings, and other eCommerce platforms. AI subscriptions saw the highest growth in the share of spend, growing over three times from last year. For Discovery Bank clients, the adoption of AI subscriptions such as ChatGPT and Perplexity have grown more than three times in 2024 compared with the previous year, further demonstrating the shift towards these recurring subscription services. Convenience at a price With busy lifestyles becoming the norm, convenience has become a big factor in how people choose to spend their money. The report highlights that spending on eating out and takeout grew by 12% in 2024 compared with just a 6% increase in in-store shopping. Added to that, it's much easier for shoppers to resist a tempting treat and stick to their grocery budget while adding to a cart on Checkers Sixty60 or Woolies Dash. This is supported by Discovery Vitality data, which shows that online grocery baskets contain 30% healthy food items, compared to 27% in-store. This shift suggests that, even while disposable income may be shrinking, people are still mindful of health-conscious spending, even when opting for convenience. But while convenience is a priority for many, it often comes at a premium, leading consumers to spend more on services that save them time but also increase pressure on their wallets.
IOL News
26-04-2025
- Business
- IOL News
Point of view: how South Africans are navigating financial challenges according to the SpendTrend25
Discover how South Africans are adapting to financial pressures in the latest SpendTrend25 report, revealing insights into spending habits, digital payment trends, and the impact of economic challenges on consumer behaviour. If you're curious about how South Africans are coping financially, ditch the dramatic headlines and take a closer look at the numbers. The SpendTrend25 report by Discovery Bank and Visa doesn't just skim the surface; it digs deep into the nitty-gritty of how we're swiping cards, saving cents, and navigating the economic chaos. Spoiler alert: what it uncovers is sobering, layered, and undeniably real. Now in its third edition, the SpendTrend25 isn't just data for data's sake. It's a reflection of our resilience, choices, and sacrifices, a snapshot of wallets under pressure yet brimming with innovation. Let's talk tech. Over 80% of South Africans prefer card or digital payments. It's a clear sign that we're embracing a tech-forward lifestyle, where even the most unlikely corners are going cash-free. But while we might be swiping and tapping, the reality isn't all smooth sailing. Banking security fears are gripping us more tightly than ever, with three in five South Africans admitting they're more concerned now than a year ago. It's a paradox, trust in the system is growing, but so is the anxiety. Here's a trend that hits home. Flat card spending amidst easing inflation paints a complex picture. We're not crying over inflated bread prices alone; we're facing stagnant incomes and escalating living expenses. It's not just the cost of a litre of milk, it's the strain on monthly budgets. To cope, we're cutting corners, prioritising essentials, and in some heartbreaking cases, dipping into retirement funds just to stay afloat. That's not just worrisome; it's a wake-up call. South Africans never stop finding joy, even in leaner times. Spending on eating out rose by 12% last year – yes, even above groceries. Because let's be honest, dining out isn't just about food; it's about sharing moments and escaping the grind. Similarly, entertainment, particularly online, has skyrocketed. We're cutting costs, but we're hanging on to sanity. Virtual cards are another bright spot. In places like Johannesburg, they're surging as safer, reward-driven choices. Here's a stat to remember: digital wallet transactions are six times more secure than physical cards. Subscriptions are booming, from streaming services to grocery deliveries. But here's what stands out: AI subscriptions are skyrocketing, driven by Discovery Bank customers. It's more than a trend; it's a peek into how tech is entwining itself into our everyday expenses, and it's happening faster than expected. There's pride to be had in our adaptability, digital smarts, and cost-conscious choices. But the warning signs are flashing too. Higher-income earners dipping into retirement funds faster than their lower-income counterparts is a behavioural alarm. It's about more than money, it's about the systems guiding us, or failing us. We need financial tools that prioritise education over panic, and planning over knee-jerk reactions. We need products that meet us where we are, not where we're expected to be. The SpendTrend25 mirrors of our financial culture. We're clever, tough, innovative, but we're under strain. If South Africa's banks, businesses, and policymakers truly understand this data, they'll realise it's their blueprint to helping us navigate the future. What we want isn't complex. We want control, rewards, and a bit more bang for every buck. And if we can get that without giving up what makes us happy, then that's something worth fighting for. * Maleke is the editor of Personal Finance. PERSONAL FINANCE
TimesLIVE
23-04-2025
- Business
- TimesLIVE
SA's spending habits decoded: 10 key insights from the SpendTrend25 report
Discovery Bank and Visa have released SpendTrend25, the third edition of their collaborative annual report of South African consumer spending habits, which is based on an in-depth analysis of credit card spend data. Combining both companies' extensive data sets and analytical expertise, SpendTrend25 tracks how consumer spending habits have evolved between 2019 and 2024 among Discovery Bank clients and the broader South African population. To enhancing the findings of the SpendTrend25 report, this year Visa and Discovery Bank commissioned an independent public survey among a set of South Africans to capture more detailed perspectives on the use of cash and digital payments, use of subscription services, banking security perceptions and the influence of AI on financial behaviour. Over time, SpendTrend insights have become remarkably valuable in identifying how best to offer more relevant, personalised banking that puts our clients in control and provides real rewards that promote financial wellbeing Hylton Kallner, Discovery Bank CEO 'Our latest comprehensive report identifies shifts in financial behaviour for practical insights into how much people spent, what they spent on and how they spent it. We've also supplemented the quantitative analyses with detailed consumer survey data to gain a deeper understanding of the drivers of the trends that we're observing,' says Hylton Kallner, Discovery Bank CEO. 'For example, while we've seen a material shift to digital payments in our spend data, this is backed up by consumer preferences whereby over 80% of South Africans surveyed are choosing cards or digital payments over cash whenever they can, and the same percentage engage more with their credit card rewards and benefits than they did a year ago as they focus on value-based spending. 'And while digital banking has increased client financial safety, three out of five South Africans are more worried about their banking security than a year ago. 'It's findings like these that provide rich, granular insights into consumers' needs and perceptions that can shape strategies and focus areas when designing products and solutions for clients. 'Over time, SpendTrend insights have become remarkably valuable in identifying how best to offer more relevant, personalised banking that puts our clients in control and provides real rewards that promote financial wellbeing,' says Kallner. 'It's also reinforced our view that digital banking security is going to be a key consumer focus point in future.' Our research, in collaboration with Discovery Bank, shows that people across all income levels are making spending decisions with careful planning and strategic use of financial tools Lineshree Moodley, country head for Visa SA 'South African consumers are undoubtedly feeling the impact of rising living costs, which is driving a significant change in spending habits,' says Lineshree Moodley, country head for Visa SA. 'Our research, in collaboration with Discovery Bank, shows that people across all income levels are making spending decisions with careful planning and strategic use of financial tools. The rapid growth of accessible and affordable online and digital payment methods is particularly noteworthy, and alongside these advancements, there are numerous tools and strategies available to help them navigate these challenges. 'Despite the pressures they face, we hope that the insights from SpendTrend25 will foster meaningful discussions and inspire targeted actions, empowering consumers to not only manage, but thrive in this dynamic economic landscape.' 10 key findings of SpendTrend25 1. Consumer card spend has slowed, despite lower inflation. The prime rate cut in September 2024 offered some relief, but recovery has been slow and led many to rely on value-based spending. In 2024, average spend growth was flat even as inflation fell from 6% to 4.4%. Consumer card spend growth trailed inflation by five percentage points, suggesting that factors beyond prices — like income constraints and rising expenses — affected spending habits. Cities like Bloemfontein, East London and Gqeberha had faster growth in spending, while cities like Johannesburg, Cape Town, Durban and Pretoria experienced more muted growth in spend. 2. Consumers are using their long-term savings for short-term expenses. While credit cards are more pervasive as a result of convenience, rewards and functionality, overall spending on active cards remained steady. South Africans are however looking for alternatives to relieve their financial pressures beyond short-term credit. One way is through the two-pot retirement system. Research among Discovery Corporate and Employee fund members found that they are using their retirement savings for expenses such as home or car costs, paying-off short-term debt, school fees and daily expenses. Among Discovery Bank clients, two-pot withdrawal rates were inversely correlated with Vitality Money status with higher withdrawal rates for high-income earners with a low Vitality Money status than lower-income earners with a higher Vitality Money status, highlighting the importance of smart financial habits and sound financial planning. 3. Groceries, retail, travel, eating out and fuel account for over 70% of total consumer spending. Groceries take the top spot for most, while high-net-worth individuals dedicate a larger share of their spend to retail and travel. Johannesburg residents spend a lower share on groceries and more on shopping and eating out or takeout compared to those in Durban and Cape Town. In comparison, people in Bloemfontein, East London and Gqeberha spend a greater share on food and fuel but less on travel, eating out and takeout. As more people return to the office, fuel spending has surged. After a 4% decline in 2023, average fuel spend per active card grew by 5% in 2024, marking a sharp 9 percentage point increase. 4. Busy lifestyles and the need for convenience increasingly influence consumer spending. Spending on eating out and takeout grew by 12% in 2024, outpacing growth in grocery spend (8%), with demand for convenience shaping consumer habits. Online grocery shopping in SA is still on the rise, with spend up 15%, while in-store grocery spend has grown by just 6%. A positive insight is that the shift towards online grocery shopping has not compromised consumers' health priorities. Discovery Vitality data shows that online grocery baskets contain a 30% share of healthy items and in-store grocery baskets a 27% share of healthy items. When it comes to prepared food, spend on dining out is growing faster at 13% than ordering takeout online at 10%. This indicates that grocery shopping is seen as a convenient task to do online, while eating out is a social experience. 5. Virtual cards are growing in popularity as South African consumers prioritise safety and convenience. Up to 45% of respondents in the consumer survey use virtual cards, driven by increased security, convenience and rewards. VisaNet data supports this trend, showing fraud incidents are six times lower with digital wallet transactions than with physical cards. Johannesburg residents use digital wallets for in-store purchases nearly twice as often as the national average, followed by Cape Town and Pretoria. Most major cities are ahead of the national curve in embracing these mobile payments. 6. South Africans are travelling less internationally but are purchasing more online from international platforms. Travel spend is returning to pre-Covid-19 levels, but at a higher cost per trip. Though overall growth in travel spend slowed in 2024 compared to previous years, the post-pandemic recovery continues. Discovery Bank clients travel far more with up to 24% more spend on travel. They saved over R700m on discounted flights, car hire and accommodation through Vitality Travel, both locally and internationally, with top international destinations being the UK, Mauritius, Australia, the US, and the UAE. While growth in travel spend slowed, spend on international platforms increased significantly, outstripping in-store spend at international destinations. 7. Omni-channel shopping experiences continue to grow both globally and locally. Internationally, consumers are embracing phygital (a blend of physical and digital) shopping experiences, such as ordering products online and picking them up in-store. This trend is also emerging in SA, with 21% of local consumers favouring phygital shopping experiences like browsing online and buying in-store. 8. The use of cash is declining and being replaced by real-time, digital payments. The consumer survey showed that 67% of South Africans use cash only a few times a month or never at all, with over 84% choosing cards or digital payments whenever they can. Online shopping continues to grow across South African cities, with transactions increasing by an average of 5% from 2019 to 2024. Bloemfontein and East London led with 10% and 11% growth, respectively. As digital payments continue to increase, affordability influences payment choices, with expectations for real-time, faster, cheaper payment systems that do not compromise convenience. The SpendTrend25 consumer survey showed that 86% of consumers believe payments should be as cost-effective as possible, while 84% believe it is essential that payments reach recipients quickly. 9. Online entertainment continues to surge. Spending on online entertainment is the fastest-growing category in SA, growing by 110% since 2023. Spending on online entertainment includes streaming services, sports betting, and event bookings. Discovery Bank clients spent more frequently and at higher values on event bookings than the broader market, with 20% growth in the average transaction value. This can be directly linked to their exclusive early access to concert and event tickets. Sports booking transactions, including padel, have also grown across the country. Among Discovery Bank clients the number of sports booking transactions grew by 64%, and by 41% in the rest of the market. Discovery Bank clients played over 93,000 padel games in 2024, 70% of them during the week. 10. Access to a wide range of subscription services is growing among South African consumers. While subscription services were once dominated by streaming, by 2024, they had expanded to include artificial intelligence, sports bookings, groceries and eCommerce. AI subscriptions saw the highest growth in share of spend — growing over three times from last year. Discovery Bank clients are leading this trend, using AI services more than the average South African, with an AI subscription adoption rate of 160% of the market. This rise in interest highlights how quickly AI is becoming part of everyday life.
