The South African Reserve Bank has unveiled a comprehensive strategy to accelerate the adoption of digital payments in line with its Vision 2025, which was published six years ago.
According to the report, the uptake of digital payment technologies in the country has been slow. In order to bridge the gap and achieve the vision, the report proposes various measures, including the introduction of cryptocurrency and a central bank digital currency (CBDC).
While South Africa’s financial services sector, particularly banking, is well-established, the report reveals that individuals with lower and middle income levels are still heavily reliant on cash, despite the advancements in digital payment technology. This is primarily due to factors such as user costs, low financial literacy, limited accessibility, and lack of trust.
The roadmap outlines high-level plans to increase the accessibility of financial technology, modernize payment infrastructure, and eliminate barriers to usage. It should be noted that these plans are solely focused on the domestic market.
In terms of cryptocurrency, although it is not considered legal tender in South Africa, it is also not prohibited. As an example, popular retailer Pick n Pay accepts Bitcoin as a form of payment at over 1,600 locations. To regulate the use of cryptocurrency, the South African Reserve Bank is studying international best practices and exploring the integration of distributed ledger technology.
Similarly, the South African Reserve Bank is examining the potential of a retail CBDC. This digital currency has the potential to offer greater cost efficiency and facilitate real-time online and offline peer-to-peer transactions. The roadmap recommends further exploration of both retail and wholesale CBDC over a two-year period.
Tokenization, which enhances security, faces regulatory obstacles in South Africa. The South African Reserve Bank acknowledges the advantages of tokenization but is closely monitoring its growth.
In conclusion, the South African Reserve Bank is taking proactive steps to promote the adoption of digital payments in the country. By embracing cryptocurrency, exploring the potential of a CBDC, and addressing regulatory barriers, the bank aims to modernize the financial system and improve accessibility for all South Africans.