Social grant cards boost cash withdrawals

Marc Sternberg

"SASSA cards now represent 14% of our transaction volumes, up from nil just eighteen months ago. The introduction of these cards represents a huge injection of new customers into the formal banking and ATM system," says Marc Sternberg, managing director of Spark ATM Systems.

The SASSA card allows beneficiaries to access their social grant anywhere in South Africa using traditional banking channels, such as ATMs. "This has in turn driven significant demand for convenient ATM services, with Spark installing a record 496 ATMs in the first eight months of 2013. A majority of Spark's ATMs were installed in rural and peri-rural areas and the strong demand for cash by the previously unbanked is reflected in the withdrawal volumes we have recorded on these rural ATMs, particularly on SASSA transactions."

Grant day congestion

According to Sternberg, the almost 10 million new SASSA cardholders into the system has resulted in the peak ATM withdrawal day for the entire ATM industry moving from the last Friday of the month to the SASSA grant day, which is the first of the month, creating huge queues at retailers and at ATMs countrywide.

He adds that many of Spark's merchants who host ATMs, have expressed their desire for the SASSA payments to be staggered across multiple days to alleviate the strain on their businesses and to ensure the social grant congestion does not coincide with month-end, which is already the busiest time of the month for them.

Lower income earners driving cash volumes

Furthermore, Sternberg says that cash volumes in the country continue to grow at a significant rate. Recent figures released by the South African Reserve Bank show that total cash in circulation in South Africa has increased by 13% year-on-year, with R82.19 billion in circulation in March 2013, up from R72.90 billion in March 2012.

The Spark ATM Systems' data suggests that it is consumers at the lower end of the income spectrum that are driving the higher cash withdrawal volumes.

This view is backed up by a recent FinScope survey, which revealed that the introduction of the new SASSA card system contributed to the significant increase in the banked population, particularly at the bottom of the pyramid, where ATM/debit card usage increased from 52% in 2011 to 61% in 2012.

The survey also revealed that 88% of the banked population use an ATM once a month as their primary means of accessing cash and that the second most popular banking transaction is obtaining cash at a store via debit card, which is done by 25% of the banked population.

Sternberg says this data indicates that cash is still very much the dominant payment method in the South African economy and that the demand for ATMs continues to grow despite the other electronic payment options available to consumers.

See the August Spark Cash Index here.