How will AI affect payments for the every-day consumer in South Africa?
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How will AI affect payments for the every-day consumer in South Africa?

Carel Botha

6 Feb 2023
How will AI affect payments for the every-day consumer in South Africa?

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No longer the stuff of science-fiction, Artificial Intelligence (AI) has captured the attention of South Africans across the board. In fact, it would be difficult to scroll any news or social media platform without finding at least one reference to the likes of ChatGPT or DALL-E. These AI-apps have wowed users for their ability to synthesise large amounts of data and generate written articles and digital artworks in seconds. More importantly, they have sparked widespread discussions on the potential impact that AI will have on a range of industries – from those in creative fields, to finance, engineering, and more.

The payments industry has not escaped this debate, and as the technology continues to advance, consumers can expect to see AI play an increasingly larger role in their day-to-day transactions. In this article, we unpack some of the ways that AI will change how consumers make payments, as well as our thoughts on what South Africans can expect in the year to come.

How is AI improving payments?

One of the biggest ways that AI is improving payments is by making the whole process a lot more convenient for consumers. AI works by processing large amounts of data. This data is generated when users make payments using a digital channel, such as their banking app, QR codes, or EFT. Using computer algorithms, AI is able to identify opportunities in the data and inform the development of new ways for customers to transact. This results in a better customer experience by reduces the time and effort needed to make payments, and even helps consumers make better sense of their spending habits and manage their monthly budgets.

The most recognisable use of AI in the payment industry has been innovations such as AI chatbots, which are enabling a more proactive and deeply personal form of customer experience. It has also started being used to improve customer security, with AI’s processing power able to detect and prevent fraud by analysing patterns in consumer behaviour and transactions. In this way, AI is also helping to identify and prevent security threats, such as hacking and phishing, by using advanced computing power to detect suspicious activity.

What is stopping AI in 2023?

But while AI has the potential to significantly improve how everyday people make payments, it would be naïve to think that the technology will revolutionise the industry overnight. Rather, there are several challenges which first need to be overcome for AI to play a larger role in the South African payments landscape.

Firstly, it is important to recognise that cash will always be a preferred form of payment in South Africa. Simply put, cash is easier to use and customers prefer the speed, flexibility, anonymity and affordability that comes with it. But it is also the physical nature of cash that inhibits the uptake of AI, which can only inform decision-making by processing large amounts of data, which in turn can only be generated at scale through digital transactions.

However, that is not to say that digital payments have not made headway in South Africa. In fact, the fintech revolution and widespread uptake of mobile phones means that, now more than ever before, people are using digital channels to transact. Except, this uptake is directly impacted by high data costs. Widespread unemployment, low incomes and ongoing inequality means that most South Africans are forced to be more frugal with their online activities. As such, they tend to fall back on more affordable ways of making payments, such as cash.

To the customer’s benefit, there has been a recent move to overcome high data costs with many businesses looking to alternatives such as zero-rating their marketplaces or investing in Unstructured Supplementary Service Data (USSD) services to make it easier for people to transact online. Good examples of this include our own integration into the Capitec Banking App and MTN Momo. These are just one of the ways in which AI might gain a foothold in the African market.

Except consumers are still faced with one more major issue: loadshedding. Regardless of data costs and payment habits, the uptake of AI in the South African payments industry cannot escape the ongoing energy crisis, which affects everything from the battery life of your device to your ability to connect to the internet. If customers are unable to get online, they will not be able to communicate the data needed to spur AI.

With increased use of AI in payments, there are also concerns about data privacy. AI systems collect and analyse vast amounts of consumer data, which can be vulnerable to theft and abuse. It is important for consumers to be aware of the data privacy policies of payment providers and to take steps to protect their personal information.

These are just some of the challenges facing businesses in the field of AI-payments. But the sector is also rapidly evolving. Ultimately, the best thing that South African consumers can do for now is to stay up-to-date with the latest developments in the field of AI payments.

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