South Africa could experience some turbulence in 2023 due to high levels of inflation and the Reserve Bank being unlikely to move away from its rate hike cycle – including the most recent increase of 25 basis points – overall leading to a rather bearish outlook. This does, however, give way for businesses to look to other means of money management and the diversification of their financial infrastructures. This may include pivoting towards a non-traditional payment provider.

The digital payments market is on the rise in South Africa and is expected to grow from $14bn (almost R25 billion) to $25bn (almost R43 billion) between 2022 and 2027. It’s imperative to equip your business with the necessary tools to facilitate digital payments, which will allow you to penetrate new markets. These are three things to look out for in South Africa’s payments landscape in the year ahead.

Keep a close eye on exchange rates

There will likely be further depreciation of the South African rand against the US dollar in 2023, so businesses can expect exchange rate weakness. Keeping abreast of the most competitive exchange rates and seeking ways to lock in favourable rates is recommended for South African businesses that rely on currency conversion and international payouts.

Africa’s e-payments market is expected to grow 152% from 2020 to 2025. Digital wallets are favoured by South Africans and are one of the most penetrated markets in Africa, with 105,870,063,200 Rand in annual revenue from e-payments. However, cards still remain the most dominant payment method.

Focus on SMEs

SMEs represent roughly 98% of businesses in South Africa and are critical to the country’s economy and workforce. Following the disruption and ripple effect of COVID-19, 2023 brings with it some opportunities for SMEs to recover, however, the challenges must also be addressed. These include empowering staff to help drive business growth, finding ways to connect with customers, and looking towards new markets if faced with dwindling demand.

SMEs in South Africa may struggle with liquidity and cash flow management, commonly due to chasing invoices, barriers to accessing key metrics, or legacy systems that cannot keep up with ambitious growth and global scaling.

2023 will bring ample opportunity for micro-enterprises and SMEs to find an innovative fintech solution that will address the payments problems that banks cannot answer to. South African banks are limited by regulations and costs, and may be less agile when it comes to providing alternative payment methods such as e-payments and digital wallets.

SMEs should look to leverage technology to reach new markets and shift demand to new client bases, accompanied by an intelligent payments infrastructure which works with them.

Furthermore, introducing automation with an API alongside a highly trained team is another component that will provide the right tools to empower South African SMEs and allow them to thrive in 2023.

Rising e-commerce opportunities

E-commerce has strongly contributed to the rise in digital payments as South Africans look for an easier way to shop and avoid crowds. In fact, e-commerce in South Africa grew about 40% during lockdowns in 2020 and 2022. Some 66% of online shoppers turn to cross-border e-commerce, which means this industry, in particular, needs a way to provide a fast, seamless and low-cost payments corridor.

Market challenges from 2022 will spill over into the new year, however South Africa looks to be an exciting region for businesses to grow and prosper. Businesses should seek out ways to combat the economic factors beyond their control, one of them being to utilise opportunities in the payments landscape.

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