Digital payments strengthen SA SMEs

South Africa’s small and medium-sized enterprises are increasingly adopting digital payments, with many reporting operational benefits such as faster transactions, reduced cash handling, higher sales and expanded reach into new markets.

The fifth edition of the Payfast State of Pay 2025 report reveals digital payments are shifting from a supporting function to a core business tool for SMEs, particularly micro businesses. More than 80% of surveyed merchants said digital payments will become their primary sales channel within the next three years, reflecting growing confidence in online and alternative payment methods.

SMEs dominate the sample, with 82.5% of respondents operating with fewer than 10 employees and two thirds generating under R100,000 in estimated monthly revenue. Female-led businesses account for 54% of surveyed SMEs, highlighting their central role in South Africa’s digital economy. Gauteng and the Western Cape remain the strongest regional hubs for digital commerce activity.

The adoption of digital payments is directly linked to new value. Almost two-thirds (64.9%) of merchants report sales increases of up to 50% after adopting digital payment methods, while a further 35.1% report growth beyond that level. Faster transaction times and reduced reliance on cash are cited as key operational benefits, with 62% of merchants pointing to improved transaction speed and 41% reporting less cash handled on premises.

Payment preferences are also shifting. From a merchant perspective, card usage declined by 41%, while Instant EFT usage increased by 18%. Buy Now Pay Later and mobile wallets are among the fastest-growing payment options, driven by consumer demand for flexibility and convenience. Payfast’s transaction data shows mobile wallet usage growing by 62% year on year, while cash-based alternatives such as MukuruPay and SCode recorded growth of more than 500%.

Unified commerce adoption is accelerating, with 43% of SMEs now using a single platform to manage online and in-person payments, up sharply from 2024. Awareness of unified commerce has improved, with only 10% of respondents saying they are unfamiliar with it. In 2024, about one-third (35%) had not heard of the concept. At the same time, sentiment towards online marketplaces is becoming more cautious, as merchants weigh increased reach against margin pressure and competition.

Cross-border trade is emerging as a significant growth opportunity. Almost 40% of SMEs already sell internationally, and 44% plan to expand into new markets within the next year. Sub-Saharan Africa, Europe and North America are identified as the top target regions, although merchants also report increased exposure to fraud and compliance risks as they expand.

Despite strong momentum, challenges remain. Cash flow continues to be the leading concern for merchants, cited by 23% of respondents, while fraud is emerging as a growing risk. Competition from marketplaces and softer sales conditions are also placing pressure on smaller businesses.

On the consumer side, cards remain the most used payment method for online purchases, although their share is slowly declining. BNPL usage doubled year on year, while Instant EFT and open banking options continue to gain traction. Trust remains the most important factor for online shoppers, outweighing price and convenience when choosing where to transact.

The report reveals that South Africa’s payments ecosystem is approaching a tipping point, with digital payments increasingly embedded in everyday commerce. As SMEs adopt a wider mix of payment methods and gain access to faster settlement and funding tools, digital payments are playing a growing role in business resilience, inclusion and economic participation.

* Read the ‘State of Pay 2025’ report on Payfast website here.

*Jason Bannier is a data analyst at World Wide Worx and deputy editor of Gadget.co.za. Follow him on Bluesky at @jas2bann.