There is an issue when it comes to transactions in Africa. That issue is cash. There are plenty of reports that point to the percentage of people who remain unbanked on the continent – it’s high. There are also reports that talk about how those who are banked use their accounts as little more than cash repositories – money in on payday, money out on payday. Why?
The African consumer doesn’t trust the system. They also face significant difficulties in rural areas that have limited card-based services and access to cashless transactions. And bank charges are hefty, eating into their pockets.
Pay attention: Cash is king
Your consumer isn’t banking savvy. They have a bank account because their employer wants to pay via EFT or because a sales rep got them enrolled, but didn’t explain exactly how the banking system could work to their benefit. They don’t trust banks, they don’t like the transaction fees and cash remains the currency of choice. In this world, cash is king. For the entrepreneur this cash-based society has both challenges and opportunities.
The challenge: Cash is easy to lose
If the majority of your business transactions are carried out with cash, you run a big risk. Cash is easy to steal as transactions are rarely audited and accounted for. Unethical employees can put half in their pocket and half on the books, directly impacting on your income. Paper money is hard to audit and track, it is expensive to bank, and often undeclared.
The challenges lie in the land where you are the entrepreneur receiving the cash, but the opportunities lie in helping other people to manage their cash.
The solution: find ways of tracking cash
The business has to be smart. Allow cash transactions to remain a part of the process, but use services that facilitate some of the collections and ease those headaches. Companies often use cash management companies, but their price tag makes handling of cash even more expensive. Fraud is rife in the cash market. There are many ways to skin a cat, but handling cash in without technology to track it can be dangerous. Any mismatch of manual records and payments needs to be carefully analysed to pick up any discrepancies.
An alternative is to employ a service provider who can manage the cash transactions for you, but this will also be a cost to the business, Retail stores can collect on your behalf, but they want you to pay a service fee. Understandable costs, but ultimately each one impacts on the bottom line.
The technology opportunity
One opportunity which has already started to edge into the mainstream is the use of eWallets and digital cryptocurrencies. Cash carrying individuals can swap these out for virtual monies that they can use to manage their payments. M-PESA in Kenya is a superb example, even if it never really got a foothold in South Africa. For the entrepreneur that wants to engage with the cash empowered customer, these solutions could potentially help overcome the hurdles of trust and cost and ensure security on both sides of the fence.
The final countdown
What it boils down to is this – cash exists and cash-based transactions and attitudes are unlikely to change overnight so the entrepreneur needs to invest in solutions and systems that manage and audit transactions carefully. Ensure there are various control measures that can pick up anomalies, give people the opportunity to unpack these anomalies and then identify any issues.
Ultimately, if your business is to successfully avoid the multiple opportunities for fraud in the cash transaction society, then you have to invest in tools that will ensure your cash is properly managed and that you’ve chosen a well-known service provider to do so. Otherwise you’re just swapping cash fraud for technical fraud…