With an estimated annual turnover exceeding R750-billion, South Africa’s informal or ‘kasi’ economy has been tapped as a key growth sector for financial services. As fintechs race to digitise payments and expand access in this space, industry leaders are calling for a more ethical and inclusive approach — one that prioritises merchant wellbeing over profit extraction.

“True success in digitising the informal economy means measurable improvements in people’s economic situations. It means innovating products and services based on African perspectives, experiences, and economic contexts. We cannot simply take a payment app designed for Silicon Valley entrepreneurs and expect it to work for a spaza shop owner in Khayelitsha — these solutions need to be developed by people who understand the lived reality of informal trading,” says Mpho Sadiki, Group Managing Director for Merchant Services in Africa at Network International, the parent company of Payfast by Network.

Over the past few years, fintechs have focused on helping informal merchants build digital footprints to access business funding and financial services — the critical elements needed to grow a business. However, not all products and services are tailored to the specific setup of township merchants.

“The majority of informal merchants are banked, personally or otherwise, but often prefer to transact in cash. Why? Because cash-only transactions are instant, and they aren’t subject to bank charges and transaction fees. But they also prevent business owners from accessing secure and affordable credit to expand their business. As fintech companies, we have a responsibility to address these challenges without creating new dependencies and complications,” says Sadiki.

Going cashless comes with specific considerations for informal businesses, who are often cash flow-reliant and experience daily cash flow variations. As a result, waiting 12 to 24 hours to receive money from a transaction can be difficult to manage. Taking a ground-up approach, Payfast has developed an immediate payout feature to fast track the flow of funds — enabling their merchants to easily access their money.

“Our focus is on creating genuine value for our merchants, rather than simply digitising existing processes. We understand that some businesses have irregular income patterns that can exclude them from traditional financial services. It’s a solution that recognises the reality of township traders,” says Sadiki.

Sadiki also recognises that, to support the sustainability of fintechs and to ensure they can continue investing in the merchant ecosystem, it’s crucial that acquirers are able to recover their costs. “As an industry, we need to create fair pricing models that balance affordability for merchants with the financial viability for service providers. By doing so, we can foster long-term growth and encourage further innovation in the digital payments space, ultimately supporting a more robust and inclusive economic environment.”

“The informal economy isn’t separate from the formal economy — they’re interconnected systems,” says Sadiki. “When we successfully digitise informal economic activity, we strengthen the entire economic ecosystem and create more inclusive growth opportunities for all South Africans.”