[Lightly edited transcript]
URI: So a recent Browser article spoke bout how Chinese people just don't use cash any more: WeChat and AliPay have become so ubiquitous that Chinese people travelling abroad have this weird sensation where they suddenly have to start using cash again; it feels kind of unsafe, it feels very strange. Lindelani, what's your relationship with cash?
LINDELANI: My relationship with cash didn't begin until I went to varsity, because before that I didn't make money of my own, and whatever money I did receive in my younger years would be controlled by family. So for the longest time it was something I just didn't think about it. When I was in varsity, my primary contact with money was through bank accounts and cards, but that was something only a minority of people were doing. For the most part how money was handled was in cash: our outlets only delt with cash, especially in the townships and rural areas where we lived. So we didn't have a detailed understanding of what digital money is.
But there's been a shift recently, in a big way. Even though it ends up being digital money, supermarkets have started trying to get people to send money to each other through their stores, instead of just having a bank account and you having a card that you control.
URI: Supermarkets try to get you to send money on a... supermarket app?
LINDELANI: [laughing] No, not an app. So, banks are not as good at reaching certain areas of South Africa as supermarkets, right? Supermarkets are more common than any bank that you would find. So was this really big challenge of trying to get money to relatives who don't live in the same area as you. What usually happens is that the young people leave the areas where they grow up and try to find opportunities in urban areas. Getting money down back home was a challenge. How it was done traditionally was you would have minibus taxi drivers deliver that money to various families. You would take an envelope, you would write a letter, put it inside and put the amount of money. Then you would pay the taxi driver to have that delivered to a house.
Then the supermarket people came up with an idea that we already have presence in all these various areas, so how can we make it easier for people to send and receive money? The idea was you can just walk up to a counter in Supermarket X — say ShopRite, a very big supermarket chain here — and then you present your ID to the cashier and give them the money. Then what you would do is you call up your family and they take down the reference number and a PIN code when you're sending. That's gotten people to think differently about money, but money is still something that's very digital. And I can see even with people our age they're still uncomfortable, I still have friends who are quite sophisticated but they still insist on carrying around hard cash in their pockets.
URI: The economist in me really wants to undrestand, do the supermarkets charge you for sending money, are they just like Western Union but in a supermarket.
LINDELANI: they charge you, it's a fixed amount of, I would say 14c if we think about it in dollars.
URI: Per dollar?
LINDELANI: [laughs] no!, it's a fixed amount, regardless of how much you're sending
URI: and that's considered quite cheap?
LINDELANI: it's considered to be quite quite cheap. And the supermarkets are making tons of money because there's a huge amount of the population that's just unbanked.
URI: do you know if part of the incentive for them is that if you have to go to ShopRite to pick up your money and then you've got a bunch of money you're going to spend it in ShopRite?
LINDELANI: There is that going on but I think a big part of it is just another area where they could be making an income, because when you go and you look at — we call them Money Markets, that's what the supermarkets call this service — the queues are ridiculously long. I would say the average waiting time in a township like Soweto is about an hour to get to the counter to get your money, and you can just imagine how many people are on the queue. And I would say just for each person to get the money out takes about 3 minutes. So they make quite a bit.
But people who are shopping at ShopRite anyway, I don't think that increases their patronage by much, but it's a good alternative source of income for the supermarket.
URI: Do people pick up their money immediately, is this like "I need money now, you send the money, I get it now"? Or are people kind of using it as a bank, are they just keeping their money in their "ShopRite account" if that makes sense?
LINDELANI: no it's "I need the money now". And the interesting thing is it's more instant than some of the banks. We have five big banks in South Africa, and two of them can make transfers that are truly instant. The rest there is like a 2-3 hour delay. So sometimes it's easier to just go to the supermarket, like a really quiet one, maybe somewhere in the city, you'll just drive there and deposit, so someone can get it within the next hour or so.
URI: [laughing] I just want to say that in the UK I think 2-3 hours to do a bank transfer is considered quite good, and in the US it can be, like, 3 days or something. It's changing a bit recently but Venmo and such got big because it was so hard to send someone money instantly. So I think South Africa might be ahead of the world on this.
LINDELANI: [incredulous] Wait, you mean to send money to any other person who has a bank account?
URI: So hard to do, so annoyingly hard to do. I had an American friend who I owed a bit of money to and I was like "how should I send this to you?", and she said "oh, just go to the bank's website and they'll mail me a check", they physically mailed her a check so that I could pay her back, I was like... is this real?
LINDELANI: You're kidding!
URI: I know, I know, it sounds unreal. So there's a couple of apps now that do instant transfers and they got super popular in the US, but they're not as popular even in the UK because people are like "yeah, I can already send money". I don't actually know why this is.
LINDELANI: So there are two main ways here you can send money instantly outside the Money Markets I was describing. If you want to send money from my account to someone else's account that also has a bank account and a card, that's the harder thing to do, that's the thing that with some of the banks takes 2-3 hours.
Then there's a second way, they found a solution, what they would do is allowed us to send money using people's phone numbers. And you can send that into a temporary bank account and they can just withdraw it from any ATM affiliated with that particular bank. So what I would do is go to my own bank account and go "I want to send X amount of money to the following phone number". Then when the person goes to that ATM that is truly instant. They would just punch in their phone number, reference number and a code and they would get their money instantly. And generally that is way more instant than trying to send money from my account to someone else's. But the risk there obviously is that you could send money to a wrong phone number sometimes, so the workaround is you send money to your own phone number and then you just forward all the details to the person you're trying to send the money to. And that could really function as a bank account, because with some banks you can take some of the money and leave some of it there.
URI: And what's the reason so many people are unbanked?
LINDELANI: So, generally, trying to go to a branch of a bank is hard for most people not living in cities. You need to travel for, I would say, an average of 20, 25 kilometres, in extreme cases like 40 kilometres to get to a branch where you can talk to a human. That's just the first challenge, access. The second challenge is usually the whole system is intimidating to the average South African, it just seems way to sophisticated than they think they can handle. You have to sit and talk to someone there who's wearing a suit, who's probably going to speak to you in English, and if you can't reply in English you're losing face. So you'd rather avoid that entire interaction. English is associated with education, so generally the educated people can speak English and if you can speak good English you are seen as someone who's quite sophosticated, it's a status thing. So people just want to be seen as people who can speak the language. If they can avoid not losing face by not speaking it well, or just making it obvious to others that they can't speak the language, it's something they'll go to great lengths to avoid doing.
The process itself is intimidating. They will ask you questions in English, ask you for things that you don't understand, the whole thing is painful, has a psychological cost to your esteem and self-worth.
URI: that makes a lot of sense. Hence supermarket Money Markets.
LINDELANI: Yes. It's a place you go to every day, you know the lady at the counter, she's going to greet you affectionately using your surname, and it's just going to be way more straightforward than if you'd gone to a bank. And generally it's easier for the average South African to interact with human beings than with systems, because systems require literacy.
URI: So even ATMs, that system with the phone and the ATM, is that hard for people to navigate?
LINDELANI: Yes, it is very hard for people to navigate. What the banks ended up doing is train their security guards to operate these ATMS, because generally people just find it easier to interact with a human than with systems. So the average ATM is going to have a security guard standing right there and they will be trained on how to operate the machine.
URI: that's super interesting.
LINDELANI: So what are the Chinese doing? I don't have a good understanding of what's happening there, what are they doing that sounds so new to people?
URI: Yeah, so basically they have this super-app WeChat on the phone that just everyone uses and you can do anything with it, so they've gone a lot further with digital money than a lot of other places have. — I actually haven't been back in a little while, and with China even if I'd been six months ago I wouldn't be confident that things hadn't changed already, everything seems to move pretty fast — but you would just snap a QR code, that's how you paid for everything, even noodles on the street that cost like a dollar. Somehow the penetration got so high that people stopped using cash for anything. So you went really quickly from this situation where, that noodle-seller wasn't going to accept card so you had pay with cash, and they jumped straight to you have to pay with your phone-app.
LINDELANI: So what that's telling me is that the average Chinese person regardless of their socio-economic background is quite technologically savvy, because what you're describing would not be possible in a country like South Africa. Operating a smart phone is not something that most South Africans not living in cities can do. Even going to WhatsApp is something that our parents have had to learn, and using apps is not generally something that they would do. So the viability of going digital goes with technological saviness and literacy, which I think for us in a country like South Africa is at least fifteen years away, if not more.
URI: This sounds like a really interesting conversation that you should have with someone who knows China better than I do, because I really don't want to embarrass myself here. But I'd be really interested to know how smartphone adoption, literacy and so on interacted with lower-income Chinese people and how they made that leap as well.