Kazang vendor

Closing the gap: How micro-merchant card acceptance is driving digitalisation in South Africa

The increased availability of affordable card acceptance is transforming the micro-merchant sector as merchants and consumers alike embrace the convenience of cards.

Growing penetration of card acceptance devices in the informal and micro-merchant sectors is helping to drive massive changes in consumer behaviour in townships, rural and peri-urban areas throughout South Africa. This indicates that merchant acceptance has been one of the missing links in payments digitalisation in South Africa. 


That’s according to Martin Wright, CEO of Kazang, the prepaid value-added services (VAS) and card acquiring business within NASDAQ and JSE-listed fintech Lesaka Technologies. He says that the increased availability of affordable card acceptance is transforming the micro-merchant sector as merchants and consumers alike embrace the convenience of cards. 


Companies like Kazang Pay are reshaping the sector with attractive transaction fees as well as free terminal hardware with no monthly rental for small retailers that meet a modest transaction threshold each month. This means that it has become increasingly attractive for micro and informal merchants to take card payments. 


Card acceptance spurs economic growth in underserved communities

Says Wright: “Because it has become so quick and easy to open a bank account in South Africa and because so many people carry SASSA debit cards, penetration of cards has increased significantly over the past few years.  At the same time, fintech companies have made it simpler and more affordable for micro-merchants to accept card payments. 


“The convergence of these two trends has seen massive progress in digitalisation of the informal sector over the past three years.  This trend is creating significant spinoffs in driving inclusion and economic growth in communities that were traditionally outside the financial mainstream.” 


According to the Lesaka Informal Economy Digitalisation Index, Kazang has transitioned from 0% to 42% of its R2-billion/month transaction volumes being card-based in the period from 2021 to 2023. More than 90% of these volumes are from debit cards, suggesting significant shifts in merchant and consumer behaviour. 


One of the key factors behind the numbers is the investment fintechs have made into increasing card acceptance terminal penetration.  Kazang, for example, operates a network of approximately 90,000 value-added services (VAS) devices processing around 3 million transactions daily. Some 50,000 of these terminals are enabled to take card payments.


Micro-merchants become hubs for daily essentials

Ashley Naidoo, Director of Kazang Pay, adds: “One of the trends we’re see among our merchants is that their average ticket size is R100. This implies that the micro-merchant has become the go-to for daily essentials in townships and rural areas. More spend appears to be moving to micro-merchants, which means that more money is staying within the community. 


“We see a significant spike in transactions on SASSA grant payment days. People can buy their prepaid electricity and airtime from a merchant within their community, buy their food staples and even draw cash without needing to spend money on transport. This brings convenience and lower costs to the people who need it most.”


Merchants with the Kazang device can offer free cash withdrawals to shoppers, meaning they no longer need to travel to ATM. This not only benefits consumers, but also helps micro-merchants to attract customers and cycle through cash in an efficient way, says Wright.


“In addition to helping merchants reduce risks and costs of handling cash, card transactions help them grow basket sizes and potentially attract more customers,” says Naidoo. “Digitalisation can also simplify tracking sales and create a footprint that could make it easier for them to access loans and other financial services. 



“Features such as a digital wallet linked to the card terminal add even more value. Card transactions are instantly settled in this wallet and merchants can pay suppliers from wallet funds. This reduces the security risks associated with cash delivery and helps merchants to manage their operating capital more efficiently.”

Kazang vendor