Nedbank Chief Operating Officer Mfundu Nkuhlu stated on Tuesday that South Africa cannot abandon cash transactions until it resolves the issue of citizen identification. He believes that a functioning national digital identification is a necessary condition for integrating the unbanked population into the official payment mechanism.
At the Nedbank Payments Summit in Sandton, Nkuhlu emphasized that the introduction of digital identification will become a key requirement for addressing the unbanked population, as long as they remain outside the banking system, the cash economy will persist.
According to Nkuhlu, the obstacle is not the technology itself, but the coordination between the public sector and private business, which digital identity can overcome.
Digital Identification Plans
The Department of Home Affairs, led by Leon Schreiber, aims to complete the infrastructure for a national digital identification platform by March 31, 2027. It is planned that citizens will be issued digital credentials via a secure mobile wallet in the 2027/2028 financial year.
However, identification specialists noted shortcomings in the draft regulations, including reliance on 2D selfies for liveness checks, which are easier to bypass with a photograph or screen than alternatives using depth sensors.
Nkuhlu clarified that the goal is a gradual reduction in cash usage, not its complete elimination. He noted that, similar to India and Brazil, where people have shown an intention to transition to digital methods for the majority of the population, the situation in South Africa is comparable. These countries have succeeded thanks to government instant payment systems that are free or nearly free for consumers, such as Pix in Brazil and UPI in India.
New Payment Paradigm
Nkuhlu explained the difficulty of abandoning a coin and banknote economy by stating that the regulator is considering creating a cash service within PayInc, formerly known as BankservAfrica, in which the Reserve Bank currently holds a 50% stake. Nedbank participates in the central bank's payment ecosystem modernization program, which forms the framework for low-cost digital payments, including PayShap.
Nkuhlu's argument fits into a broader thesis that the payment structure has changed, and South African banks must adapt urgently. He stated that payments are the 'lifeblood of society,' and that digital payments are not just a convenient replacement for cash or cards, but an increasingly intelligent and invisible system.
Instant payments are becoming the standard. Transactions are increasingly programmed, triggered automatically by events, and become smarter by collecting and analyzing data in the process. Nkuhlu forecasts a future dominated by instant, programmable, intelligent, and invisible payments, with the scaling of technologies and companies depending on trust, regulation, and interoperability.
Regarding cryptocurrencies, he noted that stablecoins 'will also play a role, but not necessarily replace banks.' Although they were designed to circumvent banking regulatory paths, they have become mainstream and allow for fast global transfers using blockchain.
Nevertheless, Nkuhlu believes that the main stumbling block remains trust. In his opinion, tokenized deposits and central bank digital currencies are more significant areas of focus than simply replacing traditional money with cryptocurrency.
He also mentioned the emergence of AI-based agents that autonomously make payments, marking a shift from human initiation of payments to software initiation within the nascent agent economy. While exciting, he warned about the risk of agents going out of control, as they can increasingly initiate payment activity with limited human oversight, posing a new serious risk.
Key Issues
Nkuhlu insisted that trust is the battleground where several fundamental questions must be resolved: who authorizes the payment, who is responsible for an agent's error, how to protect the consumer, and how to ensure privacy amid anti-financial crime measures. He concluded that these issues must be settled to maintain the integrity of the future financial system.
It should be noted that Nkuhlu is retiring early at the end of December after more than 22 years with Nedbank; the group is discontinuing the COO position and distributing its responsibilities among its executive committee.