South African banks see physical money remaining key to their business as almost a third of their customers aren’t ready to go cashless, according to a survey.

While 86% of people already use digital banking, almost all customers said they still withdraw cash at least once a month to meet various needs, according to the survey conducted by Discovery Bank and Boston Consulting Group. As long as a significant percentage of the population uses cash, the country can’t move to a fully cashless system, according to the report.

“South Africa still has a high reliance on cash relative to some other countries,” Hylton Kallner, chief executive officer of Discovery Ltd.’s banking unit, said in Johannesburg. “But the direction, and the acceptance by consumers and embrace of digital payments, and the fact that they see the future in that direction, is accelerating.”

While digital transactions are affordable and secure in countries such as Kenya, the cost of online banking is expensive in South Africa. That deters as many as 11 million people living in townships — a relic of the apartheid era — and in rural areas of Africa’s most industrialized nation from switching to cashless banking, according to the report.

Regulatory changes will be needed to drive costs lower.

South Africa’s central bank has unveiled a National Payment System Framework and Strategy plan aimed at increasing financial inclusion, reducing dependence on cash and creating an integrated platform for digital payments.

The Reserve Bank is also expected to begin its Rapid Payments Programme this year that will offer a real-time clearing system for instant payments between banks, and allow users to request payments digitally.

–By Adelaide Changole (Bloomberg)