SpendTrend25: Why South African wallets are shrinking

Consumer spending on credit cards was muted, despite lower inflation, according to the SpendTrend25 report, a collaborative study by Visa and Discovery Bank. The report analyses credit card spend data across South Africa between 2019 and 2024, spanning 12 million credit cards and 2.6 billion transactions.

Discovery Bank CEO, Hylton Kallner, says, “Our latest comprehensive report identifies shifts in financial behaviour for practical insights into how much people spent, what they spent on, and how they spent it. We’ve also supplemented the analyses with detailed consumer survey data to gain a deeper understanding of the drivers of the trends that we’re observing.”

In 2024, inflation fell from 6% to 4.4%, yet consumer spending in South Africa remained flat.

While we would expect lower inflation to mean more money to spend, the reality is far different. The SpendTrend25 report reveals a clear trend: many consumers are still feeling the pinch, and with less money to spend, spending habits are shifting. Here’s how…

Rising costs and less disposable income

Although inflation has dropped, interest rates reached 11.75% and remained high for most of 2024. The cost of everyday essentials such as groceries, fuel, and utilities also continued to rise. This is putting a large portion of South Africans’ budgets under pressure, leaving less disposable income for other purchases.

According to the Euromonitor Voice of the Consumer, 86% of South Africans surveyed feel that the cost of everyday items is rising, which demonstrates the widespread impact of inflation and why it’s harder for consumers to afford the things they need.

Turning to retirement savings for relief

In response to increasing financial strain, many turned to their retirement savings, such as the two-pot retirement savings system, to provide relief for essential expenses. By January 2025, the South African Revenue Services reported that about two million South Africans withdrew from their savings pot with a total gross lump sum of R 43.42 billion paid out. The SpendTrend25 research among Discovery Corporate and Employee fund members found they are using their retirement savings for expenses such as home or car costs, paying off short-term debt, school fees and daily expenses. Among Discovery Bank clients, two-pot withdrawal rates were inversely correlated with Vitality Money status.

There were higher withdrawal rates for high-income earners with a low Vitality Money status than for lower-income earners with a higher Vitality Money status, highlighting the importance of smart financial habits and sound financial planning.

The shift toward value-based spending

As consumers become more cost-conscious, value-based spending is gaining traction. 

“We’ve seen a material shift to digital payments in our spend data, this is backed up by consumer preferences whereby over 80% of South Africans surveyed are choosing cards or digital payments over cash whenever they can, and the same percentage engage more with their credit card rewards and benefits than they did a year ago as they focus on value-based spending,” says Kallner.

According to the Euromonitor Voice of the Consumer survey included in the SpendTrend25 report, up to 41% of local shoppers now buy more from stores where they have a loyalty card or store credit. The rising uptake and use of these benefits show that consumers want maximum value and offset rising prices by earning rewards or discounts. Discovery Bank has seen that one of the key motivators for clients to adopt healthy financial behaviours with its Vitality Money programme is the ability to book discounted flights and accommodation with Vitality Travel and pay less than the average consumer.

Subscriptions to generate value

Another shift in consumer spending is the rise of subscriptions. As people face financial pressure, whether from high living costs, interest rates, or stagnant incomes, they have to make careful choices about where to spend their money. Subscription services were once dominated by streaming.

By 2024, they have now expanded to include artificial intelligence, sports bookings, and other eCommerce platforms. AI subscriptions saw the highest growth in the share of spend, growing over three times from last year. For Discovery Bank clients, the adoption of AI subscriptions such as ChatGPT and Perplexity have grown more than three times in 2024 compared with the previous year, further demonstrating the shift towards these recurring subscription services​.

Convenience at a price

With busy lifestyles becoming the norm, convenience has become a big factor in how people choose to spend their money. The report highlights that spending on eating out and takeout grew by 12% in 2024 compared with just a 6% increase in in-store shopping. Added to that, it’s much easier for shoppers to resist a tempting treat and stick to their grocery budget while adding to a cart on Checkers Sixty60 or Woolies Dash.

This is supported by Discovery Vitality data, which shows that online grocery baskets contain 30% healthy food items, compared to 27% in-store​. This shift suggests that, even while disposable income may be shrinking, people are still mindful of health-conscious spending, even when opting for convenience.

But while convenience is a priority for many, it often comes at a premium, leading consumers to spend more on services that save them time but also increase pressure on their wallets.