South Africans are embracing AI and are increasingly willing to spend money on subscriptions for services like ChatGPT and Perplexity, even as household budgets remain under pressure due to high interest rates and living costs.
According to the SpendTrend25 report by Discovery Bank and Visa, AI subscriptions saw the highest growth in share of spend last year – surging from 8% in 2023 to 24% in 2024. That’s a threefold increase. Among Discovery Bank clients, adoption was 1.6 times higher than the market average.
The analysis in the study illustrates not only how quickly AI has become a part of everyday life, but also how South African consumers crave more than just streaming services. They expanded their subscriptions to also include sports bookings, grocery deliveries, e-commerce platforms and online media (ahem, which should include Currency!).
As a result, streaming services are slowly being squeezed out as far as share of pocket is concerned, with online media subscriptions increasing 6% last year, sports bookings – which include merchants like padel and tennis service Playtomic, and golf services such as Clubmaster and playmoregolf – rising 2%. E-commerce platforms like Amazon Prime and TakealotMore, and subscriptions offering free deliveries, such as Checkers Sixty60 Xtra Savings Plus, climbed 2%.
Discovery and Visa predict that consumers are likely to adopt more AI tools in 2025, not only to increase their productivity, but also to improve their spending decisions, using features such as comparison tools and product ratings.
Discovery Bank CEO Hylton Kallner points out that most consumers are accessing AI services through their mobile phones.
At least 62% of South Africans pay for three or more streaming services, while 29% are willing to pay for a subscription that offers discounts or exclusive deals, says Lineshree Moodley, the country head for Visa South Africa. This could include perks like early access to Black Friday specials, she adds.
Consumers are increasingly turning to reward programmes to save money as they become more conscious of their spending, while they’re also seeking to balance work and life demands after being forced to return to the office following the easing of Covid fears. At least 60% of Discovery Insure’s clients are back in the office five days a week, Kallner says.
Dipping into reserves
This all comes as consumer spending in 2024 was muted, with many people using their retirement savings through the two-pot system to cover their day-to-day expenses as an alternative to credit. Of claimants surveyed by Discovery Corporate and Employee Benefits, 24% used the money on home and car costs, 21% used their savings to pay off short-term debt, 20% on education, and 11% on daily expenses.
Even though the South African Reserve Bank cut interest rates by a cumulative 50 basis points to 11.25% in the latter half of 2024, and inflation cooled to an average of 4.4% – its lowest in four years – Kallner says households are still struggling due to “income constraints” and mounting expenses.
The study, the third collaboration between Discovery Bank and Visa, covered more than 2.6-billion individual credit card transactions, with an independent third party appointed to survey South Africans to get a more detailed view of spending.
It found that 70% of spending went toward groceries, retail, travel, eating out and fuel, though it varies across the seven different cities surveyed. Those in Bloemfontein spent the highest proportion overall on groceries, and those in Cape Town on travel, while Joburg topped the list for retail and eating out, Kallner says.
Spending on dining out and takeout grew by 12%, while overall food expenditures outpaced inflation, even though transaction sizes only increased by 1%. This suggests that the “increase in spending is largely due to more frequent purchases,” he adds. Grocery baskets are also becoming smaller but more frequent, indicating a demand for convenience.
There was a marked shift towards increased online spending on groceries, with one in every five rand being spent by 31- to 40-year-olds. Interestingly, Kallner adds, this hasn’t come at the expense of healthy eating habits, though it depends on what day of the week orders are made.
Data compiled from Discovery clients shows that 40% of baskets are healthy foods, shifting down to 29% by the end of the week when people are “desperate for a sugar kick”, he says. “People tend to shop healthily when they shop online as well.”
About 30% of food baskets bought online are healthy versus 27% in store, which Discovery actuaries attribute mainly to there being “no sweet aisle on the way out” and because people are accessing more fresh food and vegetables through home delivery services and using discounts available through Discovery’s Vitality programme.
The push for convenience will continue this year, Kallner says, while the spending patterns seen last year are likely to remain unchanged, given the uncertainty seen in the global economy and markets, forcing banking clients to look for better deals online or with AI.
“And while digital banking has increased client financial safety, three out of five South Africans are more worried about their banking security than a year ago,” he says.
Still, digital channels remain the preferred method of payment: more than 80% of South Africans surveyed choose digital or card payments over cash whenever possible. The world is truly changing, despite its paradoxes.
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