ACI Blog

From “Access to Cash” to “Access to Digital” – How Innovative Thinking Is Keeping SMEs Trading

When it comes to payments, there has been a palpable shift away from cash. According to a survey by ATM network Link, the lockdown has led to a 60 percent decrease in the number of withdrawals from cash machines. Unsurprisingly, payment card use has risen along with online shopping, particularly for groceries.

Innovating and adapting

In Southwest London, James and Matthew Drago-Ferrante run Lupo Bros, a popular café close to Wimbledon Park. On a normal day, it would be packed with local families, enjoying brunch and cappuccino. All that changed after the lockdown was announced on March 23. The brothers closed their café for a week and then opened again as a local takeaway deli and online shop making local deliveries. They stock flour, which is repacked from commercial 25kg bags into 1 kg portions, and many other popular basics such as milk, fresh bread, vegetables and Italian delicatessen. Within days, they set up an online shop that accepts credit card payments and now deliver fruit boxes and other essentials locally. Cash payments in the shop have dropped to almost zero. They estimate 99 percent of payments are now done by card.

Ed McIlroy runs the popular Four Legs Kitchen restaurant in Islington. He also adapted quickly and now runs a local burger takeaway, delivering – much to the delight of my kids – burgers to the local community. He takes orders by Instagram and requests payment by direct bank transfer. He thinks he will never go back to accepting cash; the new cashless way of life makes running his business much easier, he says.

And these are just two examples of many. In fact, most local businesses that were allowed to remain open – greengrocers, bakeries and coffee shops – have moved to a ‘no cash policy’ in the last few weeks because consumers and shop owners feel that cashless alternatives are the safer way to make and receive payments during this pandemic.

The current crisis could lead to long-term behavioral change among British consumers

I believe that the COVID-19 crisis could lead to long-term behavioral change among British consumers. Brits have rediscovered a sense of community during this crisis and many of them will continue to buy locally in the future if they have that option. Many local retailers will access new community delivery services and benefit from the new conversational relationships created with loyal, local customers. The new forms of engagement will not necessarily exclude cash, but acceptance of new forms of digital payments services is likely to accelerate.

Many corner shops and smaller merchants that previously preferred cash are now favoring cards, and once the crisis is over, the use of electronic payments is likely to remain high, even if some retailers steer consumers back to cash to avoid card handling fees. The potential of lower-cost, digital payments services underpinned by real-time, account-to-account bank transfers (sometimes referred to as ‘Request to Pay’) could offer retailers a cheaper way of accepting payment, and with more flexible terms for receipt of funds – typically in real time, rather than settlement times that can stretch out for weeks.

We could see a renaissance of the kind of 1950s corner shop, where goods were available “on tap” but only paid for once a month. Credit used to be extended by shop keepers who knew their customers well before the days of customer relationship management (CRM) technology. Perhaps it is too naïve to think that a return to such a community model is viable, but retailers of all sizes would welcome this new depth of customer relationship. And the model can be made to work if payments processing companies are able to help retailers with the tools and the value-added services needed to manage accounts in a sophisticated and digitally-savvy way.

In the post-COVID world, the debate needs to move from “Access to Cash” for all to “Access to Digital” for all

Don’t get me wrong – I do not think cash will disappear any day soon. People’s memories are short, and when we get back to “normal,” don’t be surprised to see more merchants nudging back toward cash. And choice and access, including to a wide network of ATMs, will continue to be an important aspect of payments services.

But in the meantime, we ought to think about how to include those who have until now solely relied on cash into the new world of contactless and digital payments. The U.K. Access to Cash Review has already rightly called for mechanisms to be available for anyone reliant on cash as the U.K. moves into a digital future over the next 15 years.

Providing a backstop for citizens who are dependent on cash is essential and honorable. The rights of customers and businesses who mutually prefer to use cash instead of digital is also to be protected – personal preferences should be accommodated in a civilized society. But there is a danger that a sole focus on “Access to Cash” undermines a greater need for “Universal Access to Digital.”

The over one million UK citizens with limited access to fully functioning bank accounts can be forgiven for not engaging enthusiastically in the digital and cashless revolution. A further 10 million, who are mostly on a low income, may also be understood for avoiding electronic payments if they run the risk of incurring fees – say for accidental overdrafts – at rates that are disproportionately high.
This binary view of credit on the margins was already in need of review before the pandemic; as incomes become ever more irregular – in particular in the zero-hour contracting and gig economy – the typical basic bank accounts offered to lower income citizens may have given the illusion of “inclusion” without the practical benefits. And that is before we consider the impacts of post-COVID shocks to our economy, and the new normal of furloughs, universal credit arrangements and government-enforced payments holidays.

Perhaps the government ought to be using its current stimulus arrangements to improve financial and digital inclusion across all groups in society. Given the unprecedented value of financial support committed by the U.K. Chancellor to prop up the economy, it would make sense to use a fraction of that funding to create genuinely inclusive digital payments services for the benefit of all citizens.

Find out more about how ACI is supporting its customers as they adapt to the ongoing COVID-19 crisis.

​Solutions Practice Lead, Consumer Payments EMEA

Lu Zurawski is Practice Lead for Retail Banking Products at ACI Worldwide. Bringing with him a varied and extensive background in consulting, systems integration and service management, Lu develops ACI’s strategic payments business propositions in the emerging fields of Open Banking, new access models and real-time alternative payments. Lu has over 20 years’ experience across a variety of payments markets, which is evident in his thought-provoking and often unorthodox viewpoints on the world of payments. In particular, Lu’s interest in Behavioral Economics often shines through, as he addresses the latest trends across policy, regulation, technology and customer behavior.