Can Digital Payments Be Kind?
There is no doubt that the era of less (or minimal) cash is truly upon us. According to the Access to Cash Review, cash could fall to just 10 percent of all payments in the UK within the next 15 years.
Other countries, such as Sweden, have already seen significant changes – cashless payments have grown so quickly that only 10 percent of the 20 SEB banks in Stockholm now hold cash. Beyond Europe, China is leading the way with USD$12.8 trillion in mobile payment transactions in 2018.
Although many people are finding the shift from cash to paying with a card, phone or digital wallet is making their lives easier and more convenient, it does leave important gaps in payment infrastructure.
Backlash against the cashless society – a cashlash?
The shift towards cashless has led to a backlash of late. More than 8 million UK adults would struggle to cope in a cashless society, warns the Access to Cash Review. In the UK, a newspaper columnist called the cashless society a con and in the U.S., the New Jersey Legislature and the Philadelphia City Council both passed measures for stores that do not accept cash to face financial penalties. In Sweden, the Riksbank (central bank) has started to insist that all banks continue to support cash indefinitely. And last year China’s central bank, the People’s Bank of China, stated that all business outlets had to accept cash alongside cards and mobile payments.
When it comes to financial inclusion, keeping cash in circulation is the right thing to do in many circumstances, especially when we look at smaller more personal and emotive payments. For example, charitable donations, coins for a street busker, tipping a waiter – and, of course, for the unbanked or under-banked members of society.
Can we make digital payments kinder and more inclusive?
This leaves us with a tough question and a big challenge for the payments industry: How can we make digital payments kinder and more inclusive? How do we integrate those transactions traditionally made in cash into the digital world? In short, how can we ensure payments are kind in a world of less cash? To name just a few examples, where does less cash leave tipping, charity donations or those who rely on gifts – like the homeless?
These are not small considerations; the service sector for example accounts for more than 70 percent of the European Union’s output and jobs, and those working in restaurants, bars, coffee shops, hair and beauty salons etc. rely upon tips to supplement their wages. We all know that tipping cements a great customer experience – and we feel even better because we tipped. How do we maintain this infrastructure without cash?
Tipping as part of the in-app experience
Big tech companies like Uber and Starbucks already have built tipping into the app experience. Uber allows you to tip after services rendered, as a reward for a job well done. And Square Payments, popular across street food vendors and the like in the U.S., enables POS digital payment tipping. Square is on track to facilitate roughly one quarter billion dollars in tips annually in the United States, mostly at shops where customers would not have tipped before, or might have only tossed spare change into a jar. The challenge will be how to maintain the feel-good element of tipping in the new app-based tipping environment.
New ways to donate to charities and the homeless
With homelessness a rising problem in the UK, an ever-dwindling amount of loose change in our pockets is a massive problem for this group.
An Amsterdam-based company, N=5, is trying to come up with a solution with its Helping Heart Jacket for the Homeless. The jacket, which was piloted in Rotterdam and Amsterdam last year, is a warm winter coat that incorporates a payment reader and an LCD screen. Passers-by can make a card donation of a set €1 with one tap of their card. The donations can then be redeemed by the jacket wearer for food, shelter or other support through participating homeless shelters and organizations. The company is now working with other homeless charities and organizations all over the world to make the jacket available in different cities.
China has seen many homeless people sporting QR codes. But this also raises interesting and complex issues. In a report by the International Business Times, Chinese digital marketing firm China Channel claims that many beggars encountered in Beijing are actually being paid by local businesses and start-ups to promote QR codes and entice passers-by to scan them. The scans are then used to harvest user details from their WeChat IDs, which are then sold to small businesses for unsolicited advertisements.
How do we protect payments data in the kind, cashless era?
Some of these solutions do little to meet the immediate need of the homeless, who are unlikely to be carrying a contactless card reader, which costs anywhere between £30 and £150 in the UK.
And in the kind cashless era, how do we protect payments data? If faith in new schemes is lost early on, it will be hard to rebuild trust, particularly in the age of GDPR where we all are more conscious of the need for data privacy.
Charities face perhaps the biggest challenge, but are making the most progress. One and two pence coin donations in the UK make up over £300 million worth of charitable donations across the country and it is predicted that charities could lose up to £80 million in potential donations if they continue to rely on cash. Progress is being made with a variety of contactless pilot schemes, such as contactless donation boxes set to a certain donation level (e.g. £5). The Movember Foundation trialled contactless badges as a donation platform in 2018. But challenges remain with the cost of the infrastructure, as a single contactless donation box can cost £250, compared with a £2 collection bucket.
New services must be able to handle huge volumes and comply with new regulations to keep money and data secure
Policies to drive cashlessness and the use of technology can help increase financial inclusion, but the infrastructure and the desire to implement it is still required. In some parts of the world, the emergence of pre-paid cards and contactless is enabling new solutions, but there is still work to do to overcome this hurdle. Many developing markets, including countries in Africa, have fewer legacy systems to contend with and potentially provide a model for more mature markets.
New services must be able to handle huge volumes, comply with new regulations to keep money and data secure, and they must feel secure for authorization of transactions and total values. They must also offer a fast and seamless customer experience to mimic the convenience of cash.
To build solutions to these problems, there is a need to create strong infrastructure to handle the volumes, keep both money and data secure, and be as fast and efficient as dropping a few coins on a bill or in a donation box.
Silvia will be speaking about trends shaping the global payments industry at ACI Exchange, our premier annual customer conference, in Washington D.C., June 17-20. Register now to learn from ACI payment experts and discuss the current and future state of payments with peers.
Related Blog Posts
Women Must Choose to Rise Up Despite Past, Current and Future Circumstances
Money20/20, Europe’s biggest payments and fintech event, was recently held in Amsterdam and featured Rise Up Money20/20, a global program designed to address the gender imbalance in leadership positions within the financial services and fintech industries. A cohort of 30 female professionals was selected to take part in an exclusive curated agenda, complete with a series of bespoke content sessions, one-to-one mentoring and unique networking opportunities.
How Italian Banks and Processors Can Capitalize on Digital Transformation
The European payments landscape is in an era of significant change thanks to PSD2 and other macro factors, but there is more than one way to deliver real-time and open payments to meet PSD2 requirements and its technical standards. Banks and processors must manage this alongside their own set of domestic challenges and opportunities.
Overcoming Cyber Threats to Payments Security
Recently, Gene Scriven, chief information security officer at ACI, spoke at NACHA Payments 2019 on the ever-changing landscape of cybersecurity. Here are a few highlights from his session, including the impacts of cybersecurity breaches, today’s emerging threats and the new strategies to keep your organization safe.
Removing Gender Bias and Enabling Women to Succeed in Leadership Roles
The recent UK Women in Payments (WIP) Symposium 2019 took place in London, recognizing unique leaders who help uplift women in the payments industry. Among those recognized was ACI’s Melissa McKendry, vice president, Retail Banking Implementation Services, who was honored by WIP as the 2019 Advocate for Women.
Regulating for Real-Time: The Role of Government in Payments Modernization
Dr. Leo Lipis and Craig Ramsey, Head of Real-Time Payments for ACI Worldwide, continue their discussion on real-time payments and the findings of the new white paper, Get More from Real-Time.
Payments and Fraud: The Paradox Twins
Digital commerce through web and mobile is where merchants predominantly experience shopper growth today. This has become a hugely important domain for their focus. It offers a means for international growth, new market penetration and a way to engage with shopper-hungry Millennials in their culture. Merchants frequently adopt a Digital-First, eCommerce-First or Mobile-First strategy to ensure full corporate buy-in to this strategy.
Open Payments Systems for Merchants: Don't Close Down Your Options
Remember “Open Systems”?
It was a big industry nom du jour in the 80s and 90s. Every IT system had to be open and therefore flexible and future-proof. Nobody can argue with the logic behind this; making systems easy to integrate with other systems, ensuring vendors could cooperate with one another; creating agility to improve time to market and drive down costs.
Issuing and Acquiring in a Real-Time and Open Payments Ecosystem – The Global Picture
Dr Leo Lipis and Craig Ramsey, Head of Real-Time Payments for ACI Worldwide, continue their discussion on real-time payments, stemming from the findings of the new white paper, Get More from Real-Time. See part one.
Why It’s Time for Women to Rise UP
As a senior software engineer at ACI Worldwide, Rawan Shawar helps to guide her team’s priorities and enhance processes at both the team and organizational level. Recently, Rawan was selected by the organizers of Money20/20 Asia to be part the Rise Up Class of 2019.