Welcome to issue 53 of Payments, Payments, Payments.
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Moving quickly and responsibly to a cashless society
Earlier this week I took part in the second PHOS Steering Group on the subject of “Moving quickly and responsibly to a cashless society. This second Steering Group discussed “understanding and removing the barriers to a cashless society”.
Over the last six months the UK has seen a huge increase in the adoption of contactless and digital payments, driven by both consumers and businesses concerns around health, safety and availability of cash in a post-COVID-19 society.
The figures speak for themselves:
- Nearly half of all people who previously used cash for shopping, now pay entirely with a debit or credit card following the outbreak of Covid 19 and a further 25% have replaced some of their cash purchases with cards – use of cash for shopping since COVID 19.
- Cash withdrawals at ATM’s have fallen by 36%.
- Cheque volumes have decreased by 16%.
Consumers being driven
The move to digital payments has been a result of both consumer and business concerns around health, safety and availability of cash in a post-COVID-19 society.
However, our newly formed sticky digital payment habits have largely been driven by businesses asking consumers to move away from cash rather than a conscious ‘digital first’ decision by consumers.
There are, however, some great examples of solutions that have led to consumers driving the adoption of digital payments (making conscious ‘digital first’ decisions):
- First Bus have adopted Apple’s Express mode making our bus travel super smooth (at least from a payment perspective).
- The card contactless payment limit has risen to £45 enabling a larger range of our day to day spending to be digital.
- Apple Pay limits are (finally) being set at limits above the Contactless limit, reducing the need to carry a physical debit or credit card around with us.
- The Open Banking Implementation Entity have announced that 160,000 new users are signing up every month and now 2 million people are now registered. This is opening up a new world of digital products and services.
- Soft POS solutions from firms like Phos are removing the need for merchant hardware making it much easier for shops to accept cashless payments.
- Virtual debits cards from banks link Monzo Plus are protecting our cards online.
- The Payments System Regulator are conducting a Market Review into card acquiring services which, over the longer term, should ensure more completion in the card acquiring marketplace.
- Even the potentially technophobe Harry Redknapp is buying cashless and frictionless cheeseburgers.
Accessible, inclusive and equitable digital payments
The key is accessible, inclusive and equitable digital payment options that offer real end user benefits taking the “cashless” journey from the consumer being driven from cashless options to the consumer driving the digital payment revolution through willing adoption (‘digital first’ decisions).
Remember the strategy for the ‘demise of the cheque’?
Actually the strategy was to develop and promote viable alternatives to the outdated cheque. However, with everyone fixated on the ‘demise’ of the cheque, we ended up reinventing the cheque at a huge financial cost and rapidly declining acceptance / issuance.
Cheques can teach cash a lesson here – to preserve cash for cash sake will ultimately only serve to leave people behind – we need to ensure that there is a broad range of digital payment options that offer accessible, inclusive and equitable solutions to all in society.
Other countries can teach us a lesson
Other experiences can also help the UK define a strategy:
- Emerging payment markets have created a ‘mobile first’ economy that embraces digital payments (including MPESA).
- Poland has achieved a significantly high contactless payment adoption rate.
- Some countries (e.g. Mexico and Nigeria) have addressed Know Your Customer (KYC) – “trust” – with a tiered solution (low or minimal KYC for small amounts and KYC requirements growing as payment numbers and or values grow). Or, maybe, better KYC and controls around a SIM card may provide “trust” solutions?
- The Nordics have travelled further along the cashless path than the UK and have had to address accessible, inclusive and equitable solutions for the elderly, the vulnerable and those at the margins.
- Other countries have been thinking about resilience of digital payment systems and infrastructures – after all if you hoard a supply of cash ‘just in case’ will you do the same for fresh water, food, gas, petrol and what about a battery source of electricity? Where do you stop?
There are some that say that there are too many Open Banking / Fintech offerings and a net result is a confused public. We must be careful here, the Cruickshank Report challenged innovation in payments ‘at the pace of the slowest’, a vibrant and competitive market place is a pleasant consequence of innovation.
A proactive payments strategy, offering a broad range of payment options, that ultimately focus on accessible, inclusive and equitable digital payments.
Options that focus on outcomes – e.g. ‘I don’t want an open banking mortgage solution but I want to buy a house’ and ‘I don’t need access to cash but I want to buy stuff’.
Cash should be in the mix but not preserved for its own sake.
What’s the biggest benefit of going cashless / adopting digital payments?
Don’t ask me ask the 71% of people that have replaced all or some of the cash habits.