Alexander Coleridge, founder at TapSimple, outlines how non-profit companies can recover and thrive during these times of uncertainty.
To find their feet and serve those in need, charities will need to adapt to this changing environment, leveraging technologies to find new and better ways to fundraise, connect with audiences, and operate efficiently. The charity sector represents a great opportunity for innovation, with charity tech being the key to helping the third sector bounce back after COVID-19.
The charity sector has an annual income of over £75 billion per year, which is larger than the British automotive industry. Historically, charities of all sizes have suffered from outdated technology. Ineffective fundraising, a lack of data management capability and the absence of innovation around fundraising are key concerns for the industry, but there is a growing awareness within the charity sector that alternative payment methods, machine learning, chatbots and voice assistants would speed up processes.
According to some industry commentators, the voluntary sector is operating between five and ten years behind the commercial sector in terms of embracing the digital revolution, which means we are long overdue a leap forward in innovation within this industry.
Meanwhile, the decline of cash - a response to the growth in cashless payment technologies - has been hastened by the pandemic, with cash viewed as unhygienic. This is having a significant impact upon fundraising. The pandemic has caused charities to look at alternative ways of raising funds and connecting with their audiences. As such, technology will be at the centre of charity trends as we look ahead.
The charity sector has an annual income of over £75 billion per year, which is larger than the British automotive industry.
The next 12-24 months will be critical for charities, who will need to invest in technology or fail. This means we will bear witness to technologies such as contactless, virtual events, AR, AI and other emerging technologies shaping more and more of the voluntary sector.
73% of charities say street giving is failing as a result of the decline of cash, but only 4% of charities are currently making use of contactless payment systems. This means investment in contactless solutions that cater specifically to the charity sector will be a major focus in the coming months as charities look for new ways to fundraise. Technology providing seamless mobile experiences will be especially crucial. In 2019, approximately 24% of all online donations happened on a mobile device, and digital interactions with the web, social media and mobile devices are growing - being used by people of all ages and interests. As such, charities must ensure they are mobile friendly and have optimised their online giving for mobile devices.
Some charities are already beginning to leverage technology that can help with fundraising, and those that have are seeing a major boost to donations in face-to-face giving. For example, TapSimple’s contactless and chip & pin technology, used by the likes of the NSPCC and Christian Aid, allows supporters to donate when they aren’t carrying cash, and encourages them to give amounts that are on average three or four times higher.
Innovations in Gift Aid collection are also increasing income and streamlining the donation process so that fundraisers can keep digital records, contact supporters down the line, and make each donation go further.
Technologies that boost connections with supporters remotely are also becoming increasingly important. VR and AR technologies can enable charities to build immersive experiences for their audiences. Alzheimer’s Research, for example, is now offering VR dementia training.
In addition, TapSimple’s Virtual Events platform allows charities to engage donor audiences and raise money online, enabling attendees to donate directly from a live stream or video conference page. Charities have been holding a range of fun and innovative events including virtual coffee mornings, remote bingo, cocktail making classes and live Q&As.
Traditional crowdfunding is also being disrupted, merging with gaming to create ‘stream-raising’, where gamers raise money while livestreaming gameplay. Some organisations have already begun to raise money through livestreaming gameplay, and this is likely to grow in popularity.
While 2020 will have implications for all industries, 2019’s success for the UK tech sector indicates positives ahead: digital technology grew six times faster than any other industry. Purpose-driven UK tech companies are also increasing, with investment in UK tech companies that addressed the UN’s Sustainable Development Goals nearly doubling in the last year. Evidently, the technology industry is continuing to bloom, and the charity sector will present fruitful opportunities to solve deep seated inefficiencies and create value.
Giving is a challenging environment, especially at present, but necessity is the mother of invention and charities which can take advantage of burgeoning technological developments will be best placed to thrive. Technology will not only help the third sector rise to its present challenges, it can also help charities to evolve by creating more efficient and more engaging experiences; enabling the sector to connect to a wider, more global audience. Investors should be on the lookout for technology solutions providing ways to help the voluntary sector level up.
Vince Graziani, CEO of IDEX Biometrics ASA, analyses the impact of this shift and what it means for those who rely on cash.
As lockdown eases and shops begin to reopen their doors, many retailers are encouraging customers to use contactless card payments or mobile apps to pay. This move has come as a result of the concerns around the virus staying on bank notes for around 48 hours, and therefore able to transfer via point-of-sale terminals and ATMs. In reaction to this, many of us have embraced touch-free payments to help improve hygiene in the payment process and reduce the risk of contamination.
Advancement in technology and the use of touch-free authentication allows consumers to make a transaction without having to touch a shared PoS to tap in a PIN number, sign for their purchase, or hand over cash. It is common when tapping a contactless card or using a mobile payment app and is an increasingly vital step in the process of making the payments industry safe in the world of coronavirus. However, there is a significant segment of society that still rely on cash who are unable to embrace touch-free payment authentication.
As we move more towards a more digital-focused society, government bodies are increasingly worried about the effects on vulnerable members of society. In particular, the elderly, those who remain un-banked, or those without a smartphone are still reliant on cash and could be left excluded in a digital-first payment ecosystem. In a post-COVID world, these same groups are those who could be most exposed to further viruses from cash circulation.
So, with touch-free payments important to improving hygiene, there is an important question to consider for those unable to access contactless payments: could digital exclusion be a barrier to a COVID-free society?
There is a significant segment of society that still rely on cash who are unable to embrace touch-free payment authentication.
Those who are digitally-excluded have limited or no access to digital tech that can make life more convenient, such as a smartphone or payment apps. According to the ONS, 9% of UK adults, or almost 5 million people, don’t have access to the internet, while in the USA, FCC data suggests around 42 million Americans lack broadband internet. As a result online banking would be inaccessible to many. In the UK, the government-commissioned Access to Cash review found that 17% of the population – over 8 million adults – would struggle to cope in a cashless society.
Exclusion from the digital world can lead to lower skills and confidence, but it can also lead to social exclusion and wider economic problems. As payment technology continues to advance, the use of basic IT devices could become essential to access goods and services. While touch-free digital payments offer many benefits, not everyone is ready to embrace a fully digital society just yet. But in our new normal, we must also consider the need to remove the concerns around transmission of the virus on cash.
Therefore it is important to be more innovative in our approach to payments and ensure that governments and banks work together to develop new digital payment technology in a more inclusive way, to bridge the digital exclusion gap.
Failure to do so will see those without access to digital services and payment options locked out from everyday services that so many of us take for granted and forced to continue using cash. Meanwhile more digitally-included members of society are able to avoid touching paper notes and coins or ATMs amid the threat of the virus. With more and more banking services moving online the need for simple and secure access to these digital services is more important than ever before.
In The Access to Cash review, the commission highlights biometrics in digital payments as an innovative technology that will make payments even easier in the future, which will support the pace of change towards a cashless society.
Biometrics are likely to be key to revolutionising digital inclusion in the coming years. As people get used to using fingerprints and faces to identify themselves, biometrics will become a more familiar and accepted touch-free way to validate transactions. Now, fingerprint biometric sensors can be incorporated into smart payment cards providing a speedier, personal and more secure means for consumers to authenticate payments.
During a transaction, a consumer only needs to touch their finger to the sensor on their own payment card, and then hold it over the contactless card sensor. This will allow them to authenticate a payment of any amount, without a payment limit. By extending biometrics to payment cards, authentication will no longer rely on what you know, or what you can remember, but who you are. This is valuable for those who struggle with PINs as well as in countries with lower literacy levels or less reliable identification systems.
The use of fingerprint biometrics in smart cards are also an affordable way to ensure touch-free authentication in the payment process while effectively banishing the concerns people currently have about the implications of devices being lost or stolen. For those that don’t have access to a smartphone, they will still be able to bank and pay for goods securely and in a touch-free way without a large upfront cost.
We must recognise that whilst tackling digital exclusion remains complicated, the latest advancements in biometric fingerprint technology are leading the way to a more inclusive payment method.
With the rise of digital and mobile payments, a cashless society is fast approaching, and it’s becoming increasingly important for government bodies to work alongside payment method providers and banks to ensure an inclusive future for everyone. Providing access to cost-effective touch-free payment methods, such as biometric payment cards, can help to not only reduce the risk posed by a second wave of COVID, but also help to protect people from the spread of viruses in the future.
New research has suggested that the Coronavirus pandemic will dramatically hasten the decline in cash usage in the UK. Enforced lockdown has led to a dramatic 60% fall in the number of withdrawals from cash machines, while card payments and online shopping, particularly for essential purchases such as groceries, have skyrocketed. With now significantly less demand for cash withdrawals and subsequently, more and more machines disappearing from our high street the way phone boxes once did, it’s highly likely that this changed societal behaviour will last long after the virus has left our shores.
Problems with cash have been well documented, and have only been intensified by reports early in the Coronavirus outbreak about the spread of the virus on banknotes and coins. Whilst the World Health Organisation and the Bank of England have stressed that the risk of transmission from cash is no greater than any other item, these concerns have acted as a catalyst for many to adopt an all-digital wallet. In addition, cash is actually quite inconvenient and increasingly unnecessary. Cash can be stolen or lost. Consumers are unable to redeem reward points for spend and cannot automatically track spending habits to help with budgeting. In today’s society, cash simply struggles to compete with the multi-dimensional attributes of digital payments.
If you add to this the UK increase of the contactless limit to £45 at the beginning of April, cash for many has all but become redundant. If already, only a third of payments are made in cash, it’s unquestionable that the additional pressure that COVID-19 has applied to coin and note exchange will see the predictions for a largely cashless society within the decade, accelerated at speed.
Halifax said the number of over-65s signing up for online banking jumped by 63% and their use of contactless has also soared.
And it’s not just digitally-savvy millennials that are driving this trend. Many older people have switched to online banking and contactless payments since March this year. Halifax said the number of over-65s signing up for online banking jumped by 63% and their use of contactless has also soared. It’s highly likely that temporary measures put in place to help limit the spread of the Coronavirus such as stores only accepting cards and contactless will clear the way for a cashless. Business banking app Amaiz’s recent research revealed that around 50% of small and medium businesses in the UK have either gone entirely cashless or plan to do so in the wake of the COVID-19 pandemic.
Of course, there are drawbacks to a cashless society. We must not forget that for many people, small businesses and not-for-profits, cash is crucial to their survival; for those without bank accounts, digital payments may reduce financial access. Many now call for regulation to ensure that retailers, restaurants and bars must also accept cash tender.
Whilst downsides are evident, for many, convenience outweighs. And as we become ever more reliant on digital services to tend to our basic needs in life beyond the curve, the decline in the use of cash looks set to continue.
The digital opportunity
Technology is revolutionising our relationship with money. The omnipresence of smartphones and the development of financial applications means that it is possible to bundle spending habit reports, savings, checking, credit card usage, loans and credit score all in one easy and secure place. In turn, this means that mainstream FinTech has created the opportunity for consumers to develop financial literacy regardless of background, age or current financial circumstances.
The cost of maintenance of a sparsely used cash system will become increasingly debilitating over the coming years. Cash will become costlier to maintain as its value to the vast majority of consumers diminishes. It is therefore crucial that banks and FinTech businesses work to bring those without bank accounts, and the elderly further into the FinTech ecosystem – suggestions such as the Bank of England’s digital notes are perhaps a good starting point.
The repercussions for organised crime and fraudulent activities are also significant in a digitally managed system, providing both a more secure currency – less liable to loss – and less room to hide significant portions of extra income.
Technology has worked to help us understand, track and manage our money in a way we’ve never been able to before. And as COVID-19 turned industries on their heads, banks had to evolve in real-time to further provide digital services that customers would have ordinarily sought assistance in branches or over the phone. As we quickly evolve into a digital-first world, banks, governments and businesses must recognise that digital payments are an opportunity for inclusion, for increased financial literacy and for long-term economic stability. They need to work collectively to ensure measures are put in place to protect those who still need access to cash and to provide a greater breadth of service digitally for those that will shift from pounds to plastic. For a cashless society is no longer stuff of the future, it’s here and due to the COVID-19 crisis is coming much quicker than we once predicted.
For the most part, the blockbuster film 'Back to the Future' was way off with its outlook on what society would look like in 2015; we don’t have flying cars or hoverboards. But Robert Zemeckis might have been onto something with his portrayal of ‘future’ payments. One of the common methods of payment in the film’s futuristic society was made by thumbprints, not a far cry from what many can already do with their smartphones. Ian Bradbury, CTO for Financial Services, Fujitsu UK, explores what the future of payment is being shaped in the real world.
Biometric payments are one part of a wider movement in society away from physical money. Credit and debit cards have been around since the middle of the twentieth century, but over the past decade, there has been a notable decline in the support for cash, with some retailers removing cash payments entirely. And that isn’t necessarily a bad thing.
While cash is important in maintaining the anonymity of payments, there is a lot to dislike about it. It’s easy to lose, steal and damage cash while also being expensive to produce, distribute and store. It is also a known carrier of infectious diseases, something that has been highlighted in the wake of the COVID-19 pandemic. But it is also clear that we cannot move to a cashless society until more is done to ensure the estimated 2.2 million Britons who rely on cash are not left behind.
There are ways that banks can help society transition seamlessly from physical cash to digital cash. Consumers will always adapt to changes in which we store value to trade, so we need to make sure we do it right.
Biometric payments are one part of a wider movement in society away from physical money.
Many banks are in a delicate position where most consumers now use some form of paperless payment – but not all. Meanwhile, over a third (36%) of consumers in the UK want their bank to be more innovative in their use of technology, showing an appetite amongst the public for more modern services.
But security remains a crucial aspect when considering a cashless society. One reason for cynicism is that going cashless would eliminate the anonymity of physical payments; the free and willing private transfer of value from one individual to another is considered by many to be a basic human right.
And over a quarter (26%) of consumers do not trust traditional banks to keep their data safe – a figure that rises up to a third with challenger banks. Therefore, there is no guarantee that digital-only payments would be universally accepted as there is not a unanimous trust in technology. That is arguably one of the biggest challenges we face in moving to a fully cashless society.
The western world has a historical love affair with plastic cards; they have been around for decades and we are used to them being the main form of cashless payment. But not every citizen is able to apply for a bank card. For example, one of the basic requirements for a bank account is a home address. However, for the homeless population of the UK, that is not possible. Therefore, if not considered, a cashless society could worsen the inequalities that some face.
There are ways to get around this. Some initiatives are being developed so you don’t need a bank account to receive and use digital cash. For example, you can receive a Mastercard prepaid card which you can use anywhere that accepts payments from the company. This eliminates the need for identity checks or registration and is inclusive to those who do not qualify for a bank account. Further investment in those initiatives will be key.
Offline digital wallets can also store, manage and transfer digital currency while not connected to the internet – which is critical in replacing the ‘off-grid’ functionality of physical cash. Smartphones are often used as offline digital wallets and developing that technology would limit the need for further investment in infrastructure.
It’s also not implausible that ‘smartcards’ – bank cards that use biometric authentication – will become the norm in years to come. They can be designed with a low-cost e-ink display, which requires no power, that can show how much balance the user has. Not only would they enhance security in digital payments, but it would also eliminate the need to register for a bank account.
There are clear challenges in moving to a cashless society. It requires certain investments so that no one loses out. At the same time, it must provide the anonymity that many consider being a basic right.
Yet if you consider measures such as offline digital wallets and smartcards, many of those challenges can be met. The technology needed to go cashless is already available – it now needs to be seamlessly integrated into everyday life.
We want brand experiences to be fast, personalised and seamless. Digitally native brands like Uber and Netflix have raised the bar for simplicity and convenience in every transaction, and the rise of challenger banks like Monzo and N26 is a clear example of how innovation in financial services is following these trends. Chris Ford, senior director at Blackhawk Network, explains to Finance Monthly how the COVID-19 pandemic has accelerated these trends.
Research from social media management platform, Hootsuite, found that in the first quarter of this year, 42% of online shopping was paid for with digital or mobile wallets. But, whilst payment behaviours were already changing, this has likely been exacerbated with consumers forced to dramatically change their daily lives by staying at home and adhering to lockdown regulations. Historically, chaos has fueled innovation and from what we’ve seen it may very well be true in this case. We are about to go through a new revolution in how we pay. Those that adapt quickly will win, whilst those that don’t will struggle to survive.
Right from the early weeks of the COVID-19 outbreak, businesses have started to become cashless to avoid unnecessary physical contact. Contactless payments have been encouraged by many retailers and we’ve seen the limit increase to £45 as a result. As the lockdown measures were put in place, the need for alternative ways to support people throughout the crisis has also increased the adoption of alternative payment methods such as e-code vouchers and gift cards. Even the UK government reacted by setting up the supply of supermarket vouchers for families that rely on free school meals.
Contactless payments have been encouraged by many retailers and we’ve seen the limit increase to £45 as a result.
The grocery industry, which has experienced the COVID-19 impact like few other sectors, has had to adapt quickly to changing shopping habits. From forming physical barriers for staff, to working with every aspect of their supply chain to maintain stock levels, innovation has been essential. This innovation has also extended to payments with a new category being born: the volunteer gift card. With vulnerable people not able to leave their homes to shop, these gift cards have let them send money to friends, families or neighbours who are taking on the grocery run.
The financial services industry has also developed new services to support customers who are self-isolating. For example, NatWest has created companion cards that allow others to pay for your shopping without having to give over your main account card. Additionally, those that can’t physically get to the shops to buy presents have turned to gift cards as a thoughtful way to keep in touch.
COVID-19 has pressured business leaders to accelerate the innovation that was already on the way. 50% of the UK population is already cashless according to Access to Cash Review published in March, and COVID-19 is seen as a way to make more of us move towards being cash-free. With lockdown restrictions not going away anytime soon, we will have a longer period of time to adopt these new behaviours and they are likely to hang around long enough to make them stick.
Before COVID-19, the demand for gift cards was already at a record high, with the total value of the global gift card market expected to reach $506 billion by 2025. With more organisations adapting to the new normal, the development and uptake of alternative payment methods will continue to increase and e-codes help to lead the revolution.
Apparently, it takes 66 days to form a new habit. Lockdown measures have already exceeded this timeframe in the UK, meaning that new payment habits are likely to be here to stay. Brands need to make sure they respond quickly to these new behaviours to keep meeting and exceeding customer’s expectations.
Our new norm as individuals was always going to change when it came to payments. COVID-19 has accelerated that shift in behaviour and it’s a delight to see so many companies rising to the challenge.
Enabled by the state, China’s technology companies have been able to influence consumer technology adoption in a much more homogenous way than in the West. Its digital payment system, powered by Alipay and WeChat Pay, is almost universal as a result. Even small roadside stalls routinely use digital wallets. A visitor to China soon realises that, back here in the West, we are still incredibly analogue.
What’s more, Alipay is beginning to move beyond its Chinese borders. With a projected 250m active users by March 2020, the Indian population is actively engaging with Paytm (part-owned by Alipay), despite an often fractious relationship between the two nations.
China has managed to be nimble with its digital payments innovation and adoption despite or maybe because of its intervention. In the West, democracies take a long time to agree governance and regulation. Individual companies are making forays but there’s still a lack of cohesion. There’s also huge barriers thanks to a lack of trust - just look at the scepticism over Facebook’s digital currency, Libra, many of whose key partners have abandoned the scheme.
The West is going to need to find a way of building its own cashless framework soon. If it can’t, consumers will gravitate to whatever is available. It's not about where the technology is developed, it’s about making people’s lives easier. If a technology or business provides a way to reduce friction in someone’s life, then consumers will adopt that technology. Also, payment systems are as much about the trust and ecosystem in which they operate as they are about the technology. Increasingly, the rest of the world is starting to see that 1.2 billion people can’t be wrong.
China has managed to be nimble with its digital payments innovation and adoption despite or maybe because of its intervention.
The imperative to develop an answer to Alipay and WeChat Pay goes beyond national pride – the rapid growth of a universal, digital, cashless payment alternative has the potential to supplant national currencies themselves. Even the US has acknowledged this - with Federal Reserve Chair Jerome Powell calling Facebook’s work on Libra a ‘wake-up’ call to the importance of digital currency.
A little history: in terms of the threat to the dollar, the traditional currency system has been previously pegged to the gold reserves. In the Nixon and Reagan eras, they removed the dollar peg to the gold reserves. As a result, now it is not pegged to anything. The relationship between the dollar and gold was disconnected.
When that happened the dollar rose in status - it became the reserve currency for every country in the world. Even China has an estimated $2 trillion held as a reserve, because of its universal recognition around the world and the fact that banking systems are controlled by the West. This, in turn, gives the US a lot of benefits - as long as people hold the dollar, the currency is stable. In a cashless society where the currency is digital, those reserves held around the world will be less meaningful as digital reinvents the global monetary system.
While Alipay is certainly powerful in its domestic market, it has not quite reached the status of a currency, although critically it is tied to the existing Chinese currency infrastructure. It follows that technology has the potential to disrupt the idea of national currency.
I am not predicting that this disruption is just around the corner but it’s clear that as more consumers experience more forms of digital payments, they will increasingly migrate to digital currencies. The West needs a cashless payment mechanism and we can’t assume that we can hold customers back until we’re ready. It is the law of numbers. It is about the ecosystem these numbers create. You attract people by making the experience as frictionless and connected as possible. Then these people will bring more people.
Analysis has revealed that if current trajectories towards digitisation continue, 8.17 million vulnerable members of society would suffer due to their dependence on physical payment methods. This includes 5.2 million households, or 80% of elderly homes, that rely on cash.
Also at risk of digital exclusion in the UK are the 320,000 estimated people living rough on the streets, 1.3 million adults without bank accounts and 1.352 million people with physical or mental health issues.
Global Payment Methods collates official reports to reveal the potential societal repercussions of digital exclusivity, whereby coins, banknotes and cheques are replaced by eWallets, cryptocurrencies and bank cards.
This rise in alternative payment methods has also led to a decline in ATMs, with the number in the UK dropping from 54,000 to 49,700 between January 2018 and July 2019 alone.
Since 2015, digital payment methods have risen to meet the needs of online shoppers, with eWallets and bank transfers the most popular in 2018. Cash is forecasted to be replaced by debit card as the leading payment method by the end of this year.
|Total % change
This predicted shift would have detrimental societal impacts worldwide, with 1.7 billion adults without access to a bank account, 100 million people reported to be homeless and 617 million people aged 65 and over around the globe - many of whom will struggle to go digital.
There are 450 million people currently suffering from mental or neurological disorders according to the World Health Organization (WHO), with one in four people predicted to be affected by mental illness at some point in their lives.
These figures mean that a staggering 1.875 billion people could be isolated from a digitised society at any one time, due to mental health problems alone.
WHO has pleaded for governments to provide affordable treatments for mental health, as two-thirds (67%) of people with a known disorder never seek help from a health professional. Currently, at least 40% of countries have no mental health policy and over 30% have no mental health legislation.
Establishing affordable and equal access to mental health treatments is more important now than ever before, with the latest figures implying that debit cards, credit cards and eWallets will eradicate cash usage by 2022.
Helen Undy, Chief Executive of the Money and Mental Health Institute, said: "When you’re struggling with your mental health it can be much harder to stay in work or manage your spending, while being in debt can cause huge stress and anxiety – so the two issues feed off each other, creating a vicious cycle which can destroy lives.
“Ensuring that money advice is routinely offered to people using mental health services would increase recovery rates, as well as improving the financial wellbeing of the 1.5 million people currently dealing with this terrifying combination of problems."
Mobile payment solution M-Pesa is widely adopted in Kenya and across the wider continent, with over 30 million people using the service to send and receive money. TymeBank is also hoping to become a household name in South Africa. It claims to be South Africa’s “first fully digital bank”, and recently launched its EveryDay account.
However, the big traditional branches are also getting in on the digital action and Standard Chartered is making a big play. A multitude of digital banks have been launched, and there are more to come. Jaydeep Gupta, region head of retail banking, Africa and Middle East at Standard Chartered, tells Global Data’s Retail Banker International that this is just the beginning.
“We have now launched digital banks in eight markets within 15 months as we have seen a growing demand for convenient banking in Africa. In line with this, we will be launching our digital bank in Nigeria which follows the eight digital banks which we have already launched so far. We are also working on the roll-out of the SC Keyboard to additional markets in Africa. This includes launches in Botswana, Zambia, Zimbabwe and Nigeria throughout the rest of the year.
“The SC Keyboard platform allows customers to access a variety of financial services from within any social or messaging platform without having to open the banking app. It can be configured as the default keyboard on any smartphone, making banking quick and seamless for customers who no longer need to log into their SC Mobile app for basic banking services.”
Africa is generally perceived as a cash focused continent, and while cash is still popular mobile money is catching up fast.
Gupta says: “There is still quite a high prevalence of cash usage on the continent, but you just need to look at how well mobile money has taken off over the past decade to know that Africa is moving away from cash. Mobile money is now active in 31 countries in Africa, with 84 million active mobile money accounts.”
This massive expansion in digital begs the question of whether there is still a need for the old brick and mortar establishments?
Gupta concludes: “Retaining the ‘human’ element in banking remains crucial. While digital channels are undoubtedly more efficient, hold lower error rates and have decreased cost-to-serve ratios, finding the balance between traditional and digital banking services is the key to providing exceptional customer service. Customers will always require an element of human interaction and, at Standard Chartered, we are focusing on fusing these offerings in order to provide a seamless customer experience.”
According to recent figures from the British Retail Consortium, cash has gone from the most common way to pay for shopping in the UK to third – in only a few shorts years. It now accounts for just £1 of every £5 spent in shops, with contactless, phone and watch payments all increasingly growing in popularity.
You may therefore find yourself asking: why do we still need cash if we don’t use it anymore? Shouldn’t we be adopting these new and improved methods of paying for goods instead?
Well, no not quite yet – cash still has a major role to play in our society. Listed below are five key reasons why.
Nothing beats a greasy kebab from a food truck after a night on the town, or a cheeky purchase from a handicraft stall while out shopping. However, these sorts of places often require you to pay with cash, mainly because the vendors can’t afford to offer card payment alternatives.
Just because you have a fancy phone or watch that can pay for things with a simple tap, that doesn’t necessarily mean everywhere else is up to your level of digital savviness. Roadside stands, super hole-in-the-wall restaurants and food vans often only ever take cash so, unless you want to trade your fancy phone for a burger, you’re going to need some cash.
Let’s set the scene: you’re on a night out enjoying yourself when you realise you’ve run out of drink. You head to the bar, order another one, and get your wallet out ready to pay. Suddenly, you realise that your card is missing – you must have lost it dancing earlier on.
In these types of situations, having cash available can make a huge difference. Not only can it allow you to buy that drink you were after, but it also enables you to carry on enjoying your night, and get home safely in a taxi when you’re ready to head back home.
When you visit a restaurant, it’s usually courteous to leave a tip. While some restaurants include this on the bill beforehand, or make a point to ask for it on the card reader itself, many people prefer leaving a handful of cash behind instead – depending on the quality of service provided.
Similarly, if you use a card to pay for purchases at a smaller restaurant, service provider or store, they won’t actually receive the full amount of money you pay. This is because using a card machine actually costs the company money themselves; somewhere between 0.6 – 3.5% of the purchase price, plus an additional fee on top.
If you are looking to stay in control of your finances, many studies have shown that people spend a lot more when paying with a credit card, compared to cash. This is because the tangibility of actually having to part with cash makes the ‘pain’ of the payment process feel much more real. By using a credit card, you don’t see the money leave your account, so the whole process of paying feels like it hasn’t even happened.
The pain of paying with a card only sets in once you make the brave decision to actually look at your bank balance.
Cash, on the other hand, is relatively untraceable, as it leaves no track record of who handled it, when, and at what time. Therefore, if you’d rather keep your data and purchase records to yourself, cash is the only means of doing this.
This doesn’t have to be for any criminal motive either: say you have a joint bank account with your partner and are on the lookout for a birthday present for them, they could easily see what you bought them if you paid for it using the joint credit or debit card. Surprise ruined.
Luckily, thinkmoney have uncovered the unspoken benefits for businesses if Britain were to ditch cash.
In addition, their research has also revealed which UK regions are the most prepared for the ‘death of cash’.
Research has revealed that businesses lose out on £23,145 when they only accept cash transactions.
In its 113-month lifespan, the average £20 note is exchanged 2,238 times.
A single average banknote carries up to 3,000 different types of bacteria – some of which are known to spread skin infections, food poisoning and stomach ulcers.
3. Safer Workplaces for Staff in Retail and Hospitality
Since 2012, crime within the food/ retail businesses has fallen by 9% - which could be attributed to fewer establishments handling cash.
4. Your Money is Safer With Banks
In the past year, UK banks have successfully prevented £1.66 billion in fraud.
5. A Potential £80m Increase In Charity Donations
A lack of Brits carrying cash has led to UK charities losing a staggering £80 million every year.
However, another organisation that relies heavily on donations, the church, has seen a 97% increase in donations since accepting contactless payments.
6. The Government Could Save £35 billion – Which Could be Invested in Businesses
Every year, the HMRC loses a staggering £35 billion to tax avoidance.
If Britain were to go cashless, this saving could be invested in businesses.
As there’s been a notable drop in the number of people using cash machines, thinkmoney have also uncovered which regions have seen the biggest decline over the past year. The results suggest which regions are the most prepared for a cashless society.
|The Decline in ATM Withdrawals Between 2017 vs. 2018
|Reduction in the number of ATM withdrawals
|East of England
|Yorkshire & the Humber
From this research, it is clear that Northern Ireland is the least prepared for a cashless society. It’s also worth noting that last year, N.I. was the only region that saw an increase in the number of bank branch openings. Every other region saw a clear decline.
As the UK fast progresses towards a cashless society, consumers have made it clear they are not prepared to give up their bank cards. Research by IDEX Biometrics ASA has revealed that three quarters (75%) of UK consumers are concerned about the UK becoming a cardless society, where they no longer have access to a physical debit card and could only rely on mobile payments. Evidently, UK consumers are actually more worried about the idea of a cardless society, than a cashless one.
For more than a third (37%) of consumers, as long as they have a debit card, the thought of a cashless society doesn’t bother them. Maybe not surprisingly, this is even more pronounced among young consumers, with 53% of 25-34-year-olds unworried about our growing cashless society, providing they still have a bank card.
These findings highlight that banks and financial institutions need to reconsider the cashless transition. This is true for all generations, as only 20% of all UK consumers believe we should already be a cashless society, but particularly so for the older generations, with only 9% of over 55s agreeing we should already be cashless.
In fact, despite the increasing popularity of smartphone payment apps, six-in-ten (60%) respondents would not give up their debit card in favour of mobile payments. This caution is likely stemming from security concerns, with a further 68% stating they still feel more secure using their debit card than a mobile payment and half (50%) of consumers concerned that contactless payments are insecure.
However, four-in-ten (41%) would trust the use of their fingerprint to authenticate payments from their bank card more than a PIN. This figure remains consistent across all age groups, highlighting consumers’ confidence in payment cards secured by biometric authentication.
For more than a third (37%) of consumers, as long as they have a debit card, the thought of a cashless society doesn’t bother them.
Misuse of mobile payments is another major concern for consumers. 58% worry that if they lost their mobile phone, people would be able to access their bank accounts. In contrast, even if stolen or lost, a biometric bank card can’t be misused without the owner’s fingerprint.
“With UK consumers showing their continued attachment to bank cards, it’s time for the financial services industry to future-proof payment cards for the next generation. Customers are still sceptical about mobile payment apps but, given their security concerns, they also require more protection than a PIN currently provides”, comments David Orme, SVP of IDEX Biometrics ASA.
“This shows that there is a clear demand for payment cards that provide the convenience of contactless payments with the added security of biometric fingerprint authentication. As the owner’s fingerprint needs to be present for biometric payment cards to work, reliable bank cards enhanced with biometric technology will prevent misuse and card fraud. This will bring reassurance to all consumers as the UK continues to progress towards a cashless society”, added Orme.
For more information, visit www.idexbiometrics.com and follow @IDEXBiometrics.
Despite this shift however, the payment card is very much still alive with six-in-ten (60%) UK consumers stating they would not give up their debit card in favour of mobile payments. In fact, a further three quarters (75%) of UK consumers are concerned about the UK becoming a cardless society, where they no longer have access to a physical debit card and can only rely on mobile payments.
Here David Orme, SVP of IDEX Biometrics ASA at IDEX Biometrics ASA, explores the realities of payments preferences in the UK and what financial institutions must do to ensure that we experience a seamless transitions towards becoming a cashless society.
Do you remember coins? When was the last time you actually carried around a pocketful of pennies to pay for something? Given the rapid growth of contactless transactions, mobile payment apps and online shopping, it was probably quite a while ago now. Advancing banking technology, means we are fast moving towards a cashless society. In the UK, cash payments fell behind card transactions for the first time in 2017, while Sweden expects to become the first country in the world to go fully cashless, thanks to a country-specific payment app.
However, despite being hailed as the solution to end our use of cash and cards, mobile payment apps haven’t reached anywhere near the expected level of public adoption in the UK. By 2018, only 13% of the UK population was using mobile payments, due to the majority of the population generally preferring the ease and familiarity of contactless cards.
This is supported by our recent research at IDEX Biometrics ASA, which reveals that six-in-ten (60%) UK consumers would not give up their debit card in favour of mobile payments. In fact, a further three quarters (75%) of UK consumers are concerned about the UK becoming a cardless society, where they no longer have access to a physical debit card and can only rely on mobile payments.
Clearly, the payment card has become a strong part of our daily routine. So much so that, almost two-in-five (37%) of UK consumers stated that as long as they have access to a debit or credit card, the thought of a cashless society wouldn’t bother them. Interestingly, this number even rose to over half (52%) of 25-34-year-olds.
Given this strong evidence that consumers are still loyal to the payment card, it seems that the banking industry is focusing on the growth of the wrong payment technology. As we move towards a cashless world, the future of payments may not be in smartphone apps after all.
There is a clear generational divide when it comes to the acceptance of digital payments. While over half (53%) of 18-24-year olds believe they already live a mostly cashless life, that number plummets to only 19% of those over the age of 55. Similarly, while four-in-ten (38%) of those aged 25-34 believe cash is now obsolete, only 9% of over 55s agree.
In fact, half (50%) of those aged over 55 are continuing to use cash to buy small-ticket items. Young people, however, are so tied to their card that two-in-five (40%) of those aged 25-34 say they won’t shop anywhere that doesn’t accept cards.
One of the greatest concerns surrounding a cashless society is the potential for inequality. Consumers shouldn’t be locked out of the banking system because they are less familiar with new payment methods or have limited access to digital devices. To keep our economy fair and inclusive, our payments system must stay accessible to all. Therefore, as we approach a cashless society, the UK Government and banking sector should reconsider the cashless transition. Instead of the focus on mobile payment apps, banks and financial institutions must adopt payment card technology that is convenient, secure and reliable for consumers of all ages, particularly older generations who still rely on cash.
Consumers are also dismissing mobile payment apps thanks to rising security worries around the new technology and the potential for misuse of mobile payments. Over two-thirds (68%) of respondents still feel more secure using their bank card than a mobile phone to make a payment, while almost three-in-five (58%) fear that if they lost their mobile phone, people would be able to access their bank accounts.
In contrast, half (50%) of respondents say that having their debit card gives them a sense of security. Significantly, four-in-ten (41%) consumers would trust the use of their fingerprint to authenticate payments from their bank card more than a PIN.
Given these concerns, it is evident that payment technology needs to be more secure. It’s time for banks to adopt cards with biometric fingerprint authentication, which can’t be misused without the owner’s fingerprint, even if stolen or lost. Incorporating this advanced biometric technology into payment cards would enhance authentication for transactions and provide all consumers with a safer payment process that offers more reassurance than PINs or apps currently provide.
Although the idea of a cashless society holds many benefits, 55% of consumers actually think a cashless society will be inconvenient. Whether from lack of technology awareness or security concerns, consumers are still fearful of the day when they have to rely on mobile apps to access their money and pay for goods. Given this fear, the financial industry needs to work quickly to enhance payment cards by utilising biometric technology to secure payment authentication, before cash becomes extinct.
Payment cards that provide the convenience of contactless payments with the added security of fingerprint authentication are the key to a seamless transition into a fully cashless society. Such cards will prevent misuse and card fraud, while allowing fast, convenient, secure and direct access to our bank accounts, bringing much-needed reassurance to UK consumers.
UK consumers have made their feelings clear; they are just not willing to give up their payment cards. In a cashless society, cards will still be leading the way – we must future proof them for the next generation of payments now.