A vibrant payment landscape in Southeast Asia has led consumers to increasingly adopt alternative payment methods (APMs) for online payments and reduce their dependence on cash or major international credit card brands. APMs are also known as local payment methods as they are generally created according to the demands of their local consumers.
The Southeast Asian payment market is flooded with a number of APMs, enabling customers in the region to make virtual payments using a method most convenient for them. Some of the popular APMs in the region are as enumerated below:
Bank transfers: With funds transferred directly from their bank accounts, consumers can shop for products and services online.
e-wallets: Customers can load their digital wallets with funds from their bank accounts or credit cards and use them to make contactless payments.
Mobile payment apps: To make payments using mobile payment apps, consumers are required to download these apps on their mobile devices.
QR codes: QR (quick response) codes are barcodes that need to be scanned using a mobile device to facilitate electronic payments.
Buy now pay later: Buy now pay later (BNPL) enables consumers to shop for products and make the payments in installments at zero interest.
Direct carrier billing: Also known as telecom billing, carrier billing, or simply DCB, this alternative payment method enables customers to purchase digital services and pay for in-app upgrades using their mobile devices such as smartphones, tablets, smart TVs, or payment-enabled smart wearables.
In an effort to reduce dependency on cash and move towards a digital economy, many governments in the region have initiated special programmes such as Buy Malaysian Products and ePenjana in Malaysia, Smart Nation and Digital Resilience Bonus in Singapore, and the National e-Payment Master Plan in Thailand, among others. With a number of digital payment methods crafted especially for local needs, the adoption of APMs is high in these nations.
[ymal]
APMs have now become mainstream
In some of the markets in the SEA region, alternative payment methods have become mainstream and consumers use them more than credit cards to make virtual payments. With smartphone usage rising exponentially in the region, both web- and mobile-based commerce have grown significantly as it enables customers to shop on-the-go using their mobile devices. When customers find a payment method they are accustomed to using, they are more likely to complete the purchase.
Merchants can use APMs to increase revenues
With the adoption of APMs in the SEA region increasing, merchants can use them to tap into a large section of consumers by offering APMs as a payment option and increase their revenues.
For instance, DCB not only enables customers to make payments using an internet-connected device but also allows them to have the payment added on to their postpaid billing cycle or deducted from their prepaid SIM load. As a result, even the unbanked and underbanked population can benefit from the convenience of enjoying digital services such as video and music streaming without necessarily needing traditional banking facilities or services.
Jay Floyd, Senior Principal Financial Crime Consultant at ACI Worldwide, offers Finance Monthly his thoughts on how banks can keep pace with payments innovation to better protect consumers.
Contactless and digital payments have without doubt grown in popularity during the last year, accelerated by the COVID-19 pandemic and consumers trying to avoid using cash to reduce the spread of the virus. As a consequence, the contactless limit in the UK has recently been increased to £100. While a welcome move for both consumers and the payments ecosystem, this increase comes with the inherent risk of more fraud.
It means a consumer with four debit cards on them now carries a minimum of £400 worth of payments without a PIN, rather than the current £180. This figure is actually likely to be higher, given issuers typically allow five consecutive transactions to be made before a PIN is requested. In this example, that could be up to £2,000 worth of payments. This means your leather wallet is now worth a lot more to a thief than before the limit rise.
As we face one of the worst economic challenges since the 2008 financial crash, banks need to make sure their fraud protection measures are up to scratch. And there needs to be greater consumer education about the risk of making a payment which many now view as a simple ‘tap and don’t think’ action.
Contactless paves road for payments innovation
Today’s consumers want access to fast and seamless payment experiences. In my view, contactless payments and the increase in limits will pave the way for greater payments innovation in the years to come.
For the broader payment landscape, it’s real-time payments that are leading the way for increased innovation and the growing adoption of different payment technologies - such as QR codes for payments and digital wallets.
Today’s consumers want access to fast and seamless payment experiences.
However, new payments methods and processes always present new opportunities for crime. The recent increase in real-time payment transactions in the UK has sparked an increase in fraudulent activity. UK Finance recently reported that in the first half of 2020, £207.8 million was lost to Authorised Push Payment fraud, with financial institutions only able to return £73.1 million of losses to victims.
The pandemic has further accelerated our move towards a more digital world. While the number of physical bank branches had been declining for some time, recent announcements highlight a rapid acceleration in the closure of bank branches since lockdown. During this process, criminals have adapted their methods of committing fraud, taking advantage of the rising use of contactless and real-time payments. With the adoption rate showing no signs of slowing down, banks need to adapt to the changing landscape and equip themselves with the right measures to protect customers from fraud.
Real-time fraud management solutions will increase fraud detection
Effective fraud prevention requires solutions that can detect all possible types of fraud, across all channels. Real-time payments for example track every step of the transaction processing lifecycle instantly. The good news for banks is this means fraud detection can be instant too.
Through real-time fraud management solutions, banks can increase fraud detection accuracy with advanced machine learning (ML) models to make better informed and faster decisions. It also ensures banks can be confident in remaining compliant with all fraud regulations - such as PSD2 and Anti Money Laundering directives - while delivering the ultimate customer experience.
Combining real-time payments data with ML, network intelligence and community fraud signals, fraud teams can detect fraud to improve overall fraud prevention rates at a much faster pace. Real-time fraud prevention solutions can perform millions of fraud checks within seconds and continuously learn from the data to become more accurate and effective over time.
[ymal]
Avoiding the financial crime of tomorrow
Fraud trends are moving fast and ultimately fraudsters will always find new ways to make money illegally. While banks have put in place numerous fraud prevention measures since the start of the pandemic, spending habits will continue to change, and they must be prepared to protect customers - and themselves - from the financial crime of tomorrow.
By taking advantage of the benefits of real-time payments technology, banks can put themselves in the best position to detect fraudulent activity and protect consumers and ultimately their reputation.
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.
Why the charity sector needs technology
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.
How the charity tech sector can evolve
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.
[ymal]
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.
The future for investors
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.
Ketan Parekh, Managing Director for Financial and Insurance Services at Fujitsu UK, comments on the emerging trends of the payments marketplace.
Digital wallets were already on the rise, but COVID-19 has accelerated this transformation. Consumers have been encouraged to limit contact by purchasing digitally, leading to changes such as an increase in the contactless spending limit.
And as digital and contactless payments become normalised, the move away from physical payments will happen seamlessly. It’s estimated that about a quarter of UK citizens will make at least one payment via a smartphone in 2023 – a figure that is only set to rise as time goes on. The UK may just be taking baby steps towards a digital-first future in banking.
A more streamlined payments service
People are more digitally savvy than ever. Therefore, slick payment experiences are not viewed as a luxury but are expected. And the speed and convenience that a digital wallet provides has always been an attractive proposition.
In fact, our research found that while security concerns were a key reason for consumers not adopting digital banking services, nearly a third (29%) of British consumers said they prioritise speed over security when it comes to completing transactions or transfers. Therefore, it is important that digital wallets are developed with security front-of-mind.
And many modern digital wallets already do provide good security. Biometric payment verification, used on most smartphone devices, is a much more secure way of paying than contactless on a credit or debit card.
While biometric credit cards are being developed by some banks, smartphone digital wallets provide ready-made fingerprint and facial recognition technology, which limits the risk of fraud and theft.
[ymal]
Who’s leading this change?
Organisations need to take note of the shift in consumer attitudes towards digital wallets if they want to be at the forefront of the transition – especially as there’s an increasing opaqueness in who is providing the payment services with many digital wallets. Take ApplePay: as a consumer you may see your bank’s name on the screen, but the Apple phone is, in fact, making the payment.
This allows these companies to benefit from the underlying customer data they receive, giving them a chance to control the payments marketplace.
Indeed, the rise in digital wallets has led to new, non-traditional players entering the finance industry. Apple has created its own credit card, while Facebook is still looking into developing a cryptocurrency and digital wallet on the platform – just two examples of how tech giants have entered the market.
Traditional banks should remain aware of this new competition. They command consumer trust – with over a third (36%) trusting them entirely but that does not make them invincible and new challengers will continue to emerge. And while new players don’t yet control the payments marketplace, there is certainly the potential for them to take the lead.
The market is about to become more convoluted than ever. And as wallets move increasingly digital, consumers may begin to go with the service that provides them with the best digital experience, over those they trust the most.
A digital-first future
Before COVID-19, banking was already transitioning from traditional payments to a digital-first means of spending. The pandemic has only accelerated that shift. And as consumers get more comfortable with spending via digital wallets, banks will need to consider how they are supporting the technology if they are to deliver the experiences that customers are demanding.
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.
Developing an inclusive digital payment system
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.
The importance of biometric technology to support digital inclusion
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.
[ymal]
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.
Providing cost-effective touch-free payment methods for all
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.
For many years now, an increasing percentage of consumers have transitioned to using debit cards rather than cash. Many projections state that of all global currency, only 8% of it is physical currency, which shows just how prevalent and important the likes of credit and debit cards are to global economies.
Credit and debit card use is much more widespread than before, with users citing added convenience and time saving as major reasons, yet in 2020, COVID-19 has provided another reason for both customers and businesses to embrace cashless trading. By walking into essentially any store on the high street, you will likely find signs banning every transaction other than contactless payments, which shows that COVID-19 is accelerating society towards this cashless revolution.
Since the pandemic, many stores have opted for a cashless policy, whilst cash machine withdrawals have fallen by 55%. Due to the uncertainty surrounding COVID-19 and a potential second wave, this trend looks set to continue. Below, Southern Finance's Tom Simpkins explores the pros and cons of a business going cashless during the COVID-19 crisis, as well as what advantages going cashless may have for everyone after COVID-19.
Saving Time and Money
Just as many adhered to the paperless revolution a decade ago, deciding to go completely cashless removes the need for expensive equipment that would have once been considered essential. Shops would have little to no need for tills, nor would the likes of safes be standard when all transactions would be handled electronically.
Deciding to go cashless may save time, money and effort in the long run, especially as it looks like it may be becoming the new standard. After all, the beginning of the UK’s lockdown in March saw the use of physical currency in stores drop by approximately 50%, and with lockdown measures fluctuating, the rest of the country is seeing little reason to return to relying on physical cash.
Deciding to go cashless may save time, money and effort in the long run, especially as it looks like it may be becoming the new standard.
‘Staying ahead of the curve’ is always a wise move, especially if you’re trying to get a one-up over your competition. By embracing the new standard in an ever-growing cashless society, you can adjust to the new challenges that it brings, such as a focus on convenient technology. An example of this would be to invest in contactless payment points, digital tablets, and other equipment that can make life easier for customers and workers in almost any industry, ranging from the restaurant industry to retail.
Increasing Business Efficiency
Cashless transactions aren’t just efficient due to saving time counting out physical currency, it also promotes smoother transactions for businesses in general. By primarily dealing with cashless transactions, businesses will have less stress handling physical currency, such as handling bank deposits or concern over germs. Proof of this latter point was seen in China during the early lockdown efforts, as thousands of banknotes were destroyed from fear of being contaminated.
Certain businesses and industries such as those that specialise in transportation have already seen a boost in efficiency, so much so that it feels like there’s no going back from cashless for them. A prime example of this would be buses, as before COVID-19 there were various pushes to encourage using contactless card payments as opposed to paying in cash, yet now that necessity demands contactless payments this push has become much more important.
As to be expected, cashless transactions are also much more convenient for customers, thanks in no small part to the abundance of digital wallets available. Along with credit and debit cards, most smartphones are capable of being connected to bank accounts and serving as digital cards; the likes of Apple Pay and Google Pay are already immensely popular. By being able to make a payment by placing a phone against a card reader, customers can make everyday transactions quicker than conventional methods, like fishing out a credit card.
[ymal]
Vulnerabilities with Banking Issues
Of course, no system is perfect, and some raise large concerns with a truly cashless society. From a reluctance to adapt to a cashless society to concerns with banking security, going completely cashless requires plenty of willing participants. While we’ll likely never see a day where physical currency is worthless, many are still confident in its staying power, along with the sense of security that physically holding currency provides.
Resistance to a cashless society isn’t new to the COVID-19 crisis, as the Access to Cash Review once called on the government and lawmakers to stop shops offering cashback, especially when the request was made without making a purchase. This continued push has persisted even to 2020, with the government’s budget in March detailing further protection for those that want reliable access to cash. Just as some don’t wish for a cashless society, many still rely on cash and face-to-face banking.
There’s also the age-old problem of disclosing too much information, as many fear that cashless transactions risk their banking information being stolen. Experts in the financial industry are attempting to address this issue, such as fintechs, who strive to assist electronic payments without the use of bank accounts. The truth is that when using cash, you don’t often grant the opportunity to access your banking details, and even the possibility of that happening is enough to put many people off the notion of a cashless society.
Is the Future Cashless?
While arguments can be made both in favour of and against a truly cashless society, COVID=19 has made it clear that many businesses can either thrive from it or need to go cashless to survive. The amount we rely on cashless transactions, as well as how common they become, may depend on how quickly we can handle and eliminate COVID-19, yet it’s becoming likelier by the day that the pandemic's impact will be long-lasting, if not felt forever.
Whether this extends to being a completely cashless society or not is yet to be seen, but for now it’s clear that during a pandemic and the lockdown going cashless is a safe move, no matter what industry it’s utilised in.
So, what does Wirecard’s collapse mean for the future of app-based business banking? Is it all bad news? First, let’s look at a bit of the background on app-based business banking to put the collapse of Wirecard into some kind of perspective.
The Background
During the past five years or so, a host of digital banks have entered the market to challenge the traditional high street players. Indeed, companies have never had so much choice when it comes to choosing a business bank account.
Many of these challenger banks do not have a standard banking licence but instead, operate under the terms of an e-money licence. E-money licences for Payment Services and Electronic Money companies are authorised and regulated by the Financial Conduct Authority (FCA) but represent a more straightforward – and significantly cheaper – form of licensing than a full banking licence.
E-money licences are more restricted than full banking licences – the chief limitation being that challenger banks with only an e-money licence may not hold customer deposits on their own balance sheets but must do so in a separate trust account, typically maintained by a fully authorised and licensed bank.
During the past five years or so, a host of digital banks have entered the market to challenge the traditional high street players.
The Wirecard Scandal
Wirecard was founded in 1999 with headquarters in Munich, Germany, and a subsidiary in the UK, running its business as a digital payment services provider. According to an item in the New York Times on 19 June 2020, it grew quickly, attracting hundreds of thousands of leading merchants expanding their contactless payments businesses – global companies such as Visa, Google Pay and Apple Pay, together with fintech start-ups such as Curve, Pockit, Revolut, and Soldo.
As a payment services provider, Wirecard operations are conducted in Europe under the terms of an e-money licence, rather than full banking licence, holding customer deposits in separate trust accounts.
The Wirecard scandal was sparked by news that the German parent – Wirecard AG – was unable to locate €1.9 billion of customer deposits held in those trust accounts. In response to the scandal, a plummeting share price, and no apparent means of tracing and recovering the missing billions, Wirecard AG filed for insolvency.
Reverberations
In the immediate aftermath of the scandal breaking, the FCA temporarily suspended the UK arm of the company’s operations, Wirecard Card Solutions – also known simply as WCS. Straight away, therefore, scores of those fintechs in this country which have relied on Wirecard’s payments services had to suspend the accounts of millions of individuals and small businesses in the UK.
[ymal]
Looking to the longer-term – rather than the immediate aftermath – however, it must be remembered that the German Wirecard AG and the UK’s Wirecard Card Solutions are quite separate and independent companies. As the website Sifted noted in its story on 26 June, the UK arm of the group is sufficiently independent to have its own board, regulatory regime, and accounting standards. Neither is it financially dependent on its German-based namesake – but recorded a pre-tax profit of well over £2 million in 2018.
What Next?
While Wirecard accounts were only frozen for a few days and business deposits were safe, the impact on consumer confidence is likely to be longer-lasting. Deposits at institutions that hold a full banking licence are protected by the Financial Services Compensation Scheme (FSCS) up to an amount of £85,000, so expect to see businesses seek the safety of fully licenced banks that provide FSCS protection. In fact, Barclays has revealed that it's already seen an increase in deposits since news of the Wirecard scandal broke.
A number of app-based digital banks, such as Revolut and Cashplus, had already announced that they were applying for full banking licenses before Wirecard's collapse. As the sector matures, expect more to follow.
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.
The Digital Dilemma
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.
Time to Ditch the Paper
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.
[ymal]
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.
Seeking Digital Alternatives to Cash
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.
COVID-19 has caused an overnight revolution in commerce and customer behaviour. With so many storefronts and outdoor venues remaining closed and the threat of infection persisting, customers are filling the gap with digital subscriptions and e-commerce.
However, as consumers spend record amounts on digital services and mobile apps, it’s important for sellers to be prepared for a wave of payment disputes and chargebacks. Many businesses, especially smaller merchants, are fighting for survival. Although they’re supported by the Government’s Job Retention Schemes and small business grants, cashflow and liquidity issues will pose an existential crisis for many. Gabe McGloin, Head of International Sales and Merchant Development at Verifi, shares his thoughts on how to counter the issue with Finance Monthly.
Addressing the chargeback crisis requires coordinated effort among the three main parties in the dispute: the merchant, the issuer, and the customer. Clearer communication from sellers to customers and more collaboration between issuers and merchants can pre-empt chargebacks and eliminate the burden of a formal dispute process.
A New Chargeback Culture
As coronavirus has impacted the wider economy, plans have been changed, events cancelled, and destinations closed indefinitely. This has brought about a sudden and significant increase in disputes between customers and sellers. Yet, companies also need to beware the dangers of delayed chargebacks for products and services already sold and ‘accounted for’.
With up to 120 days to claim chargebacks on credit card purchases, consumers have rushed to cancel experiences and gifts purchased as last year’s Christmas presents. Travel and hospitality have been hit heavily, as have subscription-based businesses deemed non-essential – such as gyms.
As coronavirus has impacted the wider economy, plans have been changed, events cancelled, and destinations closed indefinitely.
There’s also the very real possibility of a second wave of chargebacks surfacing further down the line. Certain sectors, including online entertainment and gaming, have experienced a considerable boost during the early months of lockdown, but this uptick isn’t chargeback-proof. Typically, an increase in transactions is followed by an increase in disputes. Even sectors performing strongly now could face a ‘chargebacklash’ a few months from now as consumers reconsider purchases made during lockdown.
The foreseeable challenge for merchants could be a lack of resources to combat the spike in disputes. The necessary personnel to manage transaction inquiries, credits, and representments may not be available due to working from home, furlough, or layoff. You can also never be certain when the wave will hit, only compounding the issue.
Proactive, Preventative Customer Service
Once a dispute has led to a chargeback, businesses have limited freedom of action. They must comply, completing all processes and admin required. The best way to manage disputes, therefore, is to prevent them from escalating. However, this must never be at the cost of the customer relationship.
To maintain positive customer relations under these circumstances, communication is key. Companies should proactively reach out to customers to provide alternatives to chargebacks, such as extending return deadlines and the validity of vouchers to provide consumers with other options. As always, ensure clarity in transaction receipts, terms and conditions, and all correspondence. This will limit disputes caused by customer confusion.
Regular, but not bothersome, education and explanation are also important. Customers often don’t realise the effect their chargeback claims could have on their favourite merchants. Appealing to their goodwill and patience can help to flatten the chargeback curve.
Even after a chargeback, merchants should continue to positively engage with the customer. It’s important that the seller pursue the customer’s best interests, even when they’re unhappy with a product or service. This includes carrying out their role in returning the funds to a customer’s account. A chargeback isn’t the end of a customer relationship and, in the current climate, sellers need to show that they care for their customers and their business.
[ymal]
Pick Your Battles Wisely
Remaining open, transparent, and proactive with customers will boost loyalty and help deescalate potential disputes. However, many chargeback disputes cannot be avoided or mitigated against. To ease the logistical and administrative burden, sellers need to pick their battles. It takes time to respond to disputes. Depending on the volume of disputes, sellers must decide which ones are worth challenging and which ones are easier to just credit.
This can be aided by greater information-sharing between sellers and issuers. The exchange of customer support contact information and transaction data, helps merchants decide which disputes are worth pursuing. They can then move beyond basic considerations like transaction sizes to more effectively deploy their resources. As a result, businesses benefit from reduced investments in manual processes.
Businesses should also provide the capability for customers to track the progress of their dispute. When the customer understands where they are in the resolution process, they are less likely to make unnecessary requests of customer service. Indeed, the more calls a customer has to make the greater the chance they will take their business elsewhere in the future.
It remains to be seen what changes to the payments ecosystem from COVID-19 will be permanent. However, merchants can be certain that continued economic uncertainty and contactless commerce will stretch their dispute resolution capabilities to the limit. But there is no better time to introduce the customer-first processes and payment protection systems needed to manage disputes, minimise losses, and maintain customer loyalty.
Not only will it make you more efficient once life returns to normal, but it will also help to save you money which can be used to reinvest in staff and other areas of your business. These are some of the reasons why COVID-19 is the perfect opportunity to reorganise your finances and the ways in which you can do so.
Work with specialist accountants
When dealing with finances, specialists can offer targeted advice that offers greater results. But particularly during these uncertain times, gaining professional advice and guidance is key, so now is a great time to work with accountants or financial specialists who really understand the nuances of your industry.
“Once you have your plan in place, you need to make sure that it is financially viable, to make sure that you are realising a profit,” says OS Accounting, a chartered accountancy firm that specialises in working with SMEs. “Any banking or financing house will expect to see realistic and well-considered financial budgets and forecasts and translating an idea into facts and figures needs experience."
Make it easier for customers to pay
No sale is complete without your customers paying you for your service or product. But with an increased need for contactless payments in light of the pandemic, it’s vital that businesses adopt and embrace cash-free payment options.
From PayPal to Amazon Pay and Apple Pay, there are various options to choose from that will make it easier for your customers to pay you to keep your business taking an income.
With an increased need for contactless payments in light of the pandemic, it’s vital that businesses adopt and embrace cash-free payment options.
Go digital
It’s much easier to keep track of all of your financial documents if the business is digitised. While lockdown forces us all to adopt more downtime, there’s time to make the switch to a more digital way of working.
Not only does it make accessing these documents easier when working remotely, but it also provides a safer form of storage as leaving hard copies in filing cabinets makes it easy for data to be stolen. There are many online tools and software options that will help you digitise your business, particularly where finances are concerned. However, make sure that all of your documents are backed up with a cloud-based service so that you can be sure they are secure.
Do the things you’ve been putting off
Now is the time to make use of more time and do the things you’ve intended to do for months but haven’t had the time. Use the lockdown to take stock of how your business is operating and make the necessary changes – this might include separating personal and business finances more efficiently by opening a separate bank account or tracking and auditing your expenses.
Whatever financial tasks that have been sitting on your to-do list for a while can now be ticked off to make the best use of your downtime.
Have regular finance meetings
COVID-19 offers a chance for a fresh start in numerous ways, but particularly where processes and systems are concerned, so get into new habits that will help streamline your business processes for the future. One way to do this is to hold regular weekly finance meetings so you can regularly keep track of income, outgoings and expenses.
[ymal]
Money is tight for some SMEs and may be fluctuating more than usual during the pandemic, so it’s a great time to gain an understanding of where your money is going. By having this knowledge, you’ll be able to avoid the liabilities that can bring many businesses down in order to keep it running productively and profitably.
Final thoughts
Businesses across a host of industries have found themselves in unchartered territory since the COVID-19 pandemic began, but it has hit SMEs harder in many cases. By making use of this time to reorganise the financial aspects of your business, you can hit the ground running once life returns to normal and ensure that your business continues to turn a profit throughout.
Moorwand and K Wearables announced on Monday their intention to give away 300 “K Rings” – contactless pay providers in the form of a ring – to NHS staff in a display of gratitude for their work in combating the COVID-19 pandemic.
The rings are designed to facilitate contactless payment by having their wearers imitate a knocking gesture over a card reader, which can be used to trigger transactions up to £45 in size.
By removing the need to touch a surface, contactless devices present a safer payment alternative for essential workers amid a global health crisis.
Moorwand’s chief commercial officer, Luc Gueriane, commented on the giveaway: “We are in a time where community is at the forefront of everything we do. Although we may be apart, we as a nation have never felt more connected, so it is vital that communities and businesses come together to support health workers in any way they can.”
“Partnering with K Wearables to provide an easy payment solution to 300 NHS workers was instantly an initiative we knew we wanted to be part of.”
“K Wearables offered 100 free contactless payment rings to NHS frontline heroes, so the team could show its gratitude and we were overwhelmed with the immediately positive response”, added Philip Campbell, founder of K Wearables.
“We were delighted when our new issuer, Moorwand, generously offered to help extend this to 300 rings for NHS workers. It's great to be working with likeminded partners and we hope the recipients enjoy using K Ring as much as we all do.”
Sarah Taylor is a Content Author at High Speed Training, the specialist online training provider to the hospitality sector. She advises cafes, pubs and restaurants on how they can adapt their business for delivery services in response to Government guidelines in order to stay profitable:
Following the Government’s call to close cafes, pubs and restaurants, many establishments have taken the initiative to temporarily change their business models in order to keep a source of revenue and operate solely as a ‘takeaway’ or delivery service. Customers are keen to show their support, as demonstrated by the widespread use of #supportlocal on social media. Meltwater data tells us that on the day businesses closed their doors to dine-in customers, the hashtag was mentioned 21,700 times in 24 hours.
In the first week of business since shutdown measures were introduced, we collaborated with market research company OnePoll to conduct a nationally representative survey of more than 2,000 people in the UK. The nationally representative survey highlighted continued widespread support and demand for local hospitality venues to serve their communities during lockdown – 83% of people would order food and drink to enjoy at home. Businesses therefore have the opportunity to continue generating an income off the back of customers’ new found appetite for supporting local establishments.
While the new legislation allowing takeaway and delivery services, as well as the online public support, represents a much-needed lifeline for hospitality businesses, it brings with it new challenges and a steep learning curve to ensure operations are run effectively, safely and are still profitable. New food hygiene procedures and contactless delivery methods are two of the many considerations that managers across the UK are grappling with.
Businesses therefore have the opportunity to continue generating an income off the back of customers’ new found appetite for supporting local establishments.
To help guide pubs, cafes and restaurants as they create new survival strategies, we asked the nation what would make them more likely to order a takeaway or delivery service from their ‘local’. Paying online and the promise of high food hygiene standards were the two most popular criteria, both voted for by 42% of Brits, providing a useful indicator for the information businesses should be promoting in order to continue generating revenue during these turbulent times. ‘Contactless’ delivery with no face-to-face contact was third (28%).
Recognising the demands on supermarkets currently, many people also pointed to a preference to avoid stores where possible (25%), or a lack of available delivery slots (22%), which provides a solid rationale for businesses selling groceries direct to the public such as freshly made pasta and sauces to tap into a new pool of potential customers.
From a marketing perspective, a quarter of people (25%) indicated that they would like to be made aware of healthy meal options. Online interaction whether via websites or social media channels was revealed to be the least likely way to prompt an order and increase profitability, for example hosting virtual cooking classes.
Looking internally, implementing new operations at the same time as meeting a surge in demand for delivery can be extremely difficult for businesses to manage. Wherever possible, businesses should try to develop short, medium and long-term contingency plans that factor in processes for keeping standards high, timely order fulfilment, balancing good stock levels of fresh ingredients and increase income as a result.
[ymal]
One of the biggest challenges will be choosing how to fulfil orders. Look at the benefits and limitations for delivering food direct to customers or signing up to a delivery provider if within a catchment area. The likes of Deliveroo and Uber Eats have recently published guidelines for restaurants as they see sign-ups in urban areas soar. Those outside of their catchment areas or that prefer to go solo may prefer to utilise software from the likes of Access Hospitality. Whichever route is chosen, the method of serving customers needs to be in line with profit margins in place, adhere to the legal requirements for food delivery services and work efficiently for both the business and consumer.
As well as choosing the most convenient delivery model, businesses should also review and condense their menu to streamline their service and adjust opening hours to target peak time periods in order to guarantee profitability. These are disruptive and defining times for the hospitality sector, and businesses need to be reacting quickly to the constantly evolving situation. Fully grasping how and why Brits are changing their eating habits, as well as carefully reviewing how best to modify their offering are just some of the simple steps businesses need to be taking into account in order to keep up with the change in demand.
