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Contactless behaviours in a COVID-19 world
Contactless behaviours have been integral to reducing the infection rate of COVID-19, and are associated with the decline in the number of people using notes and coins to purchase products. Instead, many have opted for a more secure method: their bank card and in particular, contactless payments.
Last year, the Access to Cash Review predicted that a cashless society would emerge in the UK within 10 to 15 years. However, the pandemic has now roughly halved this time. As the world stayed at home, the demand for cash unsurprisingly plummeted. With 60% fewer transactions at UK cash machines in April, the nation has steadily become less cash-reliant, with banknotes making up 15.7% of transactions in 2018. In 2019, UK Finance reported that 7.4 million Britons are already living “an almost cashless life”, using cash once a month at the most.
Prior to the pandemic, cashless payments were ‘trendy’ and cash has increasingly not been an accepted form of payment on public transport and a number of ‘cashless’ food establishments. In a COVID-19 world, going cashless is now a necessity; almost half (45%) of consumers have said that they are much less likely to use cash after the pandemic. This is predominantly due to the infectious nature of COVID-19 and the ease of transmission from surfaces to human contact.
Through my work as the EMEA Head of Commercial Prepaid Card Technology at a major bank and Global Head of Payments and Cash Management at a large fintech, I understand the growing debate over cashless societies. In my current role at Mobiquity, we worked with Wawa – a regional chain of convenience stores and petrol stations in the US – to create the ‘Order Ahead’ app. Wawa wanted a way to improve the consumer experience by making purchases quicker and more efficient so that customers could spend less time in-store. We supported the execution of this project by enabling customers to order ahead and pay for their fast food, aligning with the market need for contactless and cashless payments.
Go real-time to go cashless
Despite the speed of adoption, there is a lot of work to be done before the world is ready to be cashless. To enable a shift to a cashless world, banks would need to get closer to genuine real-time payments – facilitated through harnessing the benefits of ‘Open Banking’ and the Internet of Things (IoT).
However, emerging technologies are a double-edged sword: with real-time payments comes real-time fraud. As technology becomes more advanced, so do cybercriminals and banks must work to ensure they have the right security measures in place – taking a human-centric approach to implementing a robust security and regulatory compliance framework.
Real-time payments would offer a host of benefits for banks and financial institutions, especially with liquidity as banks would no longer have to keep large cash reserves. Instead, real-time would enable them to forecast and manage their cash more tightly and easily.
Going real-time would also present a huge opportunity: availability and access to valuable market data. The daily coffee rush at PRET, Costa or Starbucks alone would offer a myriad of data, if consumers used only card payments, to explore trends in consumption patterns. For example, which coffee is the most popular? When is the shop the busiest? Which day do they sell the most or least coffee?
The more data you have, the smarter the decisions you can make. Predictive trends and analytics on coffee consumption could be mapped out and banks could sell this ‘alternative data’ to hedge funds, investors and market analysts alike.
Moving together, as a society
With the various digital technologies available, it would be safe to say that the average person will be able to adjust to a cashless life.
However, as with most significant changes to society, the vulnerable groups and people on the ‘peripheries’ will be at risk. It is estimated that currently over 8 million adults in the UK – 17% of the population – would struggle to cope in a cashless society; 1.3 million of which still do not have access to a bank account.
As such, there has been pushback to going cashless, especially in rural communities. These communities are among the slowest to adopt digital technologies, often due to limited broadband access. They also have a significant proportion of lower-income, older and more vulnerable users, who still prefer or need to use cash.
Another major friction to going cashless is the identity management of vulnerable people. Instead of working within the existing framework of IDs and passports – which homeless and older people often do not possess – we need to innovate new solutions to create inclusive digital banking.
At the same time, among a demographic of millennials, there are some concerns over cashless societies becoming a new type of surveillance state. To overcome these concerns, it is vital that banks and financial services companies demonstrate transparency with their customers about how their data is being used and managed. Many consumers are in favour of going cashless under the proviso that they can make non-traceable payments. We must therefore consider the role of privacy consent across a variety of societal demographics to get everyone on board.
A cashless society doesn’t need to be something that we fear. We need to work together to prepare for the changes to come and prevent anyone from becoming left behind. The banking community needs to come together to solve these frictions by drawing on research, creative and analytical skills with a deep understanding of the entire customer journey – using the latest technology combined with a human touch point to deliver services that cater for these at-risk and vulnerable communities.
Of course, much needs to be done across all sectors to establish a functioning infrastructure for a cashless society, such as the provision of broadband or 5G, to facilitate digital banking. Greater steps would also need to be taken to prevent fraud which would increase exponentially as we go cashless.
The first step that we all need to take is to ensure that those most at risk of falling behind are supported. Introducing a nationwide education programme about digital banking would ‘upskill’ those affected, by providing information on digital technology and online banking as well as how to use them safely, such as budgeting and financial planning.
If created by a consortium of banks and industry experts, this would lead to economies of scale, making it more efficient to implement. By communicating to the ‘paper generation’ in their own language, we can ensure that all parts of society are prepared for the move towards, and embrace the benefits of, a cashless society.
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