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Our expert steering group’s views on overcoming the barriers to cashless

Last week we hosted our second roundtable on the subject of a cashless society. This time, we invited some expert speakers, including Liz Barclay of the Financial Inclusion Commission, Michael Rothe of Flow, a fintech providing liquidity to emerging markets, and Bailey Kursar of Tuoco, a start-up working on money and mental health issues.

They joined our Steering Group of senior banking and financial services industry executives to discuss the barriers to delivering a cashless society, particularly for those who are disadvantaged or unbanked.

Michael Rothe set the scene for the discussion, with a quick overview of the global picture, with an emphasis on emerging markets. He stated that there are 1.7bn adults globally who are ‘totally unbanked’ according to the World Bank, but that two-thirds have a mobile phone, so the mobile offers the ability to bank the unbanked. In Africa, M-Pesa has long been the service for doing this, where 1bn have a mobile money account.

M-Pesa depends on people who are paid in cash to transfer to money to mobile – there are 300m “informal enterprises” in emerging markets, employing 2bn people who were previously unable to get credit. Michael’s business Flow helps to address liquidity issues in the African market.

Norman Frankel, Regional Managing Director of Stanchion Payment Solutions, also highlighted the Middle East and Central Eastern Europe as key areas for the development of cashless initiatives. Poland and Romania were identified as markets where the use and adoption of technology and contactless payments is high, and are so seeing a significant decrease in the use or reliance on cash post COVID-19.

The first question we asked our panel was “what is the biggest barrier to adoption of cashless technology?” The key barriers suggested by our panel were:

  • Trust – That consumers trust the technology or services that they use.
  • Privacy – People like the anonymity of cash and the privacy it offers.
  • Resilience – Consumers and businesses need to know that any technology that facilitates cashless payment will be reliable, and outages won’t lead to loss of revenue or access to funds.
  • Education – Awareness and understanding of the services and options available to people, and the benefits of these in comparison to alternatives. Liz Barclay of the Financial Inclusion Commission cited research by Business Debt Line showing that 53% of small businesses don’t use online banking at all, and 18% feel they lack the necessary skills to take advantage of it.
  • Hidden costs of cash – Whilst payments may come with a clear % cost which might initially discourage merchants, the cost of cash payments is less easy to see for small businesses – time spent cashing-up, lost cash because of error of theft by staff, and the cost of transporting cash to and from banks.

Bailey Kursar of Tuoco has done extensive research in this area, particularly with vulnerable and under-banked consumers, and also cited control, digital capability and digital literacy, and tourism as other reasons for a preference for cash. She discussed the importance of inclusive design, having previously worked with the Money Advice Trust to develop services specifically to help meet the needs of previously under-served groups.

We were also joined by Gus Tomlinson, the General Manager, Identity Fraud, of GBG Plc, who spoke about the extensive work and expertise of GBG in the area of identity verification and management. She discussed the importance of everyone having universal access, and a right, to identity, given that driving licenses or passports aren’t universally adopted. For example, there are international markets where universal identity programs have been successfully delivered. Gus compared Denmark’s NEM ID, which has great adoption and is trusted, with the UK’s failed digital identity scheme. Notably, Denmark’s NEM ID didn’t succeed at the first attempt, but the Government and telecommunications providers came together to make an eID solution work.

There were lots of international and local market examples that were cited by members of the steering group where countries, companies or councils have tackled some of these issues. Kristian T. Sørensen, Partner at Norfico, shared how Denmark made its journey to a predominantly cashless society. He cited a strong digital agenda for government and the private sector alike, and a commitment to cashless which ran across the country. He cited the building of trust between government and private sector, and the halo effect that had on the wider consumer audience, as a key step on the path to cashless.

Michael Rothe of Flow cited concrete examples of regulatory approaches which helped the move to cashless in emerging markets. For accounts with transaction values of less than $100, there is no Know Your Customer (KYC) process in some African markets. The steps that the Indian Government has taken in implementing digital government and biometric authentication were flagged as another interesting example to learn from.

The role of governments was a recurring theme. Fintech Adviser Chris Gledhill said there are concerns that government intervention could extend too far, highlighting examples from Australia and China where governments have limited what consumers can spend their money on and how they do it. This was echoed by GBG’s Gus Thomlinson who cited Shoshana Zuboff’s “The Age of Surveillance Capitalism” as useful background reading for anyone unaware with the full extent of the Chinese Government’s intervention in its citizens’ daily lives.

So, given these barriers, what can we all do to progress to an inclusive, cashless future?

First, the benefits to doing so were made clear by the panel. Improved access to credit because of a clear online “financial life”, increased consumer choice, and removing the hidden “poverty premium” of cash were all raised, alongside the many other benefits from minimising the “cost of cash”.

Inclusive design should be a key concern, according to both Liz Barclay and Bailey Kursar. Fintechs and established players need to work together to build and create truly interoperable services which help those with a lower level of digital literacy or access to technology. Brad Hyett, CEO of phos, who chaired the debate, highlighted a recent example from Virgin Money. They found that some micro-businesses only accessed their online banking services when they were able to use free (but less secure) public Wi-Fi because they couldn’t afford data for their devices. a service innovation which might benefit a number of different stakeholders in this use case would be for software POS to include a provision for data from a device manufacturer or telecommunications company.

Another way to overcome the barriers to a cashless society, said Michael Rothe, is a mind-set change. We should see financial inclusion as a business opportunity. There are over 33m merchants across Europe who still only accept cash, and don’t have access to a POS terminal. That is a huge addressable market, and one that phos is committed to serving.

Education and awareness must not be forgotten either. Initiatives like Virgin Money’s M Account, which is more feature-packed than other similar “basic” bank accounts, or Barclays’ Digital Eagles programme are examples of established financial services providers investing in addressing education and awareness of the benefits of online banking and digital payments for consumers, as well as making their own products more accessible.

We would like to thank everyone who took part in another great phos steering group event – we probably could have continued for at least another hour! Our panellists and wider group members gave us lots of food for thought, and actionable insights on what we need to do to help bring about a cashless future which benefits everyone.

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