The stage is set for digital payments – are we ready?

The COVID-19 pandemic has caused a profound and dramatic shift towards a digital society. All aspects of life in the UK are becoming increasingly digital, from purchasing our daily Latte, to accessing music or interacting with government.

The digital shift was already happening, but it is absolutely clear that the pandemic has accelerated the transformation of how we pay for the goods and services we consume.

No longer are ‘payments’ and ‘cash’ languishing in the backwater of hygiene factors.

The advance of digital payments and the decline in cash use are absolute and the digital payment habits we formed pre-pandemic are now centre stage and will, I am convinced, be proven to be ‘sticky’ in a post-pandemic digital society.

This view is shared by Worldpay who, in a recent publication reported that, in 2020 from Argentina to Vietnam alternative payments were catapulted years ahead of projections – resulting in a global drop in the use of cash at Point of Sale from 30% to 20% in just one year. Furthermore, Worldpay suggest that by 2024 the use of cash at Point of Sale will be approaching 10%.

However, we must be careful not to throw the baby out with the bathwater. It is clear that, for various reasons, a number of people in our society continue to rely, or perhaps want to rely, on cash.

Against this backdrop, the accelerated decline in the use of cash is beginning to expose issues with the ‘supply of’ and ‘access to’ cash.

It is important that the final furlong of the UK’s digital payments transformation must be led by the consumer.

Mr Balz from the German Bundesbank appears to share this view:

“Consumers should be able to decide for themselves how they pay. For us, it is important to have a broad mix of options and that efficient methods for payment are available.”

At the heart of this challenge is the premise that preserving cash for cash sake will ultimately only serve to leave people behind.

The pre-pandemic shift to digital payments has been catapulted to centre stage by COVID-19, as Act Two unfolds the UK’s path to a truly accessible, inclusive and equitable digital (cashless) payments society must become a reality.

With the stage set for Act Two, the payments industry needs to adopt a proactive role.

The cry from the audience is twofold – firstly, not to preserve cash just for cash sake and secondly, not to leave people behind in an analogue payments world.

The response from those on the stage should be to:

  • Ensure that all digital payment solutions are accessible, inclusive and equitable for all in society.
  • Ensure that the UK’s most vulnerable people have access to a bank account and are not disadvantaged in making payments and getting paid.
  • Tackle, in tandem, the issues of ‘access to cash’ (i.e. the viability and sustainability of the UK’s cash supply network) and the ‘acceptability of cash’ (i.e. the ability of consumers to ‘spend’ physical cash at the point of sale).
  • Drive the debate on the future role of a Central Bank Digital Currency for the UK – an ‘e-pound’.
  • Ensure a holistic approach to the provision of retail payment schemes and the dependency on Open Banking / Open Payments / Open Finance / Open Everything.

Our experience in the UK, supported by global trends, is that digital payments are a hygiene factor of a digital society.

There is a famous small tale within the 1865 novel ‘Hans Brinker or The Silver Skates’ where a Dutch boy saves his country by putting his finger in a leaking sea wall. The boy stays there all night, in spite of the cold, until the villagers find him and repair the wall. The preservation of cash for cash sake is a short term solution, like blocking a leak in flood defences with your finger: the demise of cash is inevitable and requires accessible, inclusive and equitable digital payment solutions for everyone. 

The pandemic has provided the catalyst for significant behavioural change, this must be driven with a combination of collective and competitve innovation over the next decade.

When we arrive in 2030, how much better will it be for all in society if the shift to digital payments has become a reality due to the development of innovative and effective digital solutions that have become the natural choice because they are regarded as accessible, efficient, friction free and convenient.

And, of course, we must learn from the painful experience of ‘the end of the cheque that never was‘ decision …..

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