This year, cashless payments overtook cash payments for the first time in the UK. Globally, there are now over 100 million active mobile money users, a figure that has more than tripled over just two years. The revolution in payments technologies has arrived...
Apple Pay, Apple’s much publicised mobile payments technology, launched last year, with Samsung due to launch a competitor service imminently. A host of competitors to traditional banks have sprung up, offering faster, cheaper, or simpler payment methods and options, and new financial software is coming onto the market constantly.
These technologies are responding to consumer demands for convenience and ease of use, as well as the growth of ecommerce. Harry Clarke, founder of RingGo, has built a thriving business out of this. Ten years ago, parking in the UK was a cash only business. Parking meters and machines required small change. None to hand? Tough luck.
RingGo is a mobile payment service for parking, now boasting 7.35 million members in the UK, who were willing to adopt new technology to avoid the inconvenience. But it hasn’t been an easy journey. Technology can’t leapfrog existing bureaucracies and vested interests, which slow things down. Local authorities, for example, are wedded to old ways of doing things, and so slow to remove existing machinery.
UK companies like RingGo benefit from high card usage, making the move to mobile banking easier, but it’s not the same everywhere. In Germany 80 per cent of transactions are still cash, whilst in Poland, over 40 per cent of internet purchases are paid by cash on delivery. It’s not just about technology, but cultures and expectations, so what works in one place, might not work elsewhere.
Despite this, payment technologies can help businesses operating internationally to simplify complex multi-currency transactions. CT Business Travel, a corporate travel company, have invested heavily in A.I.D.A., a tool generating a unique, single-use MasterCard number for each transaction. Using this, they’ve been able to automate airline and hotel payments across multiple currencies, delivering substantial savings and boosting security.
These cases show clear benefits – lower costs and simpler systems are good for consumers, while reducing a company’s likelihood of losing a sale. Amazon’s patented ‘One Click’ payment system is a great example of this. Although the company keeps the exact figures close to its chest, it’s been estimated it’s made Amazon billions in additional sales conversions.
Automation can also be a valuable monitoring tool. Nathan Fulwood, a director at Tayburn, which helps businesses to improve their customer experience, claims that one of the most exciting aspects about new payments approaches is the opportunity to close the marketing loop, so revenue generation can be attributed to specific sources – better customer knowledge equals better service and more customers.
So what’s not to love? Mainly, it’s the risk of the unknown. Despite a focus on security, problems do frequently occur in early stage technologies. Apple Pay was supposed to be the most secure payment platform around, thanks to their biometric technology. But fraudsters almost immediately began using Apple Pay, loading up stolen card details, and so circumventing the need for an actual card or signature. While the technology’s performing as it should, this kind of low tech abuse of the service simply wasn’t considered.
Or how about new currencies, like Bitcoin, dubbed one of the most important innovations of our time? Bitcoin’s block chain technology enables decentralised storage, meaning it’s not controlled by governments or financial organisations. All transactions are recorded on the undeletable chain, making fraud extremely difficult. Yet transactions take place through exchanges, which haven’t always met the same standards.
Famously, Mt. Gox, a major Bitcoin exchange, was hacked over several years, with hackers skimming bitcoins worth hundreds of millions of dollars. Soon after the news went public, the exchange folded, with customers facing huge losses. And while Bitcoin continues (with a now-tarnished reputation), many other digital currencies have failed entirely.
Mt. Gox’s customers were left out of pocket because financial regulators in Japan, where their HQ is based, refused to intervene in digital currency issues. While fraud is a fact of life, the protection you have when trading in pounds or dollars, regulated and backed by national governments, just isn’t there.
Ultimately, most people stick with what they know. Cash is still surprisingly dominant, despite the growth in ecommerce, making up 40 per cent of US transactions and 48 per cent in the UK. And even in B2B transactions, digital payments are much less important than you might expect – in the US, 60 per cent of these are made by cheque. This underlines that, even amongst tech-savvy populations, sometimes people prefer the old-fashioned ways.
By 2020, it’s been estimated that up to 20 per cent of transactions in Europe might be alternative payments –
e-wallets, mobile payments, etc. But that’s a top end estimate, and still leaves 80 per cent of the market untouched. Across Europe, cultural and organisational differences in dealing with money means there’s huge variation.
While this revolution in new technologies is here to stay, consider the stakes carefully. Remember, even well-established alternatives carry risks. Business users of PayPal, for example, have reported the company’s punitive attitude to sellers when something goes wrong, freezing accounts and refusing to engage in dialogue, sometimes to catastrophic effect.
Whatever option you go for, the provider is as important as the technology. Technology is useless without proper implementation and on-going support. Equally, it needs to fit with your model. Companies who’ve made technology work for them have targeted their use effectively.
Jumping on the bandwagon is not always a bad idea. But it’s how well you do it that counts.