We were delighted to get a lot of good feedback on Neil’s previous blog on Mondex Memories and CBDCs and its relevance to CBDCs and thought it would be interesting to respond to some of the more interesting – and difficult – points raised in a follow-up blog. Before addressing those I wanted to put the Mondex program into some historical context. They were very different days – we didn’t have an intranet until 1996, let alone internet access. There were no SDKs – although actually we did build a precursor to one of those – or APIs and the idea of remote payments was still in its infancy (although we did that too).
For most of us 2020 isn’t going to be a year to linger fondly in the memory. It’s been a monumental slog in the face of grim news and little cheer but from a payments perspective we’ve seen an unsurprising surge in interest in all things payment related.
People have moved from cash to electronic payments – contactless transaction numbers have soared. People moved from face to face purchases to online. And, there’s been a ton of stress on payment systems as people have demanded refunds for holidays and flights they couldn’t take due to various travel restrictions. It’s been a year like never before.
We can expect this to be exacerbated over what will likely be an extended Black Friday and Christmas holiday shopping period. Online payments are expected to grow even though economies are in recession. For us in Europe it’s the last hurrah before PSD2 requirements on strong customer authentication come into force on January 1st. Merchants and payment companies will be well staffed on News Year Eve as they wait and see how the systems will hold up, and what sort of abandonment figures they’ll see as puzzled customers are presented with confusing authentication screens. We can probably expect a flood of concerned calls about phishing which are actually Strong Customer Authentication requests.
This is the third of three blogs about technologies to support contact-free use of public transport.
The radio again – I hear that the Transport Minister for England had just reported that there have been fewer than 400 fines for people failed to wear face covering on public transport. More than 115,000 travellers have been stopped and reminded that face coverings are mandatory, and 9,500 people prevented from travelling.
This is the second of three blogs about technologies to support contact-free use of public transport.
Public transport operators have been making great efforts to make public transport safe during the pandemic. TfL recently launched a new app that makes it easier for passengers to plan their travel and avoid routes where they might come close to large numbers of people. There are claims that the rate of uptake of contactless by passengers has increased significantly since the pandemic and the demand for contact-free transactions on public transport. Visa recently offered a graph relating to global public transport contactless transactions. However, it is not clear what the actual contactless usage is since they are hidden behind month-on-month percentage increases which look enormous when the previous months had fallen off the proverbial cliff.
This is the first of three blogs about technologies to support contact-free use of public transport.
I heard on the radio that, despite ministers encouraging people in England back to work in their offices, most are staying at home. Commuter trains are about one-third full and buses are about 40% full. During the COVID-19 pandemic, demand for public transport fell off a cliff as governments told their people to stay at home. A major part of encouraging travellers to use public transport is the provision of systems that allow social distancing of passengers from staff, ideally eliminating the need to exchange physical tickets, cash and paper receipts.
As Consult Hyperion, and as many other analysts, predicted, Covid-19 has driven the adoption and use of contact-free technology at the point of service. A recent survey funded by the National Retail Foundation, found that no-touch payments have increased for 69 percent of US retailers surveyed, since January 2020. In May, Mastercard reported that 78% of all their transactions across Europe were contactless.
Fraudsters are always looking for ways to take advantage of potential weaknesses or even inexperience in new payment devices. A recent news story promoted a man in the middle attack in which two phones are used to transfer and manipulate the transaction message between a stolen contactless card and the point of sale terminal.
The Use of Contact-free is Accelerating
At Consult Hyperion, we have already seen the pandemic accelerate the adoption of contact-free payments in the face to face environment as customers have become wary of catching COVID by touching shared devices, such as self-service terminals and PIN pads. The use of personal devices for payments is hardly new but the attraction of an in-app/in-store version of mobile payments, whereby the consumer uses an app on their own device to interact with the retailer or service provider and pay for services, has just increased dramatically. Solutions for parking (RingGo) and for restaurants (like the Wahaca app, powered by Judopay) were already demonstrating the benefits of such an approach for customers and businesses before COVID struck.
As if lockdown were not bad enough, many of us are now faced with spending the next year with children unable to spend their Gap Year travelling the more exotic parts of the world. The traditional jobs within the entertainment and leisure sectors that could keep them busy, and paid for their travel, are no longer available. The opportunity to spend time with elderly relatives depends on the results of their last COVID-19 test.
I recognize that we are a lucky family to have such ‘problems’. However, they are representative of the issues we all face as we work hard to bring our families, companies and organizations out of lockdown. When can we open up our facilities to our employees, customers and visitors? What protection should we offer those employees that must or choose to work away from home? What is the impact of the CEO travelling abroad to meet new employees or customers, sign that large deal or deliver the keynote at that trade fair in Las Vegas?
Well, this is interesting. On the very day of Consult Hyperion’s 20th (yes, 20th) annual Tomorrow’s Transactions Forum to discuss the future of secure electronic transactions and much besides what should fall through the internet tubes but the fifth annual “ING International Survey Mobile Banking 2017 – Cashless Society“, which surveyed nearly 15,000 people across 15 countries, and found that one in five (21%) people in Europe now rarely carries physical notes and coins, and a third (34%) would go completely cashless if given the choice.
Gin and contactless is my second favourite cocktail (after the Moscow Mule).
Like those 34%, I’d like to be given the choice, but there are still places that won’t accept cards (such as the Real Ale bar in Wembley Stadium) which is why I went to the gin bar instead (as shown above). But these are becoming fewer and farther between, and not only in London.
“Dr Michael Collins, assistant professor of Social Policy at the University College of Dublin, tried to live without cash during one month to see if Ireland could become cashless in a near future and follow the example of its Scandinavian neighbour. His investigation demonstrated that almost all transactions can be done without banknotes and coins, except for some small value transactions, such as a coffee in a train.”
Ha! Even on Southwest Trains you can pay using contactless cards or Apple Pay and, when the new Chinese owners take over later this year, I imagine that Alipay and WeChat will be on the menu too. When do we get to wave goodbye to cash in Woking then? Well, sadly no time soon because while the trains have contactless, the ticket machines don’t (and I shouldn’t have to go to ticket machines anyway, but that’s a different point). But in ten years? 20 years?
“Gala Casino used linear regression on cash usage data from 2004 to 2014, which saw a drop from 71% to 53%, and Payments UK predictions for 2024, to arrive at its guesstimate that 2043 will be the year in which the number of cash transactions reaches zero per cent.”
I would imagine the graph turns out to be show cash asymptotic to zero rather than zero, but while I’m not sure that the number of “cash” transactions will ever reach zero, because some people will always want to use some form of immediate and anonymous payment system, I am sure (as I told the BBC’s “Wake up to Money” chap when he called to invite me on this morning) that William Gibson’s words in “Count Zero” are prescient: “He had his cash money, but you couldn’t pay for food with that. It wasn’t actually illegal to have the stuff, it was just that nobody ever did anything legitimate with it”. By 2043? Sure. But rather than just let it happen, we really need to set a national policy about it.
“Reducing cash doesn’t mean big savings, but removing cash does, and without an actual national policy on this, the benefits will go to the middle classes at the expense of the poor. “
Therefore another vision for 2043 might be that cash becomes a class issue, where the middle classes never see cash from one week’s end to the next (except for the purpose of aiding and abetting tax evasion by paying the builder in £50s) but the underclass, trapped in cash, are excluded from the world of bank accounts and cards. This will be a good topic for discussion at this afternoon’s excellent expert panel on inclusion chaired by our CEO Neil McEvoy with Katie Evans (Money and Mental Health), Susie Lonie (who has years of experience in emerging markets), Elizabeth Duke from Carta Worldwide (who build pre-paid schemes for the unbanked) and our very own Paul Makin (the man who did the original feasibility study for M-PESA). Great stuff.