Evidence of a move towards eliminating cash as a payment method spreads far and wide: from the initiative of the New Payments Platform, designed to move money faster between banks, to the rise of totally transaction-less experiences globally, such as AmazonGo, which negates the need for any act of payment whatsoever. Tap and Go technology has boomed locally, with some 82 per cent of Australians making a tap and go payment once or more per week, according to Mastercard.
For some, such as technologically-savvy individuals, this is a positive thing. For others, such as some small businesses, the transition to digital-only will incur real costs for them.
But the common denominator in an effective and sustainable move to a cashless society is banks and financial institutions themselves. They must have the ability to service customers in a context entirely removed from as recently as a decade ago. There will be a cost and impetus on banks to invest in the innovations that will pave the way to offering digital-only payments solutions for their customers, as consumers continue to abandon cash in droves.
How will banks’ systems, networks, and applications cope with the digital transformation necessary to underpin perhaps the most major shift in payments models since the advent of the internet itself?
A recent F5 study shows over a third of Australians are carrying only A$20 or less in cash at any given time, with 8 per cent never carrying any cash at all. A further third (34 per cent) of Australians would change where they spent their money, based on whether or not card payments were accepted.
This should be a major wake up call, not only to businesses, but to the banks supplying businesses with the infrastructure to process these payments. In bringing across the remainder of the consumers still at a crossroads between cash and digital payments, banks must have security at top of mind as the final piece of the puzzle for cashlessness.
A crucial advantage
In the race to embrace digital payments, there’s one essential factor that will hold Australian consumers back from leaving cash behind forever – and that is security.
Cash, for some, still has its advantages. It is a flexible and convenient way to pay, particularly for very small amounts or in informal situations. It is also reasonably secure – one can take out cash and spend it, controlling and allocating that spend out in the open, without relying on applications. Australian consumers noted their number one concern when using banking apps is security, and it’s likely what is also holding people back from embracing FinTech alternatives, with more than a third (38 per cent) of Australians noting they would not trust a start up with their money.
The banks, in this scenario, have a distinct advantage, being in the position to purchase the necessary innovations, operations, and tools to cater to the cashless economy through the acquisition of FinTechs or the right technology stacks. Startups, on the other hand, are battling to win and build trust with consumers that their money and financial data will be safe in the new world of FinTechs and other technology giants making inroads into the payments space.
Talk like a bank, think like a fintech
Alternative, digital, yet highly-secure payments options should be the golden goose for financial institutions as Australians continue to demonstrate their appetite for cashless payments. In order to mitigate the cost of a move to a cashless society, banks much acknowledge that the power of money is moving from the old institutions of yesteryear and back into people’s hands – as so many new options open up, oftentimes with each more competitive and innovative than the last.
Banks need to think more like fintechs, exploring options for innovative customer engagement tactics and always providing new payment options that reflect the growing expectations of a seamless and technology-based functionality.
Take Uber as an example – people are now getting used to having their payment automatically extracted from their linked credit accounts and are less inclined to fumble with cash for a taxi. There’s a methodology to that approach and an understanding of the agile and frictionless nature of that customer transaction, that banks should be adopting as a rule moving forward in their digital strategies.
We can expect digital payment to constantly reinvent itself as banks seek to bolster the security promises that existing customers demand, and the product innovation that new and diversified customers seek.
Jason Baden, regional vice president, F5 Networks AN/Z
Eliot Hastie is a journalist on the wealth titles at Momentum Media.
Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.
Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).