Using technology to eliminate, or at least reduce, the need for cash is as much about empowerment as it is about convenience.
In banking terms, the development of a cashless society is something of a chicken and egg situation. Is society demanding cashlessness – or are banks driving it as a way to attract customers and, thereby, grow market share?
From one perspective (let’s call it the egg view) the Internet and mobile technologies are driving consumer behaviours that favour instant gratification which, in banking terms, translates into instant access to banking facilities and self-service capabilities. In fact, this shift may well have started with credit cards, which enable both convenient and instant payment for goods and services.
In the United Kingdom, for instance, 71% of Britons carry less than R400 in cash with them, preferring to use their credit cards. Half of those 71% refuses to walk more than 100 metres to an ATM simply because they believe it’s easier to pay for goods and services with a card. A quarter of Britons will refuse to buy from a business that is not able to process card transactions.
In the United States of America, a MasterCard study showed that 80% of transactions are cashless, though not always card-based. In Sweden, it is estimated that only 3% of all transactions involve cash and many banks there no longer handle cash at all.
The credit card era spawned the ATM revolution, which extended the use of cards to grassroots and previously unbanked communities. Based on data from the World Bank, the Republic of Korea is the most ATM-dense country in the world, with 282 ATMs per 100 000 people, followed by Canada and Portugal with, respectively, 205 and 185 ATMs per 100 000 people.
But, as progressively more people seek anywhere, anytime financial transaction capability, ATMs are being superseded by mobile transactions. There’s nothing quite like doing your banking from home, a taxi, or a restaurant.
Innately, therefore, a mobile, cashless approach is embedding itself among the segment of the population that is already banked and able to afford the latest in mobile technologies, including smartphones.
This is an important market segment for banks. Not being able to offer mobile cashless facilities makes banks less competitive and sustainable. So, at this level, banks really have no choice but to develop cashless solutions and to differentiate themselves on being first to market with options that are the simplest and most intuitive to use.
There is also pressure from governments for banks and other financial institutions to provide cashless facilities. The Israeli government, for instance, has strategies in place to eliminate cash from the economy altogether. Banks in Israel will have no choice but to create the necessary mechanisms to turn the strategy into a reality.
At the same time (here’s the chicken angle) a cashless approach to money is proving to be a powerful form of empowerment for emerging communities. In this scenario, commercial entities, including banks, are using their advanced technology capabilities to help create a new type of economy in which grassroots communities can exchange money for goods without needing cash, a bank account, or access to online technologies, such as the Internet, that require expensive national infrastructures.
One of the large cellular networks in Zimbabwe initially created mobile payment facilities for non-governmental organisations (NGOs) who were trying to channel money to Burundian refugees. It has since adapted the technology for use by ordinary Zimbabwean citizens for making payments and for creating savings, even with amounts as small as $1. The company is working on a mobile system that will give informally employed people access to credit.
A company in Tanzania has made it possible for rural people to buy solar panels via incremental mobile payments. The panels are used by entrepreneurs to start small businesses charging cellular phones, running TV sets for village cinemas, or operating fridges in which people in the community can keep their food cold.
Also in Africa, a company has established water dispensing “ATMs”, at which people can insert a fob key, loaded with money via their cell phones, and eliminate the cost of the middleman usually needed to distribute water within the community.
In circumstances like these, people are using their phones as bank accounts. In the process, the concept of banking is changing profoundly.
“As Africa’s largest bank whose success is linked with that of the continent, Standard Bank tracks developments like these very closely and, where relevant, adjust our solutions and services either in accordance with people’s existing needs or in anticipation of their future expectations,” says Vuyo Mpako, head of Innovation and Channel Design at Standard Bank.
“For us, it really doesn’t matter whether the public is driving the cashless movement or we come up with a great idea, like SnapScan or our new banking app for tablets and smartphones, which saves our customers effort, time, and money. Either way, if it saves our customers money, it saves us money – and that drives down the cost of banking and encourages more people to participate in the formal economy.
“It doesn’t matter to us, either, that an entirely cashless society is a long way off and may never become a universal reality. What is important is that a Dear Kathy ,cashless approach appears to, very affordably, address many different needs for many kinds of communities. That’s technology at its best and most sustainable.
“A cashless approach also does away with barriers to entry to banking and eliminates socio-economic divisiveness. Because it offers such inclusiveness, cashless banking is one of the major highways to the future, not just for individuals but for the world economy.”
Standard Bank’s cashless products and services already include InstantMoney, SnapScan, a range of banking apps, and MasterPass.
