Why cash is no longer king
Future financial transactions will feature facial recognition technology and possibly wearables, hearables and implantables.
Australia’s transition to a truly cashless society is well underway. Experts say it will happen within five to eight years. Others, such as Professor Richard Holden from the UNSW Business School, say it could happen within three years. No more fumbling for plastic money in wallets or metal coins in our bags – a frictionless, cashless future is within our grasp.
Two things are propelling the final push to overthrow cash as our centuries-long preferred financial transaction method. On the consumer side, the popularity of tap-card technology and smartphone payment apps shows we are becoming more comfortable paying without cash. It seems we no longer feel naked leaving home without cash, and are familiar using PIN, sign or “tap and go” card services, or Apple/Android Pay, to buy anything from groceries to affogatos. Recent Roy Morgan research also shows 71.7 per cent of Australians used some form of digital payments solution, such as PayPal or BPay, over the previous year.
On the corporate side, the launch of the New Payments Platform (NPP) in February allows households, businesses and government agencies to make transactions easily (using a simple payment ID) and immediately, at any time. A collaboration of Australia's banks, other financial institutions and the Reserve Bank, the NPP is slowly gaining acceptance as the most effective way to make fast and secure payments.
Holden's plan to phase out cash within three years begins with eliminating $100 notes in the first year and $50 bills in year two. Then it's about using education and incentives, especially convincing traditional cash users of better options.
“It’s about making sure everyone has the ability to use tap-card technology in a way that works for them,” Holden says, such as making payments using a seniors card, for instance. “Privacy is always an issue, though I think we live in a different era of privacy expectations, especially because of social media. People these days have a very different conception of what privacy means.”
Adam Smith, chief operating officer for global money transfer company OFX, says the digital economy is changing the way people do business and live their everyday lives. Smith says real-time global payments are the future, and OFX is working with its global banking partners to improve the customer experience with faster payments using the NPP in Australia and the similar Faster Payments Service in the UK.
The ongoing payment innovation overcomes existing customer pain points, lowers cost and increases efficiency, Smith says.
Holden understands why many older Australians are nervous about using technology and prefer to deal in cash. Children, too, might need notes and coins to buy food and drink from school canteens, for instance, although many outlets are cashless or allow for transaction-limited tap cards.
But Holden argues the advantages of a cashless society far outweigh the negatives. Many small businesses in Australia, especially cafes, no longer accept coins or notes. He says a cashless society will only lead to a more "honest" tax environment, and the biggest losers will be those who rely on cash deals, especially criminals.
Swedish-Australian futurist, author and managing director of Thinque, Anders Sörman-Nilsson, says that while cash is no longer king, we’re unlikely to stop stashing it in our mattresses. “Humans never stopped bartering even after the advent of coins and cheques,” he says. “It’s more likely, however, that cash will continue to fade into oblivion."
“Australia will become virtually ‘cashless’ when consumers and businesses realise the friction and frustration involved with handling cash and demand seamless payments. When the payment transaction becomes a non-event – when it automatically happens as you exit the restaurant after a delicious meal – then we’re living in a ‘cashless’ society.”
Sörman-Nilsson says Australians will quickly look for new transaction technologies, having become fed up with passwords and PINs.
"Seamless, biometric payments are the key drivers to moving beyond the old idea of credit cards or cash as a physical product, to a digital service that lives in your mobile wallet or smartphone," he says. "Your intimate payment relationship will be with your wearable, hearable or implantable digital devices, which you and artificial intelligence will train to select the right card for the right purchase. This could be for, say, frequent flyer, foreign exchange or payment term optimisation."
He says the rise of “conversational commerce” and advances in facial recognition technology will ensure consumers become increasingly comfortable scanning their bodies as an identification method. Would you like biochips with that?
Holden agrees biometrics will likely become the most popular way for people to make transactions. “We’ve already seen that with Face ID on a variety of Apple products, notably the iPhone and how that translates into, say, Apple Watch. Facial recognition is already an incredibly powerful tool. Look at how financial institutions are willing to let you access your account based on facial ID without putting in another code. They are showing a high degree of confidence already. There will be a variety of biometric things that provide people with a lot of security and comfort.”
Ultimately, Sörman-Nilsson believes the technology that does the best job of removing friction from the customer journey will “win the battle for the digital minds and the analogue hearts of tomorrow's customers”. He argues, too, that the wallet itself is becoming “decentralised”.
“Rather than thinking about which device will be the single source of truth, payment technologies will embed into the ecosystem of what you’re wearing,” he says. “Other than smartphones, if we look at which hearable and wearable devices have reached mass adoption and low social stigma, the top three would be spectacles, earphones and wrist watches. We’re already paying with our wrist watches, earpods have the capacity for conversational commerce, and in the future ordinary spectacles might become augmented with conversational payment aptitude."
“As long as you’re happy to carry a chip in your body or on your body, you can proudly claim you’re a walking ATM.”
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