Could the emergence of digital payments mean that we are finally about to become a cashless society? Is our love affair with those dirty coins and brightly coloured notes coming to an end? In the first of a few blogs on the topic, we look at the rise of digital payments and how it is affecting the way Aussies are going about their daily lives.
The biggest change in the payments industry in 40 years
What do we mean when we talk about a digital payment?
‘The biggest change in the payments industry in the last 40 years is the emergence of digital payments’ says our payments industry specialist Garry Duursma. They are payments that emanate from a smart device (typically your smartphone or watch, but it could just as easily be your fridge or your car.) ‘We've had electronic payments for a long time now, a stream of numbers that go through the payment network. But now those payments are starting to become enhanced with additional information. No longer are they just a stream of numbers - they include the context around a payment.’ This means that information such your location, the temperature or even a web search you make before purchase are transmitted, giving retailers and card providers the opportunity to deliver highly relevant information or offers.
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You don't get up and say 'I'm going to make a payment today'
Well that's wonderful for them, but what about me?
In an age where every detail of our lives is online for everyone to see, do we really want our banks knowing more about what we’re doing? How does the digital payments revolution benefit the customer?
The answer is convenience, says Garry Duursma. ‘The Uber experience (where you just get in the vehicle, travel to where you are going`and you're provided with the payment information after the fact) will become commonplace in retail and other services.’
‘You don't get up in the morning and say “I'm going to make a payment today.” You get up and say “I'm going to go to work, I'm going to buy a coffee at the station, I'm going to top-up my Opal Card”. Payments need to fall right back into the background, so that they don't interrupt your day. By intelligently linking your smartphone with the point of sale solutions in that store you can just walk out with the products and make payments disappear.’ This concept was recently demonstrated by Amazon to show how a retail experience of the future may look. Their ‘Just Walk Out’ technology means that you are verified via an app as you enter the store and sensors throughout add the products you pick into your virtual shopping cart. Then you simply walk out and your purchases are charged to your Amazon account. And you don’t get arrested for shoplifting!
'Just walk out'...& don't get arrested for shoplifting!
Will we become cashless?
While Australia is not quite leading the world in cashless payments (according to a recent study that honour goes to our Canadian friends), we have fallen in love with ‘tap & go’ which has been widely adopted by Australian retailers. It offers such convenience that in 2015 over half of the population had made a transaction that way (much more than any other country). The success of contactless card payments in Australia partly explains the low uptake at this point of digital wallets on smart devices, such as Android Pay, Samsung Pay and Apple Pay. According to the RBA, just 2% of payments are made this way, however this is a topic we’ll explore in much more detail in a future blog. By the way, not all countries are in quite as much of a hurry say adios, au revoir and auf wiedersehen to their loose change, which is why at Xinja we’ll be offering free ATM withdrawals internationally (at least for up to 4 withdrawals a month….there’s always an asterisk :-))
As the adoption of digital payments by smart devices increases, things will become even more convenient and cash will become even more scarce. So that’s a great thing right and everyone is happy? No more losing coins down the back of the sofa or forgetting about that $20 note in those old jeans?
Not so fast...
Cash is flexible, resilient and convenient in informal settings
A less-cash society
Whilst most would agree that digital payments are desirably convenient in most situations, there are those that argue this doesn’t mean we need to be fully cashless. The benefits of cash; it’s flexibility, resilience and convenience in informal settings mean that rather than a fully cashless society, a less-cash one could make more sense. There is also the inescapable fact that a 'Cashless society' is a euphemism for the ‘ask-your-banks-for-permission-to-pay society’. Whether through ‘tap & go’ or your smartphone, every transaction you make is logged and approved by various institutions.
Whether the days of cash are numbered or if it continues to live on like the trusty bicycle in a world of cars, at Xinja we’re building our bank for the future. Join the waitlist below, if you haven't already, to get early access to the Xinja pre-paid card & other products, & hear about our developments & even own a piece of the action through equity crowdfunding.