By Peter Thomas, Managing Director of DLRT, Part of the TALL Group of Companies.
Our economy has taken some really tough hits over this past couple of years. COVID has been a defining factor in how we continue to operate and do business.
We were already on the cusp of change with increased online and mobile payments offerings from new and emerging FinTech’s while our traditional High Street is under threat from the hasty retreat of the main banks as they seek to change the paradigm and get customers to ‘Go Digital’.
The move to digitise banking
COVID and our fear of handling paper or coin fed into an already fast moving and inevitable move to digitise. Before anyone states the obvious, I am not at all anti-online, digital, apps, apis or the cloud, on the contrary I believe it is our future. Good tech enables us to grow and drive efficiencies. It affords us new opportunities to deliver products and services in an omnichannel environment by maximising Open Banking and PSD2. But we shouldn’t leave people behind. We shouldn’t jump to throw all that has been good out because it is no longer seen as effective, or efficient, or indeed fashionable.
The remaining importance of cash
Cash is our only fall-back position when the lights go out. Cash is universal. It can be used by all. It is fully democratic and at society’s margins, it allows the unbanked the chance to be included. Cash offers society the opportunity to transact at a local level and help generate more. Cash does not require structures, systems or hardware.
We have seen a big push recently by our Government and the Chancellor of the Exchequer to get people to continue to use cash as they can see how ‘Going Cashless’ can inhibit and ultimately damage growth and inclusivity.
We have raced, and to a certain extent been pushed, to go digital. Card payments both debit and credit are up, online payments are exploding and banks, challengers and fintech’s are finding new and novel ways to get us to spend differently. The insidious BNPL is a case in point. Across Europe, particularly in the Nordics, where digital has been more pervasive, they are beginning to see the drawbacks associated with not having a handle on how we spend. The Nordics were always considered prudent and thrifty. They are putting down increases in spending and debt to increased ease of online, digital and BNPL as people have moved away from cash and other more tangible payment methods. When I saw supermarkets suggesting use of BNPL for everyday groceries, I became really concerned.
People need to be given choice in terms of payment offerings otherwise we are brewing up some really problematic issues for the years ahead.
On top of this growing problem, fraud levels have grown exponentially as fraudsters find new and more devious ways to extract money from unwitting victims. Whilst education is key to helping each other combat this so too is improving the robustness of technology and leveraging what is already in place.
Are imaged based payment system’s the future for secure payments?
As a case in point, cheques have been around for hundreds of years not as long as cash but a long time. Cheques continued use has been in decline as other forms of payment become more prevalent but since a government-led initiative which instructed the financial industry to recognise that consumers needed to have a choice and require alternatives, in the same way as cash does, then cheques have been given a new lease of life. In fact, our banking industry invested almost £800 million in developing an imaged based payment system (ICS) back in 2017 that has potential to really add value to the customer experience and give those who continue to wish to use them payment options. Cheque fraud as a % is minute (*£9.70 in every £10 of fraud is prevented) due to new enhanced security features. So, the question is, why don’t Banks tell us that we can use our mobile phone to scan an image of our cheques to deposit them and then receive cleared funds by the next working day? Why don’t they tell Corporates who see bank branches closing that they can capture images of scanned cheques centrally and deposit online. Cheques, like cash, are still perceived to be more costly to the bank to handle. Yet in terms of security, they remain one of the safest forms of payment. Indeed, their potential use as an alternative in the case of electrical outage, network outages, banking platform disruption, hacking, and legacy issues still has a place in the modern payment environment. Risk is always a concern. That is why we seek to find ways to mitigate it. Cash in your pocket, a cheque book in your locker or different card and mobile apps in case of any of the above. However, as operating cost pressures increase, market share is squeezed, and demand wanes, even the new payment options are coming under pressure as both banks, fintech’s and challengers are forced to close and shut their shiny new consumer-facing and business-to-business apps.
Long live the cheque!
So, as a risk mitigant, why don’t banks encourage people to adopt tried and trusted payment options by keeping a back-up cheque book just in case rather than removing the opportunity to order when opening an account, removing the opportunity to order one online without jumping through hoops, or in fact not telling their customers about the many easy ways that they can continue to use them? The Government were prepared to give the customer what they wanted by reversing the demise of the cheque. Why then are the banks determined, by stealth, to drive the them out when clearly their customers still have an appetite for the ‘good old dependable’ cheque.