Cash use has faced a dramatic decline in recent years. They say consumers vote with their wallets, and we have voted for cheaper, more efficient ways to utilise our credit. Technology has played an enormous role in our step away from paper to digital but within this movement, there are growing concerns that some of society's most vulnerable groups are and will be excluded.
Technology has the ability to both bring together and divide the public. What we must bear in mind is that while it may be the problem, it is also the solution. We have the necessary knowledge and innovative resources at hand to ensure that everyone can partake in the increased digitalisation of the payment industry and the online world in general.
It is predicted that “a straight-line trajectory of current trends would see an end of cash use by 2026” in the UK. While this may not occur, we need to be prepared, and the modernisation of the digital payments industry needs to put measures into place that promote and force financial inclusion to become a priority.
At the moment the industry's main focus is 80% of the population who are financially and technologically literate as well as active participants in banking culture. But what about the remaining 20%?
Yes, ATM machines are closing, bank branches are shutting down and outlets are starting to reject cash as it becomes riskier and more expensive to handle. But instead of dwelling on a ‘simpler’ past, we need to look toward the future and come up with viable solutions that will allow the forgotten 20% to come along for the ride.
Let’s dive in…
Sure, the answer is probably in the name but it never hurts to be thorough.
“Financial inclusion is the pursuit of making financial services accessible at affordable costs to all individuals and businesses, irrespective of net worth and size, respectively. Financial inclusion strives to address and proffer solutions to the constraints that exclude people from participating in the financial sector.”
This includes the homeless, those below the poverty line, the elderly, small business owners and anybody who for one reason or another has been or will be let down by banking and payments. Being financially included is not only a basic human right, but it will also be great for business.
Currently, over 220 million small businesses globally operate without any access to banking services. It is estimated that banks could generate over $380 billion by targeting the unbanked while simultaneously filling a crucial and injust void that has been neglected.
Research by EY showed that financial inclusion could improve GDP by up to 14% in more rural, developing economies like India and 30% in frontier markets like Kenya.
So, how do we make the future accessible to the masses?
We need to “innovate more channels to meet more customers at lower costs.”
PayPal’s CEO, Dan Schulman highlighted three major sectors that would lead to successful financial inclusion:
Universal access to digital financial systems
Safe and secure transactions which let consumers and businesses operate with confidence
Affordable participation in the economy for all (make and accept payments, get loans, save for future goals, help the community, and more)
The UK’s largest cash network, LINK, commissioned deep research into a report referred to as ‘Access to Cash’. The aim of the report was to highlight that at present, the UK is not yet ready to become a cashless society.
They accurately pointed out that ten years ago, roughly 6 out of every 10 transactions were completed with cash. This has now decreased to 3 in 10 transactions and is predicted to become as low as 1 in 10.
While they highlight that they “haven’t taken a view about the merits of a cashless society...or concluded that it’s impossible, or even undesirable” the report emphasises that 17% of the UK population would struggle if the country were to become cashless tomorrow, but how we can change this?
As previously stated, the technology that we need to support financial inclusion is right in front of us. To name a few:
Affordable card readers
“FinTech is a fast-moving sector. Thousands of innovators in the UK and internationally are developing services which could help with financial inclusion, creating digital tools to meet people's needs.”
Fears that the mentally ill, elderly, homeless and those with debt problems would suffer at the hands of the digital revolution could be combatted through the implementation of:
Budgeting and payment tools
Smart account management
So what needs to change?
It’s pretty simple. All the necessary tools are there, commercial developments just have to stop targeting “early adopters and larger market sectors” and start targeting “late adopters” who need affordable and reliable solutions.
We should be empowering the percentage of people who would struggle with a potentially cashless transition. Our mission at SumUp is to empower the smaller merchants who often struggle to obtain affordable payment solutions for their businesses. On average SumUp merchants experience 40% - 60% business growth as a result of introducing card acceptance, which is proof that offering affordable technology can really make a difference.
But before we get ahead of ourselves, and even imagine the possibility of a cashless world, we need to make sure that every member of society has the bare minimum. With 1.3 million UK consumers still not having a bank account at all, it is crucial that banks and industry players find a way to change this through technology and processes designed with inclusion in mind.
This all sounds well and good, but how does financial inclusion work in practice? EY’s study, How banks can play a stronger role in accelerating financial inclusion puts forward a few examples of how technology can aid inclusivity.
Indonesia: Bank Rakyat deployed multiple floating bank branches at sea to reach inhabitants of Indonesia’s smaller islands, giving them access to banking services. They also provided satellites throughout the country to support their branches at sea and in rural, unreachable areas.
Africa: Mastercard created a mobile platform known as 2KUZE to bring mobile payments and security to rural farmers.
Mexico: The online platform, Konfio was introduced in 2014. By measuring the creditworthiness of small businesses, they were able to secure over 50,000 business loans to merchants who would usually struggle to make this a reality.
And it doesn’t end there…
The Philippines is home to over 7,000 tiny islands where the daily income is significantly lower than other parts of the country. To combat this, Smart Information Technology, Inc deployed a mobile network to these islands giving the inhabitants access to banking, phones and mobile purchases.
An incredible example of inclusion done right took place in Peru. A mere 10 years ago half of the population were categorised as living below the poverty line and a remarkable 75% of Peruvians had absolutely no access to payment services. This all changed when GloboKasNet began providing so-called “business correspondents” that provided affordable financial transactions “identical to those of a bank via local shops and businesses already established in the communities they serve.”
Concerns of how the homeless and the elderly will and are being impacted by the changes in the payment industry are justified. But there are solutions and charities across the UK and Europe have been leading by example in repairing this.
The BBC looked into multiple charities using the convenience of card to their advantage.“Last year, ad agency N=5 grabbed headlines with its trial of the Helping Heart contactless jacket, which allows passersby to donate €1 by tapping a card reader on the chest of the homeless person’s coat. The money can only be spent on products nominated in liaison with the individual’s local shelter.”
The charity, RSP’s solutions, also found that they received “considerably more” donations after setting up contactless stations. And there are other ways to get money directly to the homeless. Oxford charity, Greater Change, enables people to donate to the homeless directly using an app. The money goes towards “essentials that are part of that person’s personal development plan.”
The Access to Cash Review published a case study on the Swedish magazine SituationStklm, a publication sold by the city’s homeless population. Sweden is well known for becoming an increasingly cashless society, which made it difficult for sellers to push their magazines. StituationStklm took note of this change, and gave every seller a badge complete with a QR payment code, allowing them to accept payments and collect their money from the main office afterwards.
The Economist recently drew attention to a study on how the elderly interact with their finances and that “age-friendly banks are beginning to learn how to protect vulnerable older customers.” It is well known that a huge percentage of the elderly feel left behind when it comes to technology. So it is no wonder that the intersection of technology and finances can appear unapproachable to this demographic.
The resources to make everything more manageable are at hand, and arguably, getting out a card instead of scrummaging for change is significantly easier.
After utilising a card reader instead of a collection plate at a local church, the Reverend pointed out that “one of the older members at our church said he thought it was great commenting it was so much easier than having to find the right money to put on the collection plate.” Online banking also spares the less-mobile from taking a trip to the high street bank, and if executed correctly, can offer helpful tools for budgeting and simplifying the sometimes overwhelming world of finances.
There is a long way to go, and a multitude of things that need to be done, but what’s important is that they can be done.