INDEPENDENT PUBLICATION BY RACONTEUR.NET #0663 10/05/2020

FUTURE OF PAYMENTS

INFOGRAPHIC BASIC INCOME SEXY PAYMENTS Distributed in 03 Digital payments are thriving, 07 Why the argument for a 08 When products are deemed but cash usage is actually on universal basic income has controversial, finding a payments the rise in some economies begun to gather speed provider can get a little tricky

Published in association with

CASH

Contributors

Kickstarting the Oliver Balch Journalist specialising in sustainability, business and travel, and author of travelogues on South cashless revolution America, India and Wales. Anna Codrea-Rado Culture and technology journalist, with work published in The New York The nationwide lockdown, which has sparked a surge in online Times, The Guardian and WIRED. shopping and cut cash machine usage by half, could accelerate the Katie Deighton Business reporter based in New UK’s shift towards a cashless society York, writing about the media and advertising industries as senior reporter for The Drum.

Anna Codrea-Rado Ben Edwards Journalist and copywriter, specialising in finance, business, legal services and technology. hen the UK government It raises the question: will this step- The pandemic has already made tan- W announced closure of non-essen- change in both consumer and retailer gible changes in cashless behaviours, as Marina Gerner tial retailers on March 13, chef Ed behaviour be the tipping point that pushes evidenced by retailers and payments pro- Award-winning arts, philosophy McIlroy had to work out how to keep his the UK into becoming a cashless society? viders increasing the contactless limit on and finance writer, contributing business, a burger bar in a north London “The current crisis has accelerated the April 1 to £45. The last contactless limit to The Economist's 1843, The Times Literary Supplement pub, going. Like many food outlets, Four shift towards cashless payments among increase to £30 took two years to imple- and Standpoint. Legs became a cashless, delivery-only small community-based businesses,” says Lu ment, but this rise was rolled out in a mat- business overnight. Zurawski, retail payments lead at payments ter of weeks. Emily Hill “I didn’t want my delivery staff han- For consumers, the value proposition of Journalist and author, formerly dling cash,” says McIlroy. "It didn't feel a cashless UK is clear: convenience. “Car- working as commissioning editor at The Spectator and feature safe." Instead, he implemented an ana- rying cash is just no longer convenient,” writer for The Mail on Sunday. logue cashless payments system. Custom- says Laura McCracken, global executive ers who want delivery place their orders vice president at Wirecard. “In the near Joe McGrath through a Google Form and then pay their future, flexibility around payment along Financial journalist and editorial bill via bank transfer. While rudimentary, the customer experience will explode.” director of Rhotic Media, with Lockdown will continue work published in Bloomberg, the cashless system has enabled Four Legs McCracken sees a future in which tech- Financial Times, Dow Jones and to continue operating through the crisis. the drive towards a ‘new nology will emerge that lets customers Financial News. It has also shown McIlroy the potential for pay in the changing room or automati- permanently shifting to a cashless model. normal’ based around cally as they leave the shop. “Integration Oliver Pickup “It’s been a dream for us,” he says. of ecommerce and physical retail spaces Award-winning journalist, the decentralisation, he specialises in technology, “Before this happened, we weren't in con- will make payments a frictionless and He sees digital payments as the only retailers to offer cashback to consumers business and sport, and trol of the money coming in because we democratisation and even invisible part of the shopping expe- way of ensuring remote access to services using their Visa debit cards in areas where contributes to a wide range were using the pub’s point of sale. It’s digitalisation of finance so rience,” she says. that can withstand any disruption to tradi- access to cash is limited. “For some, cash of publications. never ideal for there to be a middleman Some of the loudest champions of cash- tional banking systems. “The lockdown will remains the only option and as availabil- between the customer and your money.” people no longer depend less societies are cryptocurrency play- continue the drive towards a ‘new normal’ ity of cash reduces, we need to find ways Prior to the pandemic, the UK was ten- on a financial middleman ers. Charles Hoskinson, co-founder of based around the decentralisation, democ- to avoid excluding these individuals from tatively edging towards becoming a cash- Ethereum and chief executive of block- ratisation and digitalisation of finance so the financial system,” says Visa’s Mundy. less society, with one in six millennials chain giant IOHK, hopes COVID-19 will people no longer depend on a financial mid- McIlory sees this in his own business, living a cashless life. While in lockdown, result in a permanent move towards a dleman for their services,” he says. which pre-COVID-19 operated out of a pub, Publishing manager cash usage across the country has halved, cashless society. Proponents of cashless societies often where he says he wouldn’t have made the Alexion Lai according to LINK, the UK’s largest ATM systems company ACI Worldwide. “Once the “The pandemic and associated lock- look to Sweden as evidence of what’s pos- call to go entirely cashless because a per- operator. A rise in online shopping and crisis has passed, going cashless will not only down will drive a revival of interest in sible. Sweden is one of the countries in centage of his customers still expect to be Managing editor Benjamin Chiou increased use of contactless payments, become the norm for many small businesses, the decentralisation and democratisation which its citizens use the least amount of able to pay with cash. But now the situation amid fears of the virus spreading via coins but also pave the way for the adoption of new, of financial transactions through ‘chal- cash in the world. According to research looks different. “The plan was to grow into Associate editor and banknotes, all contributed to the fall innovative payments services to capitalise on lenger banks’ and technologies such as from the Swedish Central Bank, only 1 per our own premises,” he says. “If that still Peter Archer in cash transactions. the shift away from cash.” big data and blockchain,” says Hoskinson. cent of Sweden’s GDP was circulating in happens, then we’ll also go cashless.” Deputy editor cash in 2018 compared to 4 per cent in the Francesca Cassidy UK and 3 per cent in the Eurozone. While businesses and consumers alike Digital content executive Taryn Brickner CASH USAGE ON THE DECLINE herald Sweden’s shift towards cash- TOP REASONS WHY CONSUMERS STILL USE CASH Head of production ATM transaction volumes across the LINK network (millions) less payments as a more secure and con- venient way to pay, it has also sparked Justyna O'Connell

a national debate about what happens Design to those who can’t, or don’t want to, go Sara Gelfgren mobile. The same questions are now being Kellie Jerrard Harry Lewis-Irlam 250 raised here in the UK. % “It is now more important than ever to 67 Celina Lucey ensure no one is left behind,” says Jeni Colm McDermott Samuele Motta Mundy, UK and Ireland managing direc- of UK consumers say Jack Woolrich Cash usage had tor at Visa. There are currently 1.5 million they like to pay for already started to drop unbanked citizens in the UK, who by defi- small things with cash Art director significantly towards Joanna Bird the end of 2019 nition are completely dependent on cash. But Hoskinson believes the worry is Design director overplayed as groups such as the elderly Tim Whitlock and unbanked can also see the benefits of Although this publication is funded through advertising a cashless society. “New fintech innova- and sponsorship, all editorial is without bias and sponsored features are clearly labelled. For an upcoming schedule, tions such as app-based challenger banks % partnership inquiries or feedback, please call +44 (0)20 8616 55 7400 or e-mail [email protected]. Raconteur is a leading and blockchain technologies can give peo- 200 publisher of special-interest content and research. Its pub- ple far greater ownership over their own lications and articles cover a wide range of topics, including say they use cash for business, finance, sustainability, healthcare, lifestyle and identities and assets without depending peace of mind technology. Raconteur special reports are published exclu- on large financial institutions,” he says. sively in The Times and The Sunday Times as well as online at raconteur.net. The information contained in this publication “The poor performance of many large has been obtained from sources the Proprietors believe to be correct. However, no legal liability can be accepted for any institutions during the current pandemic errors. No part of this publication may be reproduced with- is creating a consumer culture more con- out the prior consent of the Publisher. © Raconteur Media ducive to decentralisation.” Other experts say the gains in contact- % 35 /raconteur.net less payments technologies should not come at the exclusion of improving access @raconteur say they like to have the to cash for those who continue to need it. @raconteur_london 2018 2019 2020 option of how to pay 150 Earlier this year, Visa launched a scheme LINK 2020 with its partner banks to incentivise Access to Cash Review 2019 raconteur.net /future-payments-2020 2 FUTURE OF PAYMENTS

Commercial feature

A

GIG ECONOMY WORKERS THINK RECEIVING WAGES MORE FREQUENTLY WOULD HELP THEM MANAGE THEIR FINANCES

To what extent do you agree or disagree with the following statements? “Receiving my wages/salary at more frequent intervals would help me manage my finances more effectively” (n=1,265)

Agree Disagree

All 26% 39%

Full-time/part- 25% 41% How technology time employed is rapidly transforming Self-employed 28% 31%

Gig economy the way we pay B 38% 29% and get paid

The advance of technology in the past few years MORE THAN ONE IN TEN UK ADULTS IS A GIG WORKER Which, if any, of the following sources of income do you receive personally? (n=2002) has revolutionised our daily lives; think virtual C assistants, streaming services and conveniently A E I buying anything from a hotel stay to a car via apps 54% 10% 3% Full-time or part- Investments Property time employed (long term)

D B F J e now expect technology to solve automate rules to respond and transactions 20% 8% 3% W problems we never knew we had. can be blocked, further verified with a physi- Pension Self-employed Casual or seasonal But when it comes to our money, cal biometric request or put forward for fur- technology advances have been slower. ther investigation. C G K L That is until now. Whether it’s new ways to This approach takes security beyond user E verify our identities, sophisticated banking names, passwords, or other security meas- 12% 5% 1% K apps, permission to share bank account ures bad actors are proficient at bypass- Gig economy Online merchant Contract for online platform data or faster payment solutions for people ing. This security doesn’t only apply at login and businesses, technology is transform- or checkout as the user behaviour can be ing how we pay and get paid. And it is help- monitored across the customer journey, D H L J F ing us to better manage our finances while at moments such as creating an account or 12% 4% 1% I G addressing one of the biggest risks we all applying for credit, checking the balance on Government benefits Zero hours Property (short term) H face: security. a gift card or asking for a password reset. This approach to user verification helps compa- Sci-fi-style security is here nies remove friction for their trusted users Mastercard 2019 The combination of behavioural analytics while weeding out fraudulent traffic. and passive and physical biometrics reduces Paul Stoddart, president of New Payment the reliance on passwords and security Platforms at Mastercard, says: “The impact questions for user verification, which are of being able to analyse behavioural data “PromptPay has made a significant mark enabled by open banking initiatives, but payments enjoyed a 16 per cent increase in both knowledge-based security tools no is phenomenal. NuData Security¹ helped a on the country’s bid to address financial they expect the experience of using them transactions and spent 46 per cent more longer reliable in a world with nearly 20 bil- Fortune 200 web retailer defend against a inclusion and support the expansion of to be safe and reliable, and expect any than a control group over four months.”⁴ lion records since 2013. persistent attacker, with its cutting-edge Thailand’s burgeoning digital economy,” issues to be resolved quickly and effec- Another key issue for businesses is pay- However, new solutions using behavioural behavioural analytics service. It tracked 77 The success of open says Mastercard’s Stoddart. “Since launch, tively nonetheless. ment risk. Companies need to monitor and passive biometrics security could trans- million logins over 90 days, with 39.3 per PromptPay has attracted 49 million sub- Mastercard Open Banking Solutions™ suppliers and customers to ensure trading form payments. We are already aware of cent detected as high-risk and blocked, and banking will rely on scriptions in a population of 69 million and support the banks, financial institutions partners are in a fit and proper condition. physical biometrics; authenticating mobile 100 per cent accuracy. The attackers modi- establishing trusted processes an average of 4.5 million transac- and third party providers by connecting, This is a huge job involving a vast number payments with a fingerprint or our face is fied their attack pattern and within an hour tions a day.” protecting and resolving issues among of credit risk reports, law enforcement lists now commonplace in the UK. Combine that NuData had updated its modules to rebuff relationships, a brand The Thai government is also using ecosystem participants. Open Banking and media sources. with behavioural analytics and passive biom- the new method.” promise, technology, PromptPay to make tax rebates and social Connect provides a single, universal con- A better approach is to use a single procure- etrics and you have a potent combination welfare payments. The Bank of Thailand nection to financial institutions’ open ment platform, such as Mastercard Track™. where the trade-off between security and Innovation in emerging markets processes, and security credits PromptPay among the initiatives that banking functionality regardless of their This streamlines procurement by monitor- convenience no longer exists. Too many people are excluded from the have resulted in the 83 per cent rise in dig- application programming interface (API) ing more than 4,500 sanction and enforce- Passive biometric authentication relies financial system, lacking bank accounts or working seamlessly and ital payments since 2016. The Thai economy standard or implementation. Open Banking ment lists. For suppliers it offers a single on the way we use our phones, computers access to basic financial tools. This is true in harmony has been transformed. Protect provides financial institutions with portal for credit risk ratings for customers. or tablets, which differs from person to for all economies, but especially for emerg- Additionally, 164 million³ migrant workers verification of third parties, fraud monitor- Preferred payment methods are managed by person. Engines collect hundreds of dat- ing ones. It’s in these markets where we are globally rely on traditional money remit- ing and alerts, while Open Banking Resolve Mastercard Track™. Using a platform such as apoints on each user to build a picture of seeing the greatest innovations in payments. tance methods where payments can take provides a clear framework for resolving Mastercard Track™ ensures maximum com- their unique biometric identity. For exam- Take Thailand, where digital payments are five days to clear and often lack transpar- disputes, which is fundamental to securing pliance with legal duties and frees up staff to ple, how fast do they swipe and type on the challenging the dominance of cash. Despite ency. In the Gulf Co-operation Council people's and businesses’ trust. focus on core commercial activities. screen or keyboard? a relatively high proportion of the popula- The result was PromptPay, a real-time region alone there are 35 million migrant “The success of open banking will rely The range of information expands with the tion having a bank account, millions lacked payment platform that allows people and workers, primarily from India, Bangladesh on establishing trusted relationships, a And finally behavioural analytics layer, which leverages access to banking and financial services, and businesses to make and receive payments and the Philippines⁴. Transfast⁵, a company brand promise, technology, processes, and Behavioural analytics, innovative new appli- the data from the passive biometric tech- almost half of all Thais paid in cash for inter- instantly into their bank accounts or digital recently acquired by Mastercard, enables security working seamlessly and in har- cations and faster payment solutions are all nology and collects insights, such as loca- net purchases. wallets linked to their national ID, corporate people to make cross-border payments to mony,” says Stoddart. “That’s why it’s key destined to change our financial fortunes tions, how the device is connected to the The government and central bank of ID or mobile phone number. This underlying family or friends in more than 50 curren- to address fundamental challenges such as as both individuals and small businesses. internet, historic payment patterns or device Thailand approached Vocalink² to help them infrastructure allows Thai people to make cies nearly anywhere in the world. It’s fast, fragmentation in API standardisation, fraud What’s interesting is how new partnerships and browser type. The vast data creates an modernise its national payments system, purchases in-store or online, pay bills and secure and transparent, and offers a variety risk and dispute resolution. are essential to deliver pioneering prod- accurate score for each user in real time. If to reduce fraud and risk in the system, donate to charities, and send and receive of pay-out methods, including into a bank We believe that by addressing these chal- ucts, often partnerships that meet customer an attempt to make a transaction is flagged reduce the use of cash and increase finan- money to other people securely from their account, digital wallet or cash. lenges, as we’re doing with Mastercard needs and would not have been thought pos- as high risk, the financial service provider can cial inclusion. digital banking app. Open Banking Solutions, we can support sible just five years ago. Power of open banking the development of an open banking eco- This era of collaboration will underpin fur- The UK has seen the birth of hundreds of system that will revolutionise how millions ther innovation as the financial sector is dis- creative fintechs thanks to its mandated manage their financial futures both locally rupted by new, creative ideas designed to open banking initiative. Open banking ena- and globally.” boost both companies’ bottom lines and our bles people and businesses to share access own financial wellbeing. Technology is pro- to their bank account data with other pro- New payment methods can transform foundly changing our relationship with our viders securely to access a range of new small businesses money at pace. financial services. It has the power to revo- The gig economy is booming, but life as a lutionise how we interact with our money by gig worker can be challenging; the work can providing a wealth of services such as better be volatile, there are often daily expenses, budgeting, savings innovations, access to such as buying fuel for the car. For those Discover more of our thinking on the fairer credit and techniques to improve our who rely on gig work as their main source of frictionless future at mastercard.com/ overall financial wellbeing. income, any delay in receiving earnings can frictionlessfuture For example, when a person uses Venmo, a put a strain on personal finances. In a com- digital wallet that lets them make and share petitive landscape, gig workers will source payments with friends, it’s open banking work from platforms that allow them to that allows Venmo to initiate those pay- access their earnings on demand. ments from the person’s bank account. Or For example, a popular ride-sharing app when they use Emma, a budgeting and per- recognised that paying its workers weekly sonal finance app, it’s open banking that often wasn’t enough to meet their needs. allows Emma to aggregate recent transac- It implemented a real-time payment tions and balances from the person’s bank service powered by Mastercard Send™, and/or investment accounts. The same enabling its workers to access and spend technology also enables traditional banks their earnings immediately. to innovate their financial services; many Mastercard Send™ is just as beneficial to already provide customers with a view of small businesses, which can face cash-flow their finances across accounts at different issues. By leveraging the technology, small providers. businesses can conveniently access their 1 NuData Security is a Mastercard company As expected with any new initiative as large earnings on demand, helping them cover 2 Vocalink is a Mastercard company as this, there are challenges that lie behind daily expenses, such as restocking their 3 www.ilo.org/global/topics/labour-migration/lang--en/ the scenes. Overcoming them is critical to store, and helping their business grow. index.html growing trust in open banking among people “Real-time payments can be transform- 4 www.mastercard.us/content/dam/mccom/en-us/docu- and businesses. They might never know ative for small businesses,” says Stoddart. ments/mastercard-send-debit-lift.pdf their favourite financial services apps are "Research shows companies using real-time 5 Tranfast is a Mastercard company RACONTEUR.NET 3

Commercial feature

A Despite ongoing reports that the end of notes and coins is near, a cashless society has yet to GIG ECONOMY WORKERS THINK RECEIVING WAGES MORE FREQUENTLY WOULD HELP THEM MANAGE THEIR FINANCES materialise. In many countries, the amount of cash in

To what extent do you agree or disagree with the following statements? “Receiving my wages/salary at more circulation is actually on the up, though the factors frequent intervals would help me manage my finances more effectively” (n=1,265) CASHING OUT behind this trend - both social and economic - are complex. Digital payments have surged over the Agree Disagree years, but the fact remains that cash is still king in CASH IN THE GLOBAL ECONOMY many parts of the world. This graph shows currency in circulation as a All 26% 39% percentage of GDP. In monetary economics, this is a crude measure of the demand for notes and coins in a 1 JAPAN 2 INDIA country. Simply put, it is the amount of money issued Historically low interest rates, an ageing (and declining) population, and low The dip in circulated money supply in 2016 is attributed to India's by a monetary authority minus the amount that has rates of crime have prompted the Japanese to hoard significant amounts of "demonetisation", which made all lower-denomination banknotes illegal in an been removed from the economy. It is important to cash, with few incentives for the public to deposit their savings into a bank attempt to crack down on black market activities and drive digital payments. And Full-time/part- 25% 41% account. The government expects signficant growth in cashless payments, while the latter has certainly increased, so has the amount of cash in circulation. time employed note that these figures fail to highlight the amount of albeit from a low base. How technology money that is held by coin collectors, held in reserve CASHLESS PAYMENTS AS A SHARE OF TOTAL CONSUMER TRANSACTIONS within the banking system or stored under mattresses. Japan (2019) Japan China (2019) is rapidly (government’s 2025 target) Self-employed 28% 31% 25% 72% of India's consumer transactions still take transforming place in cash, with many merchants in rural areas not able to take digital payments due to a lack of network connectivity and high transaction charges Gig economy 20% 40% 66% the way we pay B 38% 29% Credit Suisse 2020 and get paid eMarketer 2019 3 CHINA

China, which in the early 80s was still largely a cash economy, is now home to the MORE THAN ONE IN TEN UK ADULTS IS A GIG WORKER largest number of mobile payment users in the world (over half a billion). But while the The advance of technology in the past few years major cities rely on digital payments, internet penetration across the whole country is Which, if any, of the following sources of income do you receive personally? (n=2002) has revolutionised our daily lives; think virtual 1 Japan still low, and half of the nation still don’t use their mobiles to pay for goods. assistants, streaming services and conveniently C PERCENTAGE OF THE FOLLOWING GROUPS THAT USER A E I PROXIMITY MOBILE PAYMENTS IN CHINA buying anything from a hotel stay to a car via apps 54% 10% 3% 20% Full-time or part- Investments Property Smartphone users Internet users Total population time employed (long term)

D B F J e now expect technology to solve automate rules to respond and transactions 20% 8% 3% W problems we never knew we had. can be blocked, further verified with a physi- Pension Self-employed Casual or seasonal But when it comes to our money, cal biometric request or put forward for fur- technology advances have been slower. ther investigation. C G K L That is until now. Whether it’s new ways to This approach takes security beyond user E verify our identities, sophisticated banking names, passwords, or other security meas- 12% 5% 1% K Hong Kong 82% 77% 54% apps, permission to share bank account ures bad actors are proficient at bypass- Gig economy Online merchant Contract for online platform data or faster payment solutions for people ing. This security doesn’t only apply at login eMarketer 2019 and businesses, technology is transform- or checkout as the user behaviour can be ing how we pay and get paid. And it is help- monitored across the customer journey, D H L J F ing us to better manage our finances while at moments such as creating an account or 12% 4% 1% I G 4 UNITED STATES addressing one of the biggest risks we all applying for credit, checking the balance on Government benefits Zero hours Property (short term) H face: security. a gift card or asking for a password reset. This approach to user verification helps compa- The US remains behind much of the developed world when it comes to modern payment tech, such as biometrics, mobile wallets and even chip and pin. Mature Sci-fi-style security is here nies remove friction for their trusted users Mastercard 2019 tech infrastructures have some part to play, but a key reasons is consumer attitudes The combination of behavioural analytics while weeding out fraudulent traffic. and an established preference for cash. and passive and physical biometrics reduces Paul Stoddart, president of New Payment 15% the reliance on passwords and security Platforms at Mastercard, says: “The impact questions for user verification, which are of being able to analyse behavioural data “PromptPay has made a significant mark enabled by open banking initiatives, but payments enjoyed a 16 per cent increase in PERCENTAGE OF US ADULTS WHO SUPPORT/DON’T SUPPORT both knowledge-based security tools no is phenomenal. NuData Security¹ helped a on the country’s bid to address financial they expect the experience of using them transactions and spent 46 per cent more A CASHLESS SOCIETY longer reliable in a world with nearly 20 bil- Fortune 200 web retailer defend against a inclusion and support the expansion of to be safe and reliable, and expect any than a control group over four months.”⁴ lion records since 2013. persistent attacker, with its cutting-edge Thailand’s burgeoning digital economy,” issues to be resolved quickly and effec- Another key issue for businesses is pay- However, new solutions using behavioural behavioural analytics service. It tracked 77 says Mastercard’s Stoddart. “Since launch, tively nonetheless. ment risk. Companies need to monitor The success of open All for it OK with it Against it No opinion and passive biometrics security could trans- million logins over 90 days, with 39.3 per PromptPay has attracted 49 million sub- Mastercard Open Banking Solutions™ suppliers and customers to ensure trading 7% 16% 67% 9% form payments. We are already aware of cent detected as high-risk and blocked, and banking will rely on scriptions in a population of 69 million and support the banks, financial institutions partners are in a fit and proper condition. physical biometrics; authenticating mobile 100 per cent accuracy. The attackers modi- establishing trusted processes an average of 4.5 million transac- and third party providers by connecting, This is a huge job involving a vast number payments with a fingerprint or our face is fied their attack pattern and within an hour tions a day.” protecting and resolving issues among of credit risk reports, law enforcement lists now commonplace in the UK. Combine that NuData had updated its modules to rebuff relationships, a brand The Thai government is also using ecosystem participants. Open Banking and media sources. Switzerland with behavioural analytics and passive biom- the new method.” promise, technology, PromptPay to make tax rebates and social Connect provides a single, universal con- A better approach is to use a single procure- etrics and you have a potent combination welfare payments. The Bank of Thailand nection to financial institutions’ open ment platform, such as Mastercard Track™. where the trade-off between security and Innovation in emerging markets processes, and security credits PromptPay among the initiatives that banking functionality regardless of their This streamlines procurement by monitor- convenience no longer exists. Too many people are excluded from the working seamlessly and have resulted in the 83 per cent rise in dig- application programming interface (API) ing more than 4,500 sanction and enforce- Passive biometric authentication relies financial system, lacking bank accounts or ital payments since 2016. The Thai economy standard or implementation. Open Banking ment lists. For suppliers it offers a single 2 India Civic Science 2019 on the way we use our phones, computers access to basic financial tools. This is true in harmony has been transformed. Protect provides financial institutions with portal for credit risk ratings for customers. or tablets, which differs from person to for all economies, but especially for emerg- Additionally, 164 million³ migrant workers verification of third parties, fraud monitor- Preferred payment methods are managed by person. Engines collect hundreds of dat- ing ones. It’s in these markets where we are globally rely on traditional money remit- ing and alerts, while Open Banking Resolve Mastercard Track™. Using a platform such as apoints on each user to build a picture of seeing the greatest innovations in payments. tance methods where payments can take provides a clear framework for resolving Mastercard Track™ ensures maximum com- 5 SOUTH AFRICA their unique biometric identity. For exam- Take Thailand, where digital payments are five days to clear and often lack transpar- disputes, which is fundamental to securing pliance with legal duties and frees up staff to 10% Singapore ple, how fast do they swipe and type on the challenging the dominance of cash. Despite ency. In the Gulf Co-operation Council people's and businesses’ trust. focus on core commercial activities. Russia South Africa has one of the most mature banking ecosystems across Africa, and digital screen or keyboard? a relatively high proportion of the popula- The result was PromptPay, a real-time region alone there are 35 million migrant “The success of open banking will rely payments are growing fast, with mobile POS payments up 51 per cent in 2019 (Statista). The range of information expands with the tion having a bank account, millions lacked payment platform that allows people and workers, primarily from India, Bangladesh on establishing trusted relationships, a And finally Meanwhile, the distribution of ATMS across the country is much lower than other behavioural analytics layer, which leverages access to banking and financial services, and businesses to make and receive payments and the Philippines⁴. Transfast⁵, a company brand promise, technology, processes, and Behavioural analytics, innovative new appli- regions, which could go some way to the low level of cash in circulation. the data from the passive biometric tech- almost half of all Thais paid in cash for inter- instantly into their bank accounts or digital recently acquired by Mastercard, enables security working seamlessly and in har- cations and faster payment solutions are all 3 China nology and collects insights, such as loca- net purchases. wallets linked to their national ID, corporate people to make cross-border payments to mony,” says Stoddart. “That’s why it’s key destined to change our financial fortunes NUMBER OF ATMS PER 100,000 POPULATION tions, how the device is connected to the The government and central bank of ID or mobile phone number. This underlying family or friends in more than 50 curren- to address fundamental challenges such as as both individuals and small businesses. internet, historic payment patterns or device Thailand approached Vocalink² to help them infrastructure allows Thai people to make cies nearly anywhere in the world. It’s fast, fragmentation in API standardisation, fraud What’s interesting is how new partnerships 4 United States and browser type. The vast data creates an modernise its national payments system, purchases in-store or online, pay bills and secure and transparent, and offers a variety risk and dispute resolution. are essential to deliver pioneering prod- accurate score for each user in real time. If to reduce fraud and risk in the system, donate to charities, and send and receive of pay-out methods, including into a bank We believe that by addressing these chal- ucts, often partnerships that meet customer Global average 28 an attempt to make a transaction is flagged reduce the use of cash and increase finan- money to other people securely from their account, digital wallet or cash. lenges, as we’re doing with Mastercard needs and would not have been thought pos- as high risk, the financial service provider can cial inclusion. digital banking app. Open Banking Solutions, we can support sible just five years ago. Western Europe 33 Saudi Arabia Power of open banking the development of an open banking eco- This era of collaboration will underpin fur- Americas 32 The UK has seen the birth of hundreds of system that will revolutionise how millions ther innovation as the financial sector is dis- Mexico creative fintechs thanks to its mandated manage their financial futures both locally rupted by new, creative ideas designed to Asia Pacific 39 open banking initiative. Open banking ena- and globally.” boost both companies’ bottom lines and our South Africa 17 bles people and businesses to share access own financial wellbeing. Technology is pro- South Korea to their bank account data with other pro- New payment methods can transform foundly changing our relationship with our Pymnts.com 2019 viders securely to access a range of new small businesses money at pace. financial services. It has the power to revo- The gig economy is booming, but life as a lutionise how we interact with our money by gig worker can be challenging; the work can Argentina 5% Indonesia providing a wealth of services such as better be volatile, there are often daily expenses, 6 SWEDEN budgeting, savings innovations, access to such as buying fuel for the car. For those Discover more of our thinking on the fairer credit and techniques to improve our who rely on gig work as their main source of frictionless future at mastercard.com/ Canada With many cafés, restaurants and retailers only taking card payments, overall financial wellbeing. income, any delay in receiving earnings can frictionlessfuture Sweden is touted to enter the cashless era first . Instant P2P transfers are now For example, when a person uses Venmo, a put a strain on personal finances. In a com- ubiquitous with the most well-known app, Swish, boasting over 7.4 million Brazil digital wallet that lets them make and share petitive landscape, gig workers will source private users, compared with a national population of just over 10 million. Turkey payments with friends, it’s open banking work from platforms that allow them to UK that allows Venmo to initiate those pay- access their earnings on demand. 5 South Africa ments from the person’s bank account. Or For example, a popular ride-sharing app PERCENTAGE OF SWEDES WHO PAID IN CASH FOR THEIR MOST RECENT PURCHASE when they use Emma, a budgeting and per- recognised that paying its workers weekly sonal finance app, it’s open banking that often wasn’t enough to meet their needs. 39% allows Emma to aggregate recent transac- It implemented a real-time payment tions and balances from the person’s bank service powered by Mastercard Send™, 33% and/or investment accounts. The same enabling its workers to access and spend technology also enables traditional banks their earnings immediately. 23% to innovate their financial services; many Mastercard Send™ is just as beneficial to 6 Sweden 15% already provide customers with a view of small businesses, which can face cash-flow 13% their finances across accounts at different issues. By leveraging the technology, small providers. businesses can conveniently access their 1 NuData Security is a Mastercard company As expected with any new initiative as large earnings on demand, helping them cover 2 Vocalink is a Mastercard company 0% 3 as this, there are challenges that lie behind daily expenses, such as restocking their www.ilo.org/global/topics/labour-migration/lang--en/ 2012 2013 2014 2015 2016 2017 2018 2010 2012 2014 2016 2018 the scenes. Overcoming them is critical to store, and helping their business grow. index.html 4 growing trust in open banking among people “Real-time payments can be transform- www.mastercard.us/content/dam/mccom/en-us/docu- Bank for International Settlements 2019 Riksbank 2018 and businesses. They might never know ative for small businesses,” says Stoddart. ments/mastercard-send-debit-lift.pdf their favourite financial services apps are "Research shows companies using real-time 5 Tranfast is a Mastercard company 4 FUTURE OF PAYMENTS JOHANNES EISELE/AFP Images Getty via

FUNDING On the venture capital side, their attitude right now is ‘family first’. They VC funding are looking after their uncertain as own investments profit trajectories and timescales for invest- ment returns. “Profitability was a widespread issue for the industry before, but the COVID-19 crisis interest wanes is shining a very bright spotlight on it now,” explains Bodragin. “Simply put, many companies in the fin- As investors seek bargains in the post- tech space did not have realistic plans or COVID-19 landscape, challengers in the business models to turn a profit. Their plans consisted mostly of waiting for further payments sector are having to work hard to investment and hoping to grow large enough to crowd out the competition. secure funding and justify lofty valuations “Now, with COVID-19 raging, investors are going to sit on the fence and hold back their financing plans. Entrepreneurs will need to adapt, and only the companies run by adapt- Joe McGrath able and creative leaders have a chance of sur- viving this crisis.” However, the pressure on challenger pay- uccess stories in the payments sec- ing groups. “They are looking after their ments companies to justify their valuations S tor such as PayPal, Square, Stripe own investments.” could have positive repercussions as the sec- and TransferWise are indicative of Investors in the market say that VCs are tor begins to emerge from the crisis. the huge disruption the sector has seen over likely to maintain this position for some time, A trader reacts during the George Davies, a partner at Hambro Perks, the past decade. which means some fintechs may disappear opening bell at the New says while the pandemic has created a more Investors have been bullish on the return from the payments landscape altogether. York Stock Exchange as challenging funding environment, it has global markets crashed potential from payments challengers, sup- George Barrow, a fund manager with Polar pushed innovation to become a more impor- in late-February ported by impressive growth predictions by Capital’s financials team, explains: “I would tant commodity than ever. market analysts. expect VCs to become more circumspect, “It has a huge role to play in solving the In September 2019, consultants at McK- which will put pressure on certain capital “In financial services this is never a quick issues borne out of the coronavirus pandemic insey & Company published their forecasts intensive fintech models and those with long ECONOMIC IMPACT OF COVID-19 IS COMPARABLE TO THAT OF THE 2008 process, as there are strong regulatory breaks and helping the world re-adjust following the for the sector. Analysts projected that reve- pathways to profitability.” FINANCIAL CRISIS on these kinds of deals, but many small com- crisis,” he says. “Outstanding businesses will nues would continue growing at a steady 6 Beaumont adds that while VC firms are Analysis by McKinsey showing the correlation between global real GDP and payments revenues (%) panies could find themselves in trouble. We continue to be funded by far-sighted investors. per cent each year, between 2018 and 2023. looking after their existing investments, cor- can expect a large number of M&As in the “Challenging circumstances often breed Globally, this means revenues would grow porate venture funds, which tend to look for coming months.” the best innovation; look at the companies Global payments revenue Real GDP from $1.9 trillion in 2018 to $2.3 trillion value opportunities, are sitting on their cash Incumbents of every industry, not that emerged following the Great Financial by 2023, with the most significant growth piles and playing the waiting game. 20 just financial technology, will be look- Crisis and have defined the period since.” occurring in the Asia-Pacific region from “Corporate venture is really interesting ing for opportunities to capitalise on Analysts agree that we should expect to Spike in interbank lending rates $0.9 trillion to $1.2 trillion. in that it seems to have stalled,” she says. affordable acquisition. see a great many casualties across the fintech However, the forecasters at McKinsey “They are drawing down hundreds of bil- 15 Marwan Forzley, chief executive of pay- landscape, during the crisis. However, there warned: "A downturn, even one far less pro- lions of dollars from revolving facilities ments platform Veem, agrees. “It is very plau- is also broad agreement that the market will European debt crisis nounced than the [2008] Great Recession, from banks.” and bailouts in several sible to see an increase in M&As of smaller see a smaller number of high-quality chal- would adversely affect investment and merg- These funds may have watch lists or be 10 European countries finance providers leveraging technology by lengers emerging. ers and acquisitions (M&A) capital.” Nine waiting for distressed opportunities, Beau- large financial consortiums,” he says. “This Within fintech, M&A activity has always months on and this exact scenario has started mont explains. But the bargain hunters are activity was already happening pre-crisis, but been a key component and the current crisis to play out. not limited to corporate venture firms in the 5 at a higher price tag. will only reinforce that, according to Jeroen Fintechs that were hoping to secure invest- current climate. “Legacy payment institutions will be van Oerle, portfolio manager at Lombard ments for the first time have found backers Market analysts say rival legacy firms looking to use their balance sheets to make Odier Investment Managers. 0 are more reluctant to part with their cash, and institutional investors alike are waiting aggressive moves in the market. Incum- He explains: “Payments is a scale game. while many of the traditional sources of lend- for valuations to hit rock bottom so they can bents, in all industries, are definitely doing Either companies can grow organically or ing have also dried up. snap up the payment firms of tomorrow at a -5 their research.” through M&A, which is much faster but Venture capitalists (VCs), once the cheer- fraction of the price they previously would As funding sources start to become fewer, comes with integration challenges. It is likely leaders for disruptive payment compa- have paid. Impact of COVID-19 crisis investors are being far more choosey about M&A is back on the agenda again with valua- nies, have made a substantial retreat from “We can already see private companies and -10 where they deploy their capital. When cash tions coming down. new investments. private investors sniffing around and check- Global financial crisis was easier to come by, some fintechs were “A second component to M&A is how to “On the venture capital side, their atti- ing up on a fair number of companies, ready able to land funding by showcasing compel- finance it. Balance sheet focus is high and the tude right now is ‘family first’,” says Dr to buy them out as soon as the price goes low -15 ling products with a convincing disruptive listed market generally prefers low leverage. Louise Beaumont, chair of techUK’s smart enough,” says Konstantin Bodragin, a busi- 2009 2020 narrative. In the post COVID-19 world, how- This will have an impact on M&A, even when data, open banking and payments work- ness analyst at Brüc Bond. McKinsey 2020 ever, business plans are being scrutinised for valuations become more attractive.”

Konsentus. Confidence in Open Banking

Open Banking is transforming financial services. Advances Real-time automated checking of TPPs and the protection in technology and the entry of Third-Party Providers (TPPs) against Open Banking fraud is the reason Mastercard chose offering consumers new and innovative ways to access and to implement Konsentus Verify as part of its Open Banking manage their financial data increases Financial Institutions’ offering. With Konsentus Verify, Financial Institutions can exposure to Open Banking related risk and fraud. be confident that their customers’ data is only ever being shared with legitimate and regulated third parties for the Konsentus Verify, the Software as a Service (SaaS) solution purpose for which it was requested. from Konsentus helps protect Financial Institutions from PSD2 Open Banking risk and fraud by combining data on the Headquartered in the UK, with operations across Europe, identity and regulatory status of Third-Party Providers (TPPs) Konsentus helps deliver the confidence Financial Institutions from the different sources across Europe. This provides need to grow their business and deliver against regulatory Financial Institutions with a consolidated and real-time view of requirements whilst knowing their customers are protected. the data so informed risk decisions can be made.

At Konsentus, we identified the increased risk of fraud as an inevitable by-product of an open and accessible payments ecosystem. It will Customer undoubtedly become a global “issue as other regions follow Europe’s lead.

Mike Woods, CEO Konsentus

The Konsentus Verify solution

To find out how we can help you mitigate risk, prevent fraud and limit liability contact [email protected] or visit www.konsentus.com

Risk Fraud Rapid Simple Always Cost mitigation reduction deployment integration available effective RACONTEUR.NET 5 CommercialCommercial feature feature

CORONAVIRUS

LOCAL E-WALLETS FOR LOCAL USERS Online shift is a boon Full list of Alipay's current e-wallet partners

Chinese mainland 1 for payments tech Alipay India 2 Paytm The coronavirus KXITHVISUALS/Unsplash Thailand 3 pandemic represents TrueMoney Wallet a turning point for the Republic of Korea 4 payments industry, as KakaoPay those companies that The Philippines 5 have invested heavily GCash 4 in digital and mobile Hong Kong 9 1 6 technologies thrive Alipay HK

10 6 Malaysia 2 7 Touch 'n Go Oliver Balch 3 5 Indonesia 8 DANA usiness has never been better 7 8 B at Azimo. The COVID-19 crisis Pakistan may have sent the global econ- 9 omy into a tailspin, but this Amster- Easypaisa dam-based remittance service has seen Bangladesh transactions jump by nearly a third in 10 recent months. bKash It doesn’t take a rocket scientist, or even an economist for that matter, to explain why. Consumer spending has tanked, but people still need money for basic essen- tials. In times of economic crisis, this need is greater than ever, leading to a spike in money transfer demand. But why fintech solutions? Again, the answer isn’t tricky to pinpoint. While estab- lished players such as Western Union and Moneygram remain open for business, heading down to a bricks-and-mortar office has become significantly less attractive Preparing for a new during lockdown. So argues Michael Kent, Azimo’s chief TOP THREE REASONS CONSUMERS ments platform based on gold bullion, executive. Of course, he is quick to list the TURN TO FINANCIAL PRODUCTS FROM which reported a seven-fold increase in world of payments other advantages of a digital-based service; purchase activity during the first month NON-TRADITIONAL PROVIDERS lower fees, quicker delivery, greater secu- of lockdown. rity, simpler app-based payments and more Gold’s long reputation as a stable store of flexible collection options. value makes it a popular default in times of As payment systems, and what consumers expect from them, continue Yet the pivotal role of COVID-19 isn’t lost crisis, Glint Pay’s chief executive Jason Coz- to evolve at a rapid pace, lockdown presents a unique opportunity for on him. While it’s very unfortunate that it ens points out. Hence, the decision by this has taken a pandemic for digital payments UK fintech, which offers a prepaid debit businesses to enhance their offerings to scale, the offline-to-online switch has 72% Lower costs Mastercard, to launch a new person-to-per- been long in coming. son transfer product mid-crisis. “There’s been an accelerated shift in con- “An ounce of gold would have bought a sumer behaviour, but we think we’re riding Roman toga 2,000 years ago and today it’s a 15 to 20-year wave here with the digitisa- worth £1,356, which is more than enough to tion of financial services,” says Kent. buy a very nice outfit,” Cozens calculates. he payments landscape has “The way people pay for goods and governments in countries such as A similar mood of optimism is appar- Despite its reputation for price volatil- T evolved dramatically. A decade services may have transformed signif- Belgium and Italy made statements ent among other digital transfer compa- ity, some crypto-based payment provid- ago cash was still the domi- icantly in the last decade, but that’s encouraging cashless payments. nies. WorldRemit, for example, reports ers are also seeing an upswing. Among nant form of payment. Yet by last year, nothing compared to the changes we’re Italy, in particular, is a traditionally that the COVID-19 pandemic has com- them is Wirex, a UK mobile payments less than a fifth of retail transactions expecting to see in the next five to ten cash-centric country, but has seen the 68% Ease of use pounded the double-digit growth expe- platform, which clocked around 60,000 were made using cash and the shift to a years,” says Timea Benczik, payments volume of ecommerce transactions rienced in the run-up to the virus. Sim- new customers in the initial stages of the cashless society has been accelerated director at online foreign exchange and increase by 81 per cent, according to ilarly, Remitly reported a 40 per cent COVID-19 outbreak. even further during the COVID-19 pan- contract for difference broker Exness. McKinsey & Company. growth in transaction volume between Pavel Matveev, Wirex’s chief executive, demic, with many retailers refusing to “The arrival of blockchain has already The reliability of digital payments, February and March. says the firm’s growth partially derives accept it altogether. been a game-changer as the technology thankfully, has experienced little inter- Another beneficiary of the crisis is the from the seamless transition offered by its The pace at which payments are underpinning cryptocurrencies, but its ruption, earning plaudits for the robust- cashless payments market. With consum- Visa-like debit card, which can be topped up transforming continues to increase. In impact on payments is yet to be fully ness of infrastructures globally and ers worrying about health risks of handling with either traditional or crypto currency. a few short years, online payments have experienced. The anonymity, increased spikes in public trust. However, the coins and bank notes, the appeal of contact- 54% Faster service Helping nudge first-time consumers across gone from being hailed as revolution- security and data veracity enabled by economic crisis resulting from the pan- less cards and mobile wallets provides an the line is Wirex’s reward offer to pay back ary to being dismissed as archaic if they blockchain and cryptography will pres- demic is certain to impact the payments obvious alternative. up to 1.5 per cent of in-store purchases in do not encompass the growing array of ent many exciting opportunities in this industry, with the Office for Budget More than one in four (27 per cent) small crypto currency. features, rewards and security layers space in the years ahead. Responsibility warning UK GDP could fall businesses in the United States already Even for the pandemic’s winners, how- desired by consumers. The expecta- “Meanwhile, we also have the loom- by 35 per cent in the coming months. report an increase in contactless payment ever, the bleak prospects for consumer tions of millennials, in particular, have ing possibility of biometric payments An economic recession will affect rev- Capgemini 2019 services, such as Apple Pay, according to spending mark a cloud on the horizon. His- forced fintechs constantly to re-evaluate becoming part of our everyday lives. enues right across the payments ecosys- a survey by the Electronic Transactions tory shows that spending drops sharply But while biometric technology means a tem, though the upside is that when the Association. Even the US Treasury Depart- during a recession, US bank Wells Fargo unique sense of security we cannot have world economy does resume, the same ment is now allowing unbanked individu- notes, albeit with an upward surge when through any other means of payments, systems, and probably new ones, will be als to receive their relief cheques via mobile it ends. the ethical concerns that come with it, relied upon to facilitate recovery. payments services. “We were expecting people to spend more particularly around privacy and personal “Lockdowns around the world have Retailers are encouraging the trend online, but when we checked the data, it’s data, need to be suitably addressed given many organisations the time towards cashless as well. Restaurant chain clear most people are looking to save money before it can reach widespread use. to step back and observe consumer Burger King is prompting people to use an and cut their overall spending back,” Lockdowns around “Personalisation will take the user behaviour in light of the pandemic,” order-ahead app to pay for drive-through says Matveev. the world have given experience of payment solutions to the says Benczik. “Given the unfortunate, We were expecting people orders, for example, while Walmart has Much will depend on the sectors to next level, with artificial intelligence and yet almost certain, economic conse- to spend more online, but removed the need to press its “pay now” which payments providers are exposed. many organisations big data the key drivers in collecting the quences that will follow, as well as the button before a contactless payment. Those with a high reliance on hard-hit ver- the time to step back transactional data of individual users social behavioural changes we’re likely it’s clear most people are Other winners from the fallout of COVID- ticals, such as travel, leisure and accom- and making it possible to build a unique to see, companies have a solid time- 19 stem from fears over pending inflation modation, are in for a torrid time, while and observe consumer user journey for each consumer.” frame in which they can plan, trans- looking to save money and form and adapt to the new reality that and currency instability. One illustrative it’s the opposite for those with a foot in behaviour in light of Payments are, of course, the liveli- cut their overall spending winner is Glint Pay, a multi-currency pay- COVID-19 growth markets, including food hood of businesses and failing to meet is to come. delivery and home entertainment. the pandemic increasing demands can be detrimen- “These behavioural shifts are likely Most of the sector’s biggest players are tal. While the vast majority of fintech to become more prevalent over the spread across multiple sectors, providing companies are generally keeping up long term, including around payments, them with something of a hedge. Despite with customer demands in this field, so it would be sensible for businesses Coping with crisis a downturn in various key markets, for evolution of this scale within a busi- and retailers of all sizes to use this time instance, blockchain payments processing how payment solutions can be more ness is no easy feat and requires heavy to ensure they can compete when it Even for COVID-19’s winners, the provider BitPay saw demand in industries convenient, creative and secure. investment both in technology and comes to providing customers with a magnitude of the coronavirus pandemic such as software, IT services and currency Mobile technology is now at the fore- skilled personnel. variety of payment options. has thrown up unprecedented challenges. exchange jump 10 to 40 per cent in the first front of the payment industry’s evolu- “If there are businesses that are “Generation after generation of con- Despite an upsurge in payment volumes, quarter of 2020. tion as the overwhelming majority of being held back from adapting as sumers become increasingly demand- for example, money transfer companies “While the financial markets and the price consumers rely increasingly on mobile quickly as what would be ideal, this is ing of digital services and this will are facing difficulties in delivering of bitcoin have fluctuated, the number of apps for a variety of transactions and most likely the reason,” says Benczik. not slow in a post-COVID world when payments. In countries such as Argentina, purchased customer transactions through other banking services. “This also depends on the indus- people will want even more perks, cre - the Philippines and Senegal, for example, BitPay has remained unchanged”, says Bill As digital natives, the younger gener- try. In the online brokerage world, for ativity, security and control in the way cash pick-up facilities are closed, while in Zielke, the firm’s chief marketing officer. ations who use online payment meth- example, there is much more to con- they pay for things. many other markets opening hours have For Dutch investment company Finch ods the most have already learnt to sider when offering the best payment “Some of the key trends we’ve seen been cut back dramatically. Capital, the digital payments market is manage all aspects of their financial life method for clients, including compli- brewing include introducing social That said, regulators are green-lighting acceleration of digital solutions, such experiencing a best-of-times, worst-of- on their smartphones. As a result, tech ance and regulation. Brokers always media platforms as a gateway to pay innovations to help keep money flowing. as the use of electronic signatures, times scenario. As the firm observes in a firms and financial institutions alike are look for trusted partners with low fraud for a product or service, for example In Kenya, for example, small and medium- blockchain-based solutions and report on COVID-19’s impact on the fintech racing to lead the drive towards mobile ratings to ensure the highest level of through the simple click of a buying sized enterprises (SMEs) are now permitted automated processing. sector, the end of cash may be nigh, but payments. Accenture predicts 64 per know your customer.” button on the social media page of the to transfer KES150,000 (£1,200) a day via Despite such advances, however, a level headaches await. cent of consumers will use a mobile Most organisations are going through business they are purchasing from. This Safaricom’s M-pesa mobile money service, of institutional inertia remains, warns According to the World Bank, for exam- e-wallet service this year, up from 46 a challenging period in light of the behaviour has already been observed more than double the previous level. ICC secretary general John Denton. With ple, a drop in migrant workers’ incomes per cent three years ago. COVID-19 pandemic. Yet while the among the current generation, so the While the money transfer industry SMEs in emerging economies facing a could see the remittance market shrink E-wallets combine numerous fea- near-shutdown of the economy has younger demographics that are true is hyper-aware of the challenges faced very real liquidity crisis, the ICC is calling by 20 per cent in 2020, the largest annual tures craved by consumers, most undoubtedly been staggeringly disrup- digital natives and even more inclined by customers, regulators and financial on governments to speed the shift to decline in the past century. notably unprecedented simplicity and tive, it has also propelled many compa- to interact on social platforms will institutions alike have responded with digitalisation, including payment of Grim as macro-economic conditions convenience, supported by mobile nies forward when it comes to remote almost definitely expect this.” “really smart, joined-up thinking”, says emergency business relief packages via look, COVID-19’s once-in-a-generation integration, use across multiple plat- working and presented a unique chance Steve Moffat, director of payments at non-cash means. boost for digital solutions is pushing the forms and robust security. Crucially, in to reassess, re-evaluate and restruc- WorldRemit. “We are looking at mobile payments payments market into a new era, says Nigel an age of globalisation, they also facil- ture numerous parts of their business. For more information please visit A similarly positive, albeit ad hoc, systems and digital wallets, as well as Green, chief executive of the Zurich-based itate cross-border transactions, elimi- This includes the opportunity to look at www.exness.com response is evident in the wider expanding the remit of credit card financial consultancy deVere Group. nate the need to have a bank account their payment systems. financial sector. A recent report by the providers,” says Denton. “These are the “Without question, this is a major turn- with a physical entity and allow for pay- Electronic transactions have risen International Chamber of Commerce sorts of things we need to make businesses ing point,” he says. “And those payments ments in local currency. Statista esti- sharply with the introduction of (ICC), for example, highlights a rapid resilient and keep them liquid.” companies that have invested in mobile mates there will be 1.31 billion proximity social distancing, especially in the ini- and digital technologies will be the payment transaction users by 2023, up tial stages when people feared cash likely winners.” from 950 million last year. was able to transmit the virus and 6 FUTURE OF PAYMENTS FINANCIAL INCLUSION 1.3m unbanked adults in the How tech UK, with one in five of those living in London is fighting 4.1m UK adults are defined as being financial in financial difficulty exclusion From improving access to cash through to 3.1m flexible loan arrangements, technology is have high-cost loans helping ease the financial burdens of some living from paycheque to paycheque 57% Ben Edwards

s the world moves towards a more The pandemic also risks plunging mil- Westend61 Images Getty via of the adult population have no cash A digital future, millions of consum- lions into financial distress as businesses savings or savings of less than £5,000, ers without access to finance are at lay off staff and some self-employed rising to 67 per cent in Northern Ireland risk of being left further behind. or recently hired workers miss out on There are around 1.3 million unbanked government support. adults in the UK, according to the Finan- Digital debt advisers such as Tully, which cial Conduct Authority (FCA), while the was originally set up as a personal finance 2019 Access to Cash Review shows that more management tool to help those on low and than 15 per cent of people with an annual unpredictable incomes get a grip on their % income under £10,000 rely entirely on finances, are expecting to see increased could make a real difference. It might mean Other companies are also working on allow them to make online transactions 71 cash to make payments. demand for their services as the economic paying more over time, but given the chang- ways to improve access to finance for those with a virtual debit card, which means Yet while technology could potentially impact of the pandemic grows. ing nature of incomes that people are going on low incomes. Glasgow-based Soar has users can participate in the digital econ- have no investments at all make financial inclusion more challenging, “Our main purpose is to help people to experience, not just because of the global built a digital banking platform for credit omy without having to open a bank some businesses believe tech is the answer to with long-term financial difficulties, but pandemic but with the rise of the gig econ- unions and community banks, which have account, says Duncan. Financial Conduct Authority 2018 improving access to finance. in response to the current crisis we set up a omy and that style of working, having the often struggled to compete with the likes of Another problem credit unions have Take Pockit. It is trying to fill the vacuum solution that enables creditors to refer cus- flexibility to manage your budget with vari- payday lenders, despite offering lower inter- faced is appealing to younger customers left by high street banks by providing mobile tomers who are going through short-term able payments would be great.” est rates. who lack access to finance. Enter fintech banking to those on low incomes, allowing difficulties and want to check their eligibil- Another area where those on low incomes “Traditionally the process of applying company Nivo, which has created a mes- them to make digital payments while still ity and apply for payment relief,” says Olly have often been overlooked is access to suita- for a loan through a credit union is not very saging platform that allows users to com- being able to withdraw cash. “The high street Betts, chief executive of OpenWrks, the com- ble savings products. Around one in four UK digitalised and is fraught with paper-based municate with their credit union through a 15% banks make it incredibly difficult for people pany behind Tully. adults has no savings, according to the FCA. exercises, so it just takes ages to get a deci- smartphone app. to access basic current accounts if they don’t Tully uses open-banking technology to “There’s always a push to advise those on sion, whereas going through a payday or “Credit unions are still very relation- have a photo ID and a good financial history,” enable people who are struggling finan- low incomes to save, but there’s very little other high-cost lender, people generally get ship-orientated organisations, so while with an annual income under £10,000 says Virraj Jatania, chief executive of Pockit. cially to smooth out their debt repayments understanding of the reality of people who results in minutes,” says Andrew Duncan, a lot of people will try and build technol- rely entirely on cash to make payments Jatania says the coronavirus pandemic by adjusting what they pay each month live paycheque to paycheque,” says Jatania. chief executive of Soar. ogy that, if they can help it, won’t touch a Access to Cash Review 2019 has underscored the need to make digital based on their current income level. Betts Pockit has tried to solve this by offering a Soar’s technology means credit unions human being at all, that’s not compelling payments more accessible for financially believes COVID-19 could encourage banks different type of savings account that also can now match that by speeding up the to credit unions because they still want to vulnerable people given the constraints on to adopt this concept more broadly across helps improve users’ credit scores, poten- decision-making process and, through have relationships with people while also cash usage during the health crisis. the industry and shift away from fixed tially giving them better access to finance the Faster Payments Service, disburse being digitally accessible,” says Mike Com- “One of the problems at the moment “The cash economy has many limitations, monthly repayments. in the future. Customers set a savings tar- loan funds in a matter of minutes, help- mon, chief executive of Nivo. with people who are more financially which were exposed by the virus outbreak “If ever there was a catalyst or a time for get, which Pockit then locks away as a 0 per ing steer people away from more expensive Common also has an eye on Nivo’s future excluded is that finance can be quite bor- as many stores would not accept cash pay- it to be possible, it is now,” he says. “Just cent loan. As customers repay the loan each payday lenders. potential as a channel for personal finance ing, but if you can deliver people relevant ments and many elderly were told to self-iso- imagine if your bank gave you a slider so month, they grow their credit score and at Soar is also teaming up with payments management tools to distribute financial personalised insights in a fun and gam- late without the means to shop for essentials you could notch down your loan repayments the end of the loan period they get to unlock platform Modulr to offer credit union advice powered by artificial intelligence ified way, you can make finance more online,” he says. to 90 per cent for a couple of months, that their savings pot. members a payments account that will directly to customers. engaging,” he says.

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Residents in Madrid celebrate the April Fair at their balconies during the Covid-19 Pandemic; Spain has vowed to roll out a universal basic income “as soon as possible”

BASIC INCOME FACIAL RECOGNITION Joaquín Images Corchero/ Europa Getty Press via Virus fallout could Facial recognition usher in the UBI era continues to As governments the world over continue to grapple with the devastating divide opinion economic and social consequences of the coronavirus pandemic, the argument for a universal basic income has begun to gather speed Data is the most valuable commodity of the modern era. Global tech giants thrive on collecting it and making a profit from it. So the march towards facial recognition payments may seem unstoppable. However, Oliver Pickup the idea that our faces are being harvested and stored digitally is raising

uy Standing says he is struggling piece Utopia, about an imaginary, ideal “Take, for instance, when the US govern- far more than a few eyebrows. Here are the pros and cons G to keep his feet on the ground, pun island state. And although there have been ment announced it will issue money to all unintended, presumably. The pro- some small UBI pilots, notably in Finland citizens via so-called helicopter drops. It has fessor of development studies at the School and India, the transition from theory to to work with a variety of different banks that of Oriental and African Studies, Univer- practice has been hard to navigate, not least each have their own processes and infra- Emily Hill sity of London, is the world’s pre-eminent because questions linger around how such structure to transfer money. It can also only authority on universal basic income, or UBI, schemes should be funded. reach those with a bank account. If everyone a model for providing every person with an Now, however, at a time when an esti- were given a crypto ‘Fed wallet’, though, they unconditional sum of money, regardless of mated 1.7 billion adults are unbanked and could instantly credit people with tokens to Pros employment status or resources. without access to a bank account, block- use to purchase goods and services.” Indeed, promoting the concept of UBI, chain technology, which promises immu- A project exploring blockchain-backed which is designed to enable a baseline tability, decentralisation and transparency, UBI is GoodDollar, a decentralised, not- f course, there are many pros “It appears consumers are becoming But when it comes to facial recog- standard of living and address wealth ine- could be the answer to building a UBI mech- for-profit organisation supported by Assia’s O when it comes to facial recogni- more accepting when they are trading nition payment we’re in unregulated quality, has been his life’s work. And now, anism at scale. Dozens of organisations are eToro. “Theoretically, everyone can receive tion payment, especially from biometrics for convenience in the pri- territory as legislation lags behind the aged 72, after struggling to be heard for the seeking to both deliver and finance UBI a GoodDollar token into a crypto wallet, not the industry’s point of view. After all, vate sector in terms of faster and more latest technology. best part of half a century, he is suddenly through blockchain tech. needing to jump through the regular hoops devotees of the iPhone are already using secure payments,” says Gus Tomlin- The industry should, perhaps, be look- inundated with media interest and his dec- “From a practical standpoint, blockchain of opening a bank account and effectively it if they have the latest model, making it son, general manager of identity fraud ing to France where the first standard reg- ades-long toil is vindicated. offers the possibility of financial inclusion helping to reach the unbanked,” he says. already the new or latest normal. at GBG, a global leader in identity data ulation applicable to biometric systems at Hordes of others, crucially across the to everyone,” says Yoni Assia, chief exec- Assia, who believes “wealth inequality is a crit- intelligence. “Most prominently, we work was introduced. It prescribes spe- political divide, are joining the UBI conver- utive of investment platform eToro. “In ical challenge of our time”, concludes: “The cur- have seen Apple enabling facial cific requirements for processing biomet- sation, owing to the financial dire straits contrast to the traditional finance system, rent global crisis highlights the need for a new recognition to unlock phones, ric data to control information systems in many millions of people are in because it provides a frictionless way to transfer economic order, and I believe it will inevitably the first step in extending the context of business tasks. of the COVID-19 pandemic. “I had eight wealth to those who need it. advance and accelerate efforts to deliver UBI.” strong authentication to This is in stark contrast to the situa- interviews yesterday, from eight different access apps.” tion in India where the world’s largest countries; it’s just mad,” a weary but will- When it comes to giv- biometric identification programme ing Standing, who last year, at the behest ing out your facial char- comprehends roughly a billion regis- SUPPORT FOR UNIVERSAL BASIC INCOME of former shadow chancellor John McDon- Gallup/Northeastern University 2019 acteristics, why would tered users (the entire population is 1.3 nell, wrote a basic income report designed UBI has been suggested as a way to help people who lose their jobs because of advances in you worry if you’ve billion) and facial recognition privacy to inform the Labour election manifesto, artificial intelligence. The following data shows the percentage of UK adults in support for... already given away concerns are very serious. reveals over Skype from Geneva. your thumbprints to “Upon its creation, Aadhaar was UBI Higher taxes to fund UBI Companies that benefit from AI advancements “It’s hard to keep up with all the requests, to pay more taxes to fund UBI your phone, photograph largely viewed as a well-intentioned but it feels like a pivotal moment. I would album to Instagram, initiative that could stem government say the probability of basic income being contacts book to Face- waste and protect citizens’ identities,” implemented has gone from 20 to 50 per 77% book and so on? Tomlinson explains. “Today, many cent. It’s time for humility, though, rather Overall 53% “Currently, conven- view it as a mass-surveillance tool that than having a ‘I told you so’ attitude.” 66% ience still beats other infringes privacy rights.” The COVID-19 outbreak and its fall- concerns,” says John Currently, the European Union’s out, which experts agree will be long and Age Erik Setsaas, vice General Data Protection Regulation painful, has shifted policy proposals president of inno- is meant to prevent abuse of our pri- that a month or two ago were dismissed 84% vation and iden- vacy. Geoff Anderson, senior part- as radical and fringe, such as UBI, into 18-29 54% tity, at digital nerships manager at Digital Catapult, the mainstream. 59% identity fintechurges companies using biometric pay- “I believe the economic crisis that is going to Signicat. “Peo- ment technology to get ahead of poten- come will cause more death and misery than ple use Google for tial future problems. “The appeal of the coronavirus outbreak itself,” says Stand- 81% mail, maps, docu- biometrics is obvious: it’s easy to use, ing, who co-founded Basic Income Earth Net- 30-49 49% ments and search- almost impossible to lose your facial work in 1986. He predicts “widespread chaos” 65% ing, even though characteristics and also quite sci-fi,” if prime minister Boris Johnson’s government we know Google he says. “We’re at the relatively early “throws lots of money wildly into job-reten- collects informa- stages of the biometrics life cycle, 72% tion schemes”, mostly because the cash won’t tion and creates so what we do now will really set the 50-64 reach “where it needs to get”. 54% a profile.” agenda for its future use.” Attitudes towards UBI are changing rap- 70% idly. For example, at the end of March, a 170-strong, cross-party group of parlia- 66% mentarians called for UBI to be introduced 65+ 54% Cons in the UK. That was before Spain, in mid- 77% April, became the first country to agree to rollout nationwide UBI. Many other coun- There is obviously a lot of excitement “While the benefits are endless, busi- which isn’t easy to navigate, plus there tries, including Japan, Australia, the Neth- around facial recognition technology nesses must also consider the risks that is reputational risk if companies aren’t erlands, New Zealand, Brazil and Singa- and its implications for the future of arise from deploying face recognition seen to be taking privacy seriously.” pore, have expressed their intentions to Five advancements in UBI payments, and rightly so. But it’s impor- systems as they need to take appropri- It’s also important to understand the follow Spain’s lead. tant to temper enthusiasm with caution. ate steps to comply with the law,” says potential for fraud. Customers might UBI is generating great interest in Amer- Spain to roll out UBI “as soon as Thomas’ Hospital. Responding on Twitter It is vital, therefore, the industry con- Tamara Quinn, partner at international think that because their face is unique, ica, too, with Democrats and Republicans 01 possible” to a think tank’s case for basic income centrates on the privacy concerns that law firm Osborne Clarke. “Facial recog- they don’t have to worry as they would if increasingly viewing it as a viable solution In the most significant breakthrough in the guarantee, she wrote: “I’ve long been are most pertinent, so the risks to the nition and video surveillance are cov- relying on a password or PIN number to to the significant economic challenge. 500-year history of universal basic income interested in [the] concept of UBI but [the] consumer don’t exceed potential gains. ered by a complex web of regulations, authorise payments. “Every day that goes by without UBI (UBI), in early-April Spain’s centre-left current situation strengthens [the] case Last year, it was revealed that the means more preventable deaths and government became the first nation to immeasurably.” biometrics data of more than a million more unnecessary suffering,” argues New unveil plans for some form of guaranteed people had been exposed from a data- Orleans-based author Scott Santens. “UBI income. “We’re going to do it as soon Brazil approves basic income An invasion of privacy? knowledge or their consent,” says base owned by the biometric security is important everywhere, but it is espe- as possible,” said Nadia Calviño, Spain’s 04 emergency measure Anyone interested in payments Megan Goulding, a lawyer working on company Suprema. This included facial cially important in the United States, where minister of economic affairs. In early-April, Brazil’s president Jair technology should take note of a court the case. recognition collected by London’s Met- before this pandemic even began to over- Bolsonaro sanctioned a law that case launched in Cardiff concerning Understandably, this has prompted ropolitan Police. whelm what we call our safety net, 13 mil- UK could “certainly consider” UBI institutes an emergency basic income automated facial recognition used negative headlines and it seems a “Combined with the personal details, lion people living under the poverty line 02 Prime minister Boris Johnson was unconditionally. All adults will receive by the state. This is the first major balance must be struck between usernames and passwords, the potential were already getting no assistance whatso- open minded about UBI earlier this year, R$600 (£92) a month. Payments will legal challenge in the UK regarding the use of biometrics by the state for criminal activity and fraud is mas- ever from the federal government. though a parliamentary debate concluded continue for three months, though facial recognition privacy concerns and its potential benefits in the sive,” according to one of the research- “I've always wanted to get UBI imple- it was not “the best method to tackle might be prolonged, depending on the and was brought by office worker payments sector. ers who brought the situation to light. So mented to save lives, prevent suffering and the extraordinary situation”. However, continuation of the economic crisis Ed Bridges, who believes he had his “The technology will, as technology biometrics is not immune from the diffi- upgrade everyone's wellbeing through a vastly considering two million people in the UK wrought by the COVID-19 pandemic. image captured by police while he was does, continue to be developed," culties faced when it comes to fraud. improved system oriented around prosperity have become unemployed since the start shopping in 2018. says Andrew Hartshorn, information “Biometrics is not fool-proof and, and human thriving. Right now, all of those of the pandemic, it is likely UBI will be Twitter chief backs UBI "By the time I was close enough law specialist at law firm Shakespeare just like your credit card, details can things have gone up an order of magnitude debated in parliament again soon. 05 Jack Dorsey, chief executive to see the words 'automatic facial Martineau. “I think its use is likely to be stolen and cloned,” says Ander- in importance. I'm happy to see more peo- of Twitter, announced he would make recognition' on the van, I had already be curtailed going forwards, or rather son. "A picture of your face can ena- ple finally taking UBI as seriously as it always UBI case “strengthened available $1 billion to fund COVID-19 relief had my data captured by it,” he told used in limited circumstances, where ble anyone to steal your identity. Until should have been, but at the same time, it's 03 immeasurably” in Scotland efforts around the world. “After we disarm the BBC. “That struck me as quite a use is more focused, with less scope the reliability and security of biome- hard to celebrate anything, when the stakes Nicola Sturgeon, the first minister of this pandemic, the focus will shift to fundamental invasion of my privacy.” for widespread invasion of privacy.” trics can be proven, it should only be are now higher than they've ever been.” Scotland, showed her support for UBI on girl’s health and education, and UBI,” he Mr Bridges is supported by the civil Bridges has appealed a ruling that an opt-in choice for users. What abso- Sir Thomas More, the London-born the day COVID-19-stricken Johnson was wrote. More high-profile tech leaders are rights group Liberty. stated South Wales Police did not lutely must not happen is a rush to Renaissance humanist, hinted at the man- moved out of intensive care at London’s St expected to follow suit. "It is just like taking people's breach his human rights by using implement biometrics as the de facto ifold benefits of an unconditional basic DNA or fingerprints, without their the tech. means of authentication; let’s not run income in his controversial 1516 master- before we can walk.” 8 FUTURE OF PAYMENTS

PAYMENTS SOLUTIONS Why sex startups face uphill payments battle Finding a suitable payments provider is a vital initial step for any startup conducting an online business. When your core product is controversial to some, however, things can get a little tricky

Katie Deighton

ex toy sales skyrocket during the S coronavirus pandemic” is perhaps one of the lesser-spotted humor- ous headlines to come out of the COVID- 19 lockdown. As social distancing splits up some couples, embargoes casual sex and drives people to seek respite from relent- less stress or boredom, vibrator retailers are experiencing a boom. Despite the circumstances, this rise in demand is welcome good news for startups in the sextech arena. Their path to growth has been littered with fights to market their products on Facebook, to advertise on the New York subway and to be taken seriously at tech conferences such as the Consumer None of the big payments providers will risk? There may be people that come through can afford to fund lobbyists, regulation Electronics Show. touch the app. Stripe was interested, but only who aren't as professional as us. If they were change, public education initiatives and foun- They’ve also had to battle to sell their prod- if Killing Kittens censored its entire raison done [prosecuted] for human trafficking and dations. We need all of that in sextech, because ucts online. Because while launching a sex- If [payments providers] are saying ‘no' to money, d'être: sexually explicit content. Senior con- PayPal took a payment which allowed that, we need a new legal definition of adult content. tech website is fairly uncomplicated, integrat- nections Killing Kittens’ founder Hadleigh PayPal are liable. It's not worth it for them.” “All the laws were written for porn, and ing a payments provider into an ecommerce there has to be a really good reason. And the Bolt had made at PayPal went all the way to Others in the industry are less resigned to terms and conditions are written for porn as platform isn’t. the head office in San Francisco to debate the take the rules as they come. Former ad agency well. Nothing has caught up with the internet, PayPal, for instance, allows the sale of “cer- really good reason is they might lose a lot of case, only to come back with bad news. executive Cindy Gallop launched the “social so nobody has driven a movement to re-ex- tain types of adult products and content” but audience if they didn't say ‘no’ He questioned their conclusion. Why sex” video platform Make Love Not Porn to amine that all-encompassing ‘adult’ clause in “prohibits the use of... services for the sale of would they work with a sex toy manufacturer provide a space on the internet for real-world the light of sextech and sex education.” materials that depict criminal behaviour or but not Killing Kittens? Their response: the sex. Designed through the female lens and Gallop’s more pressing aspiration is to the sale of sexually oriented content or prod- sale of a sex toy is fine, but if you encourage with all films moderated by a human from partner with a fintech that will prove it can ucts to minors”. Equivocal policies such as people to use it, we won't allow it. beginning to end, she maintains the content “process payments for legal, ethical, trans- these effectively close the door to much of the tify it as art. But when we launched our app And the really good reason is they might lose The brand has consequently spent a lot of is not porn. Big payments providers refuse to parent sextech startups and make a [s***] sextech world. on Google Play, they said we can't put up pic- a lot of audience if they didn't say ‘no’.” time patching together a payments system work with her anyway. tonne of money” in the process. Only when Soumyadip Rakshit, co-founder of sex- tures of vibrators. So, we changed them to But reaching a friendly compromise with that’s build around numerous providers For now, Make Love Not Porn runs off a the cash generated becomes impossible to ual health firm MysteryVibe, spent months line diagrams.” a payments provider becomes more diffi- with various clearing banks for it to oper- payments provider that caters primarily to ignore will payments providers and clearing negotiating for the services of Apple Pay. Rakshit has spent years finding such cult the closer a sextech company moves ate seamlessly across multiple currencies. the adult industry, but the rates are “extor- banks think about relaxing their sextech pol- While Apple was happy to facilitate the sale of workarounds to payments providers’ poli- towards porn. It’s been frustrating, but completely neces- tionate”, Gallop says. She wants to change this icies, she says. what are technically medical devices, it took cies. He’s found the companies are generally Sex club Killing Kittens has been build- sary. For Bolt, the options were either build not by lobbying the likes of PayPal at a micro Bolt, similarly, sees Killing Kittens as a will- issue with MysteryVibe’s “play” page, which agreeable to work with and notes they work ing out an app for its paid-for subscriber something new or “don't take money and level, but by blowing her grievances right out ing groundbreaker for future sextech com- depicted various sexual positions. on a case-by-case basis. He also believes community for the last few years. While free lose the business”. in the public domain. panies. “As society changes, we will already “We had three options: we could remove their decisions don’t have anything to do from porn, the platform facilitates online He sympathises with the policies of pay- “The three huge disruption opportunities in have shown this can be done,” he says. “Stripe the page, we could adapt it or we could just with ethics or morality. dating with a chat functionality that, given ments providers to the extent that he doesn’t tech today are sex, cannabis and blockchain,” will say ‘there's actually very good revenue not have Apple Pay,” he says. “The truth “It's completely commercial,” he says. the uninhibited nature of Killing Kittens’s believe there’s much point in arguing against says Gallop. “Investors are flooding into the to be done in this industry’. And the compa- here was the ‘play’ page was illustrated with “If [payments providers] are saying ‘no' to real-life parties, invariably contains unin- them. “[Sextech] is a small part of the global other two and what that means is these sea- nies that come after us, in the next five to ten hand-drawn watercolours, so we could jus- money, there has to be a really good reason. hibited language. economy, so why would they want to run the soned startups in cannabis and blockchain years, will have it easier.”

The second factor is our disposition. Peo- ple who are tightwads and who make up about 25 per cent of the population, accord- BEHAVIOUR ing to one study, experience more pain when it comes to paying than spendthrifts who make up 15 per cent.

Tristan Colangelo/Unsplash Tristan “Tightwads experience a lot of distress when they make purchases, especially the optional kind, and that prevents them from How spending spending the money they think they should spend on certain things, and they some- times kick themselves afterwards,” says Scott Rick, associate professor of marketing at the University of Michigan. money can On the other side of the spectrum, spend- thrifts hardly experience any pain at all. “They just can’t stop themselves,” says Dr Rick. Spendthrifts are largely insensitive to payment methods, but for tightwads, con- buy happiness tactless methods and framing techniques, for example if a fee is described as “small”, Behavioural economics can reveal useful make a difference. The third factor is whether we consider insights into our motivations and feelings a product virtuous or frivolous. Buying fat- free yogurt feels different from buying ice when parting with hard-earned money cream with sprinkles. Only the latter gives us pangs of guilt. Virtuous items are those we consider nec- essary and they’re more likely to induce shop- Marina Gerner ping momentum than vice items, which make us pause because of the momentary guilt. So buying milk leads to more subsequent pur- ry to imagine life before lockdown “If you want to resist the impulse,” says chases than buying ice cream. T – if you can. You’re on your way Professor Dhar, “ask yourself what else you But there’s an effective way for compa- back home from work and you pop could do with the money.” His studies show nies to counter the guilt we feel when buy- into a shop. You weren’t looking for any- that people typically neglect to think of ing “vice” products. It’s an age-old method: thing in particular, but an hour later you opportunity costs, or alternative things we coupling vice products with charitable find yourself walking out with a big smile could buy with the same amount of money. donations. In one study, 48 per cent of peo- and multiple bags in tow. What happened? Those who do are more likely to choose the ple were likely to opt into a donation when Behavioural economists call it the effect of cheaper option or buy nothing at all. “shopping momentum”. Conversely, retailers can use framing We like to think we’re rational consum- techniques to get people to spend more. nia. Think of sitting in a taxi, staring at the ers when it comes to our spending. After “Paying a lot for cashmere socks seems CONSUMERS AND THE PAIN OF PAYING meter creep higher and higher. It’s painful. all, our financial decisions have a huge gross to many people,” says Professor Dhar. Widely cited survey of 13,000 respondents But what kind of a pain is it exactly? A impact on our wellbeing. Think of an If cashmere socks are presented among brain imaging study led by Professor Nina unforgettable holiday or a house bought at other types of socks, we’re inclined to see Mazar, a behavioural scientist at Boston TIGHTWADS the wrong time. But in reality, we’re emo- them as socks first and consider their mate- University, found that the pain of paying is We like to think we’re Those who spend less than they ideally would like tional creatures, susceptible to biases and rial second. But experiments have shown not like a physical pain. It’s more similar to rational consumers when external factors. that if the same socks are presented along- distress or anxiety on a neural level; it can Luckily, behavioural economics makes side other cashmere goods, we categorise % help keep our spending in check. it comes to our spending… our irrationality more predictable. In them as “cashmere” first and “socks” sec- 25 However, not all payments are equally in reality, we’re emotional the words of Nobel prize-winning econo- ond, and we’re willing to spend more. painful. Research tends to revolve around mist Professor Richard Thaler, it’s “eco- There’s another framing technique to three key factors. The first is payment creatures, susceptible to nomics done with strong injections of increase spending. When buying a new method. Paying by card is less visceral and good psychology”. backpack, for example, our tendency for SPENDTHRIFTS therefore easier than paying with cash. In biases and external factors When considering paying for goods, “duration neglect” means we don’t typically Those who spend more than they ideally would like one study, people were willing to pay twice researchers have found that buying one think about how long we’re going to use it as much to bid on tickets for a basketball thing makes us much more likely to buy for. But if people are asked to consider how % game if they could pay by credit card rather subsequent items, regardless of our pre- long an item is meant to last, they’re likely 15 than in cash. Contactless payments and buying theme park tickets, but only 32 per vious deliberations. Browsing things to to pay more. phone payments make parting with money cent did so when buying a six-month supply buy online or in a store, puts us in a mind- Such framing techniques influence our even easier. of toothpaste. set of “deliberation”. But as soon as we buy pain threshold for paying. People are, gen- The latest example of separating purchas- So if a vice product is coupled with a one item, a cognitive shift to “implementa- erally speaking, loss averse and the idea ing from paying are checkout-less Amazon charitable donation, people’s guilt is bal- tion” occurs. “Our mindset changes from of a “pain of paying” was coined some two UNCONFLICTED Go shops, where people don’t consciously pay anced by the warm glow we experience whether or not I should buy something to decades ago by professors Drazen Prelec at all. Hundreds of cameras around the store when we give to charity and the moral sat- how do I buy this?” says Professor Ravi Dhar of the Massachusetts Institute of Technol- are able to detect what customers take off the isfaction we purchase. Our pain of paying of the Yale School of Management, New ogy and George Loewenstein of Carnegie 65% shelves and automatically charge their Ama- is assuaged, while both the company and Haven, Connecticut. Mellon University, Pittsburgh, Pennsylva- Scott Rick et al, Journal of Consumer Research 2008 zon account when they leave. charity benefit.