Technology Finance Fintech

Wave your customers goodbye: the existential threat from payment tech

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September 26, 2018 | 8 min read

You know the little squiggle-in-the-air thing you do to get the bill? In less than ten years, I predict that you’ll be doing that to pay too. What you owe will automatically be whisked from your personal, business or shared account - whichever gives you the best rate of exchange or the biggest rewards - all with a flick of your wrist. If you decide later to move the payment between accounts, or alter the tip, or pay in a different currency, crypto or otherwise, you’ll do it just as effortlessly.

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We’re witnessing a revolution in the transactional landscape and the drama isn’t centred on the removal of physical effort from the process. Inevitably, via AI, we’ll see the removal of decision-making too, from actions that currently require fairly involved consideration. (“Should I put this on the Monzo?” or “Does my shiny new insert-name-of-trendy-card impress anyone at this table?”)

What does that mean for banks, fintechs and payment platforms? Only that much of the loyalty they’ve established with their consumers – all that empathetic brand-building - may be swept away. In the time it takes for you to wave at a waiter.

When in Rome

To some extent, the way we like to pay is a cultural thing and digital payments have shown different rates of uptake worldwide. The Germans and the Japanese are among the most sceptical, seemingly suspicious of moving through the world cashlessly or leaving a digital trail of all their spending habits.

We Brits, on the other hand, are happier to tap for anything – a bottle of water here, a newspaper there - without much consideration, perhaps because we’re already one of the most surveilled societies in the west. The adoption of contactless by Transport for London in 2014 helped speed the broader take-up of tap payments, along with a wider range of affordable EPOS providers making tap-and-go feasible, even for the smallest vendors. A third of the UK population and a half of millennials now say they barely ever use cash.

In China, there’s been a huge rise in the use of social apps to pay for goods or services with the likes of AliPay and WeChatPay - built by tech and ecommerce behemoths Alibaba and Tencent. Paying is seen as a frictionless extension of social conversation and QR codes are huge - a third of all mobile payments are made with them – to such an extent that they’re even accepted by beggars and buskers.

In South Korea, only about 20% of transactions are currently made in cash. But winning the race to cashlessness are the Swedes. The Royal Institute of Technology in Stockholm predicts that the country could abandon physical money within the next 5 years. (Only 13% of payments are in cash now.)

National rail operator SJ is offering commuters the chance to pay with a chip embedded in their hand - not unlike the chips our pets are routinely tagged with - and SJ isn’t the only Swedish company embracing biometrics. Stockholm-based ‘digital house of innovation’ Epicenter gained a lots of press, not all of it positive, for running an active campaign to chip their employees. The implants give staff access to the offices and photocopiers and allow them to pay for refreshments with a wave of the hand.

The case for cashlessness

“There’s definitely a really interesting bright future (in chip implants) but there’s been a lot of hype around it...this is a generational, behavioural thing that takes time”, says Buzzfeed writer Charlie Warzel - one of the many reporters who volunteered to be chipped while reporting the Epicenter story. And of course, the idea of a cashless society fires up a lot of ethical debate too.

Go Cashless, a not-for-profit whose sole purpose is ‘to promote the end of cash in the UK by December 31 2020’, points out that cash is the currency of the black economy, that it enables tax-avoiders, that it’s dirty (ask any bank teller for grisly confirmation) and is expensive to handle – and that we all suffer the knock-on costs, as a result.

But there’s a strong case against us ever going completely cashless. Big Brother fears aside, any significant power cut and we’d all be looking at a sudden return to feudal bartering.

Intentionless spending

Studies have also shown that we also spend differently when we do so digitally. For his book The Choice Factory, Richard Shotton investigated how contactless cards affected price sensitivity by asking people leaving coffee shops: ‘How much did you spend?’; ‘How did you pay?’; and then ‘Can I see your receipt?’. Cash payers typically overestimated their spend by 9%, those who paid with a contactless card underestimated by 5%.

To combat this, there are now products to counter ‘intentionless spending’. The design team behind the Fitbit, San Francisco technology studio NewDealDesign, have launched Scrip - an attractive, tactile device you load with spending cash.

To pay, you move your thumb across it in the way you would count out notes. Denominations physically ripple to the surface, mimicking the motion of giving cash. It’s designed to slow transactions, to re-invoke the human experience back to digital payment and to ‘turn off your financial autopilot’.

Similarly, Acorns, a micro-investing service, has launched a rewards debit card that’s vertically-aligned to suit the tap-and-go style of modern spending, but made out of tungsten, so it makes a satisfying ‘thunk,’ when you drop it on the table.

‘Mission control for your money’

While Acorn and Scrip have a valid point to make, one that might appeal to a certain type of spender, my money is on the likes of Curve to be the dominant direction of travel.

Curve offers to ‘simplify your financial life by connecting your accounts to one smart card and one even smarter app’. Mariano Belinky, managing partner at Santander InnoVentures - one of Curve's early backers, explains, “Spotify, Citymapper and Amazon Echo are bringing together data and services to make it easier for people to manage different aspects of their life - from travel to getting a better deal. We will soon ​see people …. using a single intelligent platform to connect all their accounts and services. Curve’s launch is an important milestone in the evolution of consumer finance.”

All Curve needs is the application of biometrics and you have my restaurant-of-the-future scenario. Whereby with a smile, a word, a wave or a thumbprint, the platform I use will understand my financial habits well enough to settle-up automatically, using the account that best suits my needs for that exact transaction. But there’ll be no brand loyalty taken into consideration during the process.

Which poses a huge threat – and not just to banks. What if that platform can also switch me between telecoms or energy suppliers, to chase the best deals and rates? What does that do to the brand value of a whole host of utility business? The knock-on effect for all kinds of names is massive - and this scenario is just around the corner.

The role of agencies in all of this is to help clients understand how to stay relevant in their marketplace, in rapidly changing times. If this means that retailers, brands or platforms need to re-think their positioning, communications, physical spaces or underlying tech, that's what we’re here to help with.

Tim Hutchinson is digital experience director at Start Design

Technology Finance Fintech

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