The future is cashless – this is what our Wirecard experts regularly report on this blog. But as we also find other perspectives exciting, we have asked various experts with different backgrounds for their insights, experiences and opinions about cashless as part of our "Cashless Think Tank" interview series (click here to read all parts published so far).
We continue with Ysbrant Marcelis who has many years of payment expertise, including as a management consultant, founder and executive with a payment service provider and with a bank. Today, he works as a partner at Commerce Ventures in the US.
Payment expert Ysbrant Marcelis
Ysbrant, from your perspective, what are the most important advantages of cashless payment?
I think there are five key advantages to cashless payments.
The first is Cost. It is incredibly expensive to produce and manage physical cash. This is a cost to governments, banks, merchants and to consumers.
The second is Convenience. Cashless payments enable consumers to determine how to pay and when to pay. There are many use cases that illustrate this benefit – from paying bills, to entering the subway, to buying airtime on your phone.
The third is Speed. Physical payment products create friction in the transaction. Digitizing the payment enables much faster – inclusing real-time – movement of funds and reconciliation of accounts.
The fourth is Security. Cash presents a real risk – and one that tends to disproportionately affect less wealthy parts of the population.
The fifth is Empowerment. While this is last, it is certainly not least. Digital methods of payment create an electronic record. The data associated with this record can help provide information and intelligence to the individual – leading to more effective savings, greater visibility to spending patterns, and potentially new financial products.
What are the most important trends that are helping cashless to become more prevalent worldwide?
While the degree of cashless adoption ranges widely across markets, there are four broad trends that help drive adoption. The implementation of advanced mobile infrastructure with decreasing subscriber costs has enabled card acceptance to become widespread. This is not limited to the ability to connect payment terminals to mobile networks. It has also enabled the advent of mobile-based payment applications across market environments – whether pioneered with M-Pesa in Kenya or Apple Pay in the United States.
Mobile infrastructure laid the foundation for the second trend: the growth of commerce applications with embedded payments. Consumers across the world now purchase meals, book cars, buy products, watch movies, book tickets and pay for street food all through payment credentials stored on their phones. In many markets, these applications have leapfrogged not just cashless but cardless payments.
"The introduction of Amazon Go has provided an early signal for how ‘frictionless checkout’ can shift the orientation of payment from active engagement to passive enablement" – Ysbrant Marcelis of @CommerceVC #CashlessThinkTank #WirecardBlog
Fundamentally, these two trends fuel a third trend centered on the growth of new platforms that make it easier to accept electronic payments for merchants and issue payment credentials for consumers. This trend around new acquiring and issuing infrastructure has enabled non-financial players – ranging from marketplaces, to delivery services, to alternative lenders – to provide cards and accept electronic payments at unparalleled scale.
The last trend is centered on innovation in identity and fraud management. While the digitization of cash creates many positive externalities, it also creates greater risk that the underlying systems become compromised through bad actors, infrastructure failure, or simply maintenance gaps. Significant advances in fraud prevention and digital identity have enabled institutions to push electronic payments while balancing these risks more effectively.
How do you think cashless payments will be made in 2030?
I believe that we’re rapidly evolving to commerce that is enabled by but disconnected from the act of paying. In the United States, the introduction of Amazon Go has provided an early signal for how ‘frictionless checkout’ can shift the orientation of payment from active engagement to passive enablement. This paradigm shift has really significant implications for the industry. Card issuers will fight harder to be ‘top of wallet’ and yet become increasingly less relevant as consumers disassociate shopping from paying, and card loyalty.
Merchant acquirers will no longer capture the transaction at the point of purchase but need to become the back-end processor for the application provider. Payment networks may lose relevance in a transaction flow where the application provider – like Amazon or Alibaba – creates a self-contained ecosystem. We see numerous start-ups and corporations setting the stage for this future and we may arrive there well before 2030.