I love giving talks on payments technology (it was part of my job for over four years after all). I take one of my cards out (usually a Monzo or Starling due to the jazzy colours):
“Do you know how many generations of payments innovation are on these cards?”
- Embossed card number (this is how the numbers are usually raised, in case civilisations collapse and shops need to return to tracing these with emboss machines. I’ve always thought this seemed silly, but 2020 has taught me anything could happen…)
- Magstripe (these are still used in other countries, including the USA)
- CHIP (for your CHIP and PIN transactions)
- CVC (the card verification number, sometimes called CVV or CV2 – this is the 3 or 4 digit number usually on the back of your card which you type in when online shopping. It’s purpose is to make online shopping more secure)
- Contactless (we can now pay using our phones using this technology).
Payments innovation is slow (particularly compared to how quickly other industries move). There are a number of reasons for this including regulations, but it is mainly because we are slow to change our payments habits. We, rightly so, are untrusting and worried about anything to do with our money. There is a common saying among payments experts – “the last cheque will be written when the last cheque writer dies”. When I give talks on payments, I usually ask the audience if anyone in the room has ever written a cheque. I also ask if anyone has used Apple Pay or Android Pay. Sometimes there are rooms where everyone has written a cheque and no one used their phone to pay, and vice versa. There are also rooms where no-one has used either method of payments. I’ve gotten quite good at predicting the audience’s responses.
As someone who has never written a cheque, and who frequently leaves her purse at home, I welcome these payments innovations. I also benefit from the push towards cards (particularly contactless) during the COVID-19 crisis as I very rarely carry cash. I, however, am not the norm and while these innovations make my life easier, they are creating further inequality.
Cards 4 COVID
Most of my friends and colleagues pay by card. Often paying for a round of drinks or coffee for a group, and easily having money sent to them by various apps (such as Monzo or Starling) requiring only phone numbers or bluetooth. Cards and apps for finance are easy for us and improve our shopping and social experiences. This is how payments innovation is supposed to work (and to create less friction points to prevent you spending money, think Uber and their Invisible Payments).
This is not how they work for everyone. To access these apps requires a number of things. Mainly, a device (such as a smartphone or tablet) and internet access.
One of the key findings of the Lloyds Bank UK Consumer Digital Index 2020 was that 11.7 million people in the UK lack the digital skills for everyday life. That is 22% of the population, made up of 9 million people who are unable to use the internet on their devices by themselves and 2.7 million who cannot use the internet to it’s full benefit. Further to this, the report predicts that 25% of the population will continue to have low digital engagement by 2030. These skills were to be related to age, income and a number of other factors.
Once you have both a smart phone and internet access, you need the know-how to download an app. You will likely need an email address. All things we take for granted, that are certainly not universal. As well as this, for any financial product such as a bank account or credit card, you need an address and to, generally, pass some sort of credit check. This excludes many people from access to contactless debit cards.
Another important aspect, which is often overlooked, is trust. People need to trust the technology (be it an app or contactless on their cards). They also need knowledge of how to identify scans from legitimate financial products and companies. Often people feel if they are unsure, it is better to be safe and keep all their finances offline.
We have people without bank accounts (who may use credit unions or manage all their money in cash), more without debit or credit cards, and even more without contactless cards. Meaning this new push towards cards only (with good reason of course) is marginalising those without even further.
This exclusion is not new. Many markets only accept cards – it’s cheaper for vendors, cash comes with germs and it is quicker for customers. I definitely understand the benefits. When these markets are in recently gentrified areas, it sends a message that the market is for a particular type of resident. Unlike when I find myself somewhere that accepts only cash, people without cards cannot quickly run to “lift cash from the hole in the wall” (or get money from an ATM in non-Northern Irish English).
Many people were quick to judge those queued outside Primark when the shops reopened after the Covid -19 lockdown in the summer of 2020. Not everyone has the ability to shop online (due to the lack of cards, internet, devices, knowledge or trust), and during lockdown the weather has changed, children have grown and adults may need new clothes as diets and exercise regimes will have undoubtedly been altered during this time. Also, shopping is a day out for many, and everyone is allowed to treat themselves.
As well as missing out on online shopping, with the expanded range of shops and products available worldwide rather than locally and online only deals, this exclusion extends to the financial world. Savings rates (at least in the UK) are not particularly good at the minute, finding a worthwhile savings account requires shopping around (which is significantly easier for tech comfy people, rather than visiting every bank, depending on TV adverts or writing letters). The best rates that can be found are from online-only companies, such as Marcus by Goldman Sachs or Synergy. Even with high street banks and building societies, their best savings are (yes, you guessed it) online only. Currently, we get rewarded for cutting out human interaction and the need for physical premises and employees, by keeping our money online. Meaning these preferential rates can only be obtained by those comfortable managing their money solely online.
There are a lot of things available online only, I could go on and on, but I think these examples paint the necessary picture. The online world, with many apps and products being used, makes people more susceptible to scams and fraud. Fake emails, calls and even companies are out there everyday, trying to trick people out of their money.
As well as the scams and frauds aimed at getting people to move money or buy fake goods, a new wave of these schemes relating to Crypto Currencies. For those who don’t know, Crypto Currencies are a digital asset that can be exchanged for goods. The value is often thought of in coins (such as BitCoin or LiteCoin). So far this probably just sounds like money, as a lot of people tend to do all their banking digitally. One big difference of Crypto Currencies to conventional currencies is decentralisation. The idea of these currencies is that no one company, bank, government or person controls the assets, the users do. A lot of people have made a lot of money through these Crypto Currencies (and a lot of people have lost money), and ads targeting people to purchase them have become common. These are largely scams, and sometimes even have the ‘Money Saving Expert’ Martin Lewis’ face on them to try and legitimate them. As he is a trusted figure, he is very outspoken about the need for these ads to be removed and regulated.
Another selling point of these currencies is helping the unbanked (the people mentioned earlier who are being excluded). Jamie Barlett and Georgia Chaat reported on a BBC podcast The Missing CryptoQueen about OneCoin and the heartbreaking stories of people from around the world who have spent their life savings on these coins which, as of yet, cannot be exchanged for goods. Many of these people also recruited their friends and family to invest in OneCoin.
As technology advances and our lives, including our money, identity and finances, move more digital, there is a need for education. Both around how to use the technology but also to ensure people do not get scammed out of their money. Financial education is largely left to families, or for us to figure out for ourselves. Take for example a story I tell as a joke, although it isn’t really funny and is a reality for many. I didn’t realise you were supposed to save money until I was 20. My family weren’t well off, had lots of debt and any additional money we ever had went on treats. It’s also often seen as rude to talk about money in Britain (luckily this seems to be changing with my millennial generation and younger. With great companies like MyBnk doing amazing work teaching kids about finance in schools, fingers crossed this changes). It wasn’t until a friend at uni was talking about reaching her ISA limit for the year, and was extremely shocked I didn’t have a savings account with my three part-time jobs.
So, the questions remain: how do we engage those left behind in education on technology? How do we show them the benefits but protect them from the scams?