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Swipe, Scan, Tap, and Walkaway …the future of money

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Call it changing times as more and more economies are backing the trend towards making transactions without cash. There are even countries that hardly use cash; China and Sweden for example. We have gradually come to this new era where carrying cash around is seen as a bother because one does not really need to. With a swipe of a card, a scan of a QR code or just the tap of a button on a smartphone or watch, one is able to pay for products and services without any physical cash.

Yes, we all know it’s been long coming, but it’s definitely amazing how fast cashless society is taking over the global economy. In fact, following a rapid growth in contactless transactions, card payments overtook cash payments for the first time at the end of 2017 in the United Kingdom. In Ghana, for instance, more and more stores/companies are embracing payment for products/services with credit/debit cards and mobile money services. People are now in the habit of not having any physical cash on them or even something like “walk around money”. There is even an advert on local television by a mobile money service suggesting that people can now pay their Sunday church offering and tithe through mobile money. Transportation with Uber or Bolt (Taxify) and the likes are also easier without cash because all one needs is to input one’s card details in the app and one is good to go.

Cashless, who needs physical cash anymore? My guess is as good as yours! Not having cash around gets rid of the entire problem of not having to worry about the security that cash requires. But how easy is this going to be for everyone to use. To be cashless, one may need the latest smartphone, latest apps and well, latest everything. Can older folks adjust to these changing times and technology?

Why Cashless Society?

Technology proliferation is changing the way things are done and “cash” is not without resulting in the fading away of physical cash. This may have sounded like a science fiction some many years ago but definitely happening currently. The cashless transaction may be executed in the form of Credit card, Debit card, Mobile wallet, Point of Sales (POS), Internet banking, Mobile banking etc. Some real world examples are PayPal, Google Wallet, MoneyBookers, Payoneer, Amazon Go and now Apple Pay amongst others.

Cashless societies have existed based on barter and other methods of exchange and also made very possible using digital currency such as bitcoin. This concept has been discussed widely particularly because the world is experiencing a rapid and increasing use of digital methods of recording, managing, and exchanging money in commerce, investment and daily life in many parts of the world and transactions which historically would have been undertaken with cash but often now undertaken electronically.

The trend towards use of non-cash transactions and settlements began in daily life during the 1990s when electronic banking became popular. By the 2010s, digital payments methods were wide spread in many countries and cash became actively disfavoured in some transactions.

Opting for Cashless Society

There are extensive benefits of cashless society from the societal and business perspectives, everyone has something to gain, and that’s the beauty of cashless society. Safe, convenient, fast and reliable.

Cashless methods provide handy transaction methods that reduce the risk of carrying hard cash. This reduces the risk of being robbed and that is a major concern for people and businesses who handle huge sums of cash. It helps to reduce instances of tax evasion, curbs generation of black money and reduce corruption because physical cash can be unidentified and untraceable it plays a large role in crime, including bribery, tax evasion, money counterfeiting, corruption and terrorist financing.

However, cashless payments leave behind traceable records, making it harder to conceal income, evade taxes and hide black market transactions. It keeps the record of all transactions which will help to reduce illegal monetary transaction. Every transaction is recorded and cannot be hidden, as such, prevents illegal monetary activities. Also one is able to keep track of their spending habits and keep good records as paying with cash only gives one paper receipts which can easily be lost or thrown away. Cashless society also offers digitization of transaction as well as ease of lifestyle. Everything is made easy cashless – paying for dinner, buying a dress, paying a bill etc. no hassle of having to carry cash and count it out. It also means faster and secure transactions. Simple lifestyle for everyone.

Cashless society is a great deal. The future of money is going cashless on a global basis. However, it does have a few downs to it. There are risks of identity theft and information loss. One will think, with technologies such as voice and face recognition, as well as retina-scanning, being inbuilt to payment technologies, transactions will be more secure than ever but unfortunately, hackers, cyber fraud and the likes are on the rise and may be easy for such unscrupulous people to gain access to private information. Inactivity of the electronic device during the transactions; glitches, outages, or innocent mistakes can occur. It’s very likely for a device to malfunction or not work at all. This can be frustrating and one may wish there was a cash payment method instead. The internet can also misbehave and may be slow or not functioning. One may have less control in spending. It may become very easy for one to spend over the budget because one’s cash is all available on a card. When one spends with cash, one feels the “pain” of every penny one spends. But with electronic payments, it’s easy to swipe, tap, or click. It might take a great deal of discipline to go by one’s budget and make sure not to become a spendthrift. Also an extra charge may be imposed by merchants. Charges will occur especially when one uses devices that may not be from one’s service provider.

Emerging Smart Technologies for Cashless Society

Cashless Society is made possible today by numerous smart technologies that has caused a new wave of digital disruption and generated momentous progress in payment technology; the Internet of Payment of Things.

Wearable Tech

Watches, bracelets and even shoes are all payment technologies currently in use. They combine unmatched convenience and accessibility with the ability to collect and use a tremendous variety of sensor data.

One can walk into a store, pick items of the shelf and simply tap his/her watch against a device or just walk pass the door; payment is sorted.

These wearable techs open opportunities for tech companies to invent more devices that people could wear thereby taking the burden of using one’s wallet or purse.

Cashless Cars

Pay for fuel, road tolls, parking garage, car wash etc. with just one’s car driving through. No need to stop and roll down one’s window to pay for such services anymore.

Technology is evolving and so is everything else with it. It’s all about convenience now.

Digital Assistants

Alexa, Cortana and Goggle Assist have e-commerce capabilities in-built. They will be able to place orders and pay for products and services simply by saying the order on one’s phone.

These devices are connected to things at home or in the office and may have gathered enough data to know the tiniest of details like when one is out of sugar. With this information, one’s digital assistant may give an alert and then with permission order a fresh box of sugar. No need to visit the store or use cash, simply cashless.

Mobile Applications

Thanks to contactless payment, lots of mobile apps have been created for smartphones to ease the cashless payment of things.

Some of the top apps in use currently are:

Google Pay– Free for android phones

Allows users to pay for apps, book trips, eat out, watch shows. Users need to simply add their card information and it also keeps track of their payment methods, billing, shipping and transactions.

Apple Pay– Free on iOS

Apple Pay is a mobile and digital wallet service created by Apple which allows users to make payments in person via the app, and on the internet replacing the use of credit and debit cards.

Venmo– Free on Android and iOS

Venmo is an app which can be downloaded on both Android and iOS handsets. Users can link their debit or credit card details and use the app to make purchases and send or receive money from other Venmo users. 

Paypal– Free on Android and iOS

Paypal was only used on eBay but today PayPal app can be downloaded on both Android and iOS handsets, allowing users to link their debit or credit card and automatically make purchases online without needing to enter their financial details. Users can also send, receive and collect money from other participants, all in one app.

Emerging technologies are making the move into the cashless society very easy and for the tech savvy generation we are in now, one can only embrace it and evolve with the changing times. Many countries are doing very well with implementing cashless society. According to Forex Business world’s top 10 most cashless countries are: Canada, Sweden, UK, France, USA, China, Australia, Germany, Japan, Russia.

Sweden may be winning the race towards becoming the world’s first completely cashless society. More than 59% of consumer transactions in Sweden are completed through non-cash method, which is highest in the world now. Mobile payment app Swish is favourite to the Swedes.

Where does Ghana lie in all of this?

Mobile money penetration has grown significantly since its introduction in 2009, with GH¢155.8 billion in mobile transactions in 2017, up from GH¢78.5 billion in 2016. The Bank of Ghana in 2012 began compiling data and observed that the value of mobile money transactions reached GH¢ 19.6 million.

According to the 2016 Ghana Banking Survey by Price Waterhouse Cooper, mobile money usage in Ghana has been focused on remittance and fund transfer, while service for payments was still lagging as of 2015.

According to DPO Group, the use of credit and debit card has not really penetrated Ghana yet because credit card fraud is prevalent in Ghana, leading to what has until recently been a cash-based economy.

As conservative as Ghanaians are, it is very difficult for one to give out his or her personal information or card details for fear of it being used by another or being over charged for a service.

Interesting to note that, Ghana in gradually accepting the digital era as systems like digital identification falls in place. Mobile money is also widely embraced and who knows, Ghana can also become a cashless society with the right regulation, technology and partnerships.

It’s not all bad in a cashless society, there are a lot of benefits and opportunities ready to be grabbed.

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Finance

Building a Sustainable Competitive Advantage in the Financial Market

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The prime differentiator among firms, and the heart of wholesale banking, is talent. A small subset of talent creates the majority of value in the industry, making it critical to identify, attract, develop, and retain the right people. This task has become more challenging, however, as financial services has lost some of its allure as a destination for many top new graduates.

Here is the challenge: banks must envision the future value chain for products, customers, and technologies in their sector and then pinpoint what talent they will need to bring this value chain to life. They must assess what sorts of talent their business lines need, recruit and identify the individuals best suited for those roles, align talent to the value those functions produce for the organization and maximize their productivity, and broaden their organizations’ reach to create more diverse and inclusive teams of talent.

Best-practice talent management can deliver highly cost-effective incremental value. At capital-markets firms, for instance, full ‘electronification’ combined with the astute talent management required to attract and retain the talent that remains could shrink the front office by 20 to 30 percent in the long term, while increasing the productivity, value, and rewards to the remaining team. For the largest capital markets and investment-banking firms, this combination of a smaller, more highly rewarded team could cut compensation costs by about 10 to 20 percent, realizing savings of $300 million to $600 million annually off of the average $9 billion in capital markets and investment-banking costs (3 to 7 percent).

Some banks are already reaping the benefits of investment in these kinds of improvements: in corporate banking, new skills and technology have produced significant revenue gains from a smaller staff of relationship managers (RMs), and shown gains in productivity on the order of 20 percent.

The impact of banking’s electronic transformation on talent

Automation and analytics are transforming the basic processes and economics of commercial and investment banking.

In capital markets, electronic venues will continue to supersede voice trading, shifting the source of value from traditional traders to trading platforms and, importantly, to the engineers who develop them.

Trading operations will continue to evolve from the factory floors of the past, with large, expensive teams of traders and salespeople showing little differentiation in performance, to select technology-focused staff. Automation is well underway, and will continue to reduce staffing needs for trading desks.

Off the trading floor, the automation and modernization of traditionally labor-intensive, as well as pre- and post-trade analysis and processing, will deliver significant cost savings.

In corporate banking, predictive analytics can anticipate customers’ credit needs, converting RMs’ traditional brute-force selling efforts into more targeted and timely offerings. And as customers increasingly rely on digital channels for day-to-day business, RMs will be freed from many administrative tasks and gain as much as 30 percent in time to develop client relationships.

Traditional approaches to networking and business development need to be updated to leverage the latest technology and analytics, raising the success rates and productivity of RMs, and with their returns on firms’ assets. The shift creates greater opportunity for each RM by enabling more targeted and strategic conversations, but also raises the bar to assemble the skills to leverage these new technologies.

Technology is central to the task, but as mentioned earlier, value in banking is centred on talent—as well as the firm’s balance sheet. Experience has shown that the top 10 percent of a capital-markets bank’s team creates as much as 50 percent of value, and that in corporate banking, RM production is similarly concentrated.

Research shows that current technologies could automate the work of more than 40 percent of positions across financial institutions. The reinvention of banks’ organizational mechanics is inevitable. Staffs will be smaller and more productive, and possess different talents and personal profiles.

To emerge with greater productivity, banks of all types will have to adapt their talent to the new structure, in their attitudes toward recruiting, training, succession management, and the work environment.

The gaps in banking talent

And yet, while many banks have come to realize the importance of these shifts in technology and environment to their talent management across all business segments, few have made the needed changes. Digital talent that is well versed in capital markets and commercial banking has always been scarce—and even greater challenge in the current competitive labour market.

Complicating the challenge, finance is no longer the preferred career destination for much of the talent banks so crucially need. Among tech-skilled candidates, large tech companies and start-ups are typically viewed as offering engineers more interesting and innovative problems to solve, as well as more collaborative cultures, than the command-and-control financial world. Moreover, potential tech recruits perceive a limited career path at financial institutions.

In recruiting more generally, the damage to the industry’s reputation from the financial crisis has dissuaded many students from pursuing financial careers.

Last, having stripped so many people from the cost base over the past several years, as well as reduced investment in training, many banks lack a strong internal bench of talent to develop. Thus, their organizational pyramids have become misaligned and show gaps at critical levels.

Talent management in three directions

To succeed in the technology evolution in banking, banks will need to retrain, restaff, and reorganize. They need to start by determining what skills they need, then identify individuals with those skills, and finally develop succession programs to ensure they have the right talent in the future.

Banks have many talent levers at their disposal, in the following three categories:

  • identifying talent and aligning talent to value
  • improving the productivity of talent
  • building more diverse, inclusive, and agile talent teams

Identifying talent

Banks tend to fill leadership positions with their biggest individual producers. But big producers do not necessarily make the best managers. In addition, the current generation of top producers may not possess the digital skills and experience needed to identify and act on future value-creation opportunities. Banks need a more expansive approach to hiring that recognizes the importance of digital skills.

Banks should also reconsider the practice of drawing senior producers from their industry competitors with lucrative pay packages. While proven production certainly has value, past successes may not be as relevant or lasting in a digital environment.

In recruiting, financial firms also tend to “hire in their own image”—for example, favouring candidates from a small circle of select business schools. Research has shown that graduates from a range of universities can perform as well as, and sometimes better than, those hired only from the elite schools, depending on the specific needs and requirements of function. These graduates also frequently stay at their firms longer, reducing the burden of having to replace talent in the future.

Conventional thinking about aligning talent to value holds that a business unit’s front office creates the most value. In a digital environment, however, a firm’s essential trading algorithms and platforms—and the software engineers that design them—may dominate the value equation and generate even more than its RMs, salespeople, and traders.

A talent-to-value approach assesses the value creation and protection potential of key technologies and positions, and then identifies the roles that enable the creation of that value. Further, it looks at the skills required to capture value and examines the fit of the incumbent team to those responsibilities. The last steps lead to a plan for managing talent succession with the existing team and for building and refreshing the skills of the team.

Banks that confine their value analyses to the top tiers of their organization can overlook 90 percent of critical roles. After a rigorous analysis, firms may find that in a digital world just 10 percent of their managers create 50 percent or more of the value, and yet none of them sit with the senior team. On the other hand, as many as 20 percent of firms’ managers may create little value.

Accordingly, firms must rigorously analyse value across the firm, both for business units as a whole and for their individual employees. To define value analysis at the individual level, firms can develop a detailed understanding of each role to distinguish the value expected from being present on a team (the “beta” of value from the average seat on the desk) from the incremental value attributable to unique talent (the “alpha” of the individual producer).

Taking a more expansive view of talent to value can produce impressive results: organizations that frequently reallocate high performers to their most critical strategic priorities are 2.2 times more likely to outperform their competitors on total returns to shareholders.

Improving productivity

Talent is both the scarcest resource and the greatest differentiator for banks, so they need to protect that resource and enhance productivity. We see three key ways to do so: through technology that leads to smarter decisions and more intelligent client coverage, through active coaching, and through training to supplement the skill base. Consumer banks have historically offered the following strong coaching and training programs for talent development, but such efforts tend to lag for most capital-markets firms and commercial banks:

  • Decision technology. Capital-markets firms closely track talent performance indicators that emphasize outputs such as profits and losses and sales credits. They often fall short, however, in quantifying inputs that can heavily influence overall results—such as collaboration between groups to foster cross-selling—based on firm priorities and culture.

Within ten years, digital technologies will be able to relieve corporate banking RMs of many non-client-facing tasks, giving them more time to devote to production. To maximize the opportunity to relieve their front-office staff of manual tasks, banks should invest in advanced analytics systems, such as for client relationship management, which can automatically suggest the “next product to buy” for their clients, for automation of credit decisions, and for automatic distribution of market colour and axes in capital markets.

  • Coaching. In day-to-day management, banks should implement real-time, fact-based coaching and feedback with team members, guided by clearly defined matrixes of expected capabilities for development. Managers in commercial and investment banking are at a particular disadvantage in coaching, as many have been promoted on their production prowess rather managerial mettle, and lack a coaching awareness.

In order to maximize their productivity, capital-markets banks must invest in concrete training that incorporates situations that confront managers and their reports.

Banks should also deeply assess the strengths of their top performers and use the resulting insights to develop management training. Individuals can learn where they lead or lag peers and learn practices to enhance their capabilities. Through such programs, companies across industries achieve repeatable gains in revenues of from 5 to 20 percent, driven by more effective management.

  • Training. Banks must develop a metrics-based approach to identify the attributes that generate productivity, then quantify and sharpen those skills. Leading banks are developing training and rotational programs tailored to building skills—in one case a week-long technology boot camp for all managers, in another a three-day executive training program to build collaboration.

Corporate banking RMs will need to handle a broader range of products, and in some cases assume a more strategic advisory role for clients, sometimes with CFOs and CEOs. They will need training in the products, of course, but might also require some psychology training to prepare them for the more empathetic role they may need to bring to these relationships.

Last, meetings are an ongoing pain point for most institutions and a drag on productivity. Banks can reduce the pain with a coherent set of meeting practices: for example, 45-minute time limits for standard meetings; mandatory advance agendas; discouraging attendance by multiple, similar senior managers (for example the CEO and COO of a business); and inviting only necessary attendees. Meetings need not be so frequent. Digital communications can readily supplant many face-to-face meetings, freeing the business to spend more time with clients.

Building more diverse, inclusive, and agile teams

Financial firms generally underperform in promoting women and people of colour to senior positions, in spite of strong evidence in its favour: across industries, firms in the top quartile for gender diversity are 27 percent more likely to create value, and those in the top quartile for diversity in both gender and ethnicity were 33 percent more likely to rank high in profitability.

Banks should expand their programs for diversity, and make those efforts known in recruiting programs. They should also act—leveraging data and analysis—to remove bias from promotions both in policies and practice.

Banks will also benefit from diversity through better integrating the talent in nearshore and offshore centres that are frequently ignored and untapped. Last, the foundation of agile banking operations is empowered, multifunctional teams. Increasing interactions among geographic business centres—head offices and technology and data hubs—will maximize the value of agile processes but requires careful planning and more integration among units.

  • By Matthieu Lemerle, et al

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