Cash has been having a hard time lately. With social distancing, retailers no longer appear to want your cash. They want you to keep a safe distance, but they still want your money in other ways. In the most developed countries, payment by card is well established, and there’s generally a good infrastructure to accept card payments. Globally, card schemes like Visa and MasterCard have reported a huge increase in the use of contactless payment in the stores where cards can be used, and many consumers have adopted cards in ways new to them. Of course, in the lockdown, we’ve also seen a substantial increase in e-commerce and in m-commerce as people look to the internet to buy more of their goods for delivery. The telephone has also seen a resurgence for ordering goods, as some local merchants have found it easier to adapt their business model by encouraging clients to call them to make their order. Other countries with stricter lockdowns where people are literally forbidden from leaving their homes have increasingly used the phone to order their goods. Effectively we’ve all become remote buyers. We’ve changed from a society that needs to go and look and feel-goods, into a society that is happy to order and have stuff delivered. Fortunately, OmniPayments facilitates these e-commerce gateway services.
“OmniPayments is being used as a Payment Gateway in Chile,” says Lorenzo Fuentes, GM OmniPayments Chile. Will we ever return to our old ways of physical face to face commerce?
As an aside, one local brewery of mine has adapted their business to operate as a drive-thru. While they don’t encourage you to drink and drive, they are encouraging you to “drive and buy drink.” But like so many more traditional places, they haven’t yet migrated to the latest contactless card technology. So instead still seated in your driving seat, they offer you their Point-of-Sale terminal on the end of a 2-metre stick for you to enter the PIN. I have to add they also have now started a delivery service where they sell at normal prices and deliver for free next day, so if the lockdown is making us one thing, it could be more regular imbibers.
On a slightly more serious level, as we progress through the lockdown, parallel exercises are taking place at government level to distribute emergency funds to those that need it. Governments around the world are stepping up to the challenge of helping those most affected by the pandemic. How can governments distribute money quickly to their population in time of economic stress? How can paper vouchers, e-vouchers, or m-vouchers be best circulated into the populace? What infrastructure would best support its distribution? And how can governments do this quickly?
None of these are easy questions to answer, and there is no one size fits all solution. Those countries with a strong existing banking network, high penetrations of bank accounts can facilitate payments more directly to consumers via payments into those accounts. Germany, for example, was reported to have provided somewhere close to 5000 euros to every self-employed person per month so they could cover their costs of not working that month.
If you live in a more developing part of the world you’d be familiar with people tending to queue at banks to deposit money, withdraw money, dispute their ATM transaction, pay to top up their electricity card, queue to pay every bill they have to pay because that’s the only way to pay, then that totals up to a lot of queuing, a lot of time lost to productivity, and ultimately not much social distancing either.
How do countries like these go about distributing cash to their most needy in time of emergency? Ideas have been springing up that involve distributing vouchers to be used in specific food stores. This would involve issuing them, distributing them, and working with retail food stores to accept them as payment. Mobile phone ownership is high enough in many countries such that such a scheme could be rolled out to issue the vouchers electronically in conjunction with mobile operators. These mobile operators would distribute them to phones, using either SMS text, or other popular, widespread apps such as WhatsApp, or even a dedicated App solely for the purpose of receiving and storing the vouchers for consumer spend. Stores themselves have been quite flexible in agreeing to use simple QR code scanning apps on a phone, even on a standalone basis, before moving to a later phase of integrating the voucher acceptance with their day to day till function. Of course, the stores must also have a way to authorise these vouchers centrally using a card payment service to ensure they are used once and once only.
Organisations that can adapt rapidly can meet the urgent needs of a broad population. “Our customers use OmniPayments to quickly disburse government funds to citizens in need,” says Yash Kapadia, CEO OmniPayments.
This use of mobile or m-vouchers represents the creation of money, in that it becomes a parallel currency token that will need managing in the long term, or conversely, shutting down once the emergency is over. That’ll be for the administrators to reflect on.
Governments are looking at other ways to create money too. And they are looking to the Central Banks to help. Let’s consider the role of a central bank for a moment. They are there to serve and regulate high street banks, but not to compete with them. They are there also to control the money supply, enough to grease the wheels of the economy but not so much that it causes inflation. However, they are now looking over their shoulder at some of the other commercial players who could threaten their dominance. Let’s take Facebook’s Libra currency as an example. While Libra hasn’t yet gained world dominance and the card schemes are not fully on board, the growing use of social platforms by the young certainly indicates that such a trend might well take off. With Covid-19 depressing the demand for cash at the same time, this could be a twin-forked attack on the dominance of the Central Bank. Bitcoin and its other imitators are other considerations too. Central Banks will resist the temptation to wade into the world of consumer banking and merchant banking, as their role is to underpin a strong banking sector. A Digital Currency certainly has its attractions. A digital currency that can be bought and sold, and used electronically to trade in goods & services should be much cheaper to distribute, to account for, and to tax. It offers an alternative to Cash. It can move quickly across great distances, even across borders. But it also offers central banks a way to reclaim their control over the money supply. However, let’s not forget there is an enormous level of trust in cash. Whether cash is in your wallet or under your mattress, there is always the knowledge that it can be traded. Returning to the idea of a Central Bank digital currency, this would give the central bank the weaponry to help distribute funds directly to its population; consider it a version of the much-hyped “Helicopter drop.” The Helicopter Drop was floated as an idea back in 2008 during the last financial crisis as a means to get money quickly to the population, and while in 2020 we do not have a financial crisis but instead more of an economic demand-side dead-stop, there will be stresses in the economy as we start to recover and return the journey back to normality.
As the lockdown eases, will there be pent-up demand chasing fewer goods and services? Will we still have the plethora of small businesses to choose from? Will big businesses be the only ones that can weather the storm? How quickly will the population feel safe enough to mingle at close quarters?
My guess is that the population will be so fed up with the strains of lock-down that they will be more than willing to re-engage with the world. The draw of traveling around the world will not diminish, although I can foresee the aircraft middle-seats proving less popular than a headache. We are social animals, we still need the water cooler, and we’ll still need to interact.
What I hope comes out of this crisis is a world in which we are better prepared and more able to adapt in a way that keeps people working, keeps businesses afloat, and where funds can get to those who really need it.