Crypto, cash and crystal balls: the future of money
Some innovation lands so completely, we can forget life before it. Contactless payment’s a case in point. It only really started taking off in 2014, yet by 2019 accounted for half all debit card transactions. UK businesses are set to process 11bn contactless transactions a year by 2026: four times as many as 2016. But that’s just the tip of the iceberg for payment trends. The 2020s will see a revolution in the sector.
Next after contactless is mobile payment. In 2016 just 2% of Britons had registered for mobile payment systems like ApplePay. By 2018 that had risen eightfold to one in six. The swift shift from pin to NFC to mobile will accelerate acceptance, and expectation, of further innovation. Mobile developments mean anyone will be able to accept payment for anything: redefining what ‘retail’ actually means. Social payment apps with great CX will drive use of platforms, as apps did for Apple and Android. There’ll be a race to lock businesses into a single platform.
As important as it is, though, mobile’s only a transitional technology. The future is ‘invisible’. China leads the way here. A combination of AI, big data and face recognition means customers in more and more shops can walk in and out, with goods but without ‘paying’. Invisible’s not a given in Europe. Privacy concerns are growing around facial tech. But when consumers weigh up privacy and convenience, the latter typically wins. Already 40% of consumers are happy to provide personal data in exchange for personalised marketing. If it happens it’ll mean massive job cuts but more space instore for CX. As tech costs fall, ‘invisi-payments’ will appear in more non-retail and leisure spaces, turning every venue into a ‘shop’.
Currency is next for disruption. Most big tech platforms already have their own payment apps. Soon they could have their own currency, as Facebook is attempting with Libra. To go from using a Social payment app to a Social currency app is a small step for customers. But it has far-reaching consequences for business. Again, it’s not a given. Banks and governments will fight it. Libra has already encountered massive opposition. Banks may even create their own digital currencies to compete. 10% of central banks are now looking to do so, versus just 5% last year. Or an independent cryptocurrency like Bitcoin could bypass them all. Either way digital currencies have huge implications: for sales, where pricing could get complicated, and payroll (“this job pays in Libra”).
National currencies actually face a two-pronged attack: externally from Social Media, internally from new local currencies. The drive for regional independence is a huge global trend. Largescale, like Brexit, or California’s legislative tussle with Washington, to small: a resurgence in Homesteading, the rise of independent Prepper communities. Political devolution will drive economic devolution, creating new economic regions with independent currencies whose profits go to local amenities.
Dumping the dollar?
If traditional currencies survive, they’re unlikely to escape disruption. The dollar’s been the default global currency for decades. But an increasing number of countries whose trade is tied to it are nervous of how aggressive US economic policy might impact them. The Economist believes the dollar might lose its default position. A currency like the Yen could take its place. But it’s more likely that the volatility across currencies will dissolve any concept of ‘standard’, making radical currency fluctuations the norm, majorly impacting import and export businesses.
Bye bye banks?
Traditional banks are losing ground to innovation. Customers look unlikely to offer a lifeline. According to a recent Bain & Company poll, people trust Amazon more than their bank. Two thirds of Prime customers – and over a third of non-Amazon customers – would happily sign up if Amazon opened a bank. History’s not on the traditionalists’ side either. Today’s youth are tomorrow’s core customers, and they’re the ones championing neo-banks and challengers like Monzo.
Meanwhile the shift from institutional to peer trust will accelerate trends like crowdfunding and P2P lending. Alongside business trust-trends like incubation and co-opetition, they’ll create increasingly diverse remuneration methods. As neighbourhoods become more self-managing, we’re likely to see a resurgence in barter systems and time banks. As more consumers earn outside their ‘day job’ via the likes of Etsy, Task Rabbit or Airbnb, they’ll be more able to self-determine their own rates and rewards.
Cash will crash
Cash use is falling by double digits year on year. By 2028 just one in ten transactions could be in cash. Going all-digital will reduce admin costs in retail and other sectors. It will also bring benefits around transparency. For instance, the scoring systems used from eBay to Airbnb could expand to reduce bad-debt risk for SMEs. All-digital transparency will enable the UK to raise more tax: hopefully to fund business-benefiting infrastructure. Cash supports those with no bank accounts or dependent on the Grey Economy, and some businesses. But micropayment services in Africa suggest digital currency might be a more than adequate alternative.
The UK is today second only to the US for investment in financial technology. Start-ups here raised $2.3bn last year. Most will focus on improving convenience around, say, receipts, tax or group payments. But watch this space. Combine new consumer appetite for financial innovation with the ambitious entrepreneurs attracted to such a volatile market, and we could see the creation of something so radical it supersedes all predictions above …