While the Covid-19 pandemic continues to worry global economies, payments innovation is still a focus in many quarters. Japan's biggest three banks are joining forces with East Japan Railway's Suica smart transit card to link their digital currencies to the commuting payment tool. With around 80 million users of Suica cards, the opportunity to expand the digital currency platform is vast. The initiative means that Suica card users will be able to link their cards to their bank account to transfer digital currency onto the card in real-time – offering a real boost in convenience.
While a launch is slated as early as autumn 2020, there will be barriers to overcome on the journey – not least improved security protocols to avoid fraudulent use and increases in deposit insurance. Japan is not the only country making headway with digital currencies as China announced in April that it had launched its pilot program for a national digital currency across four cities.
UK Finance announced this week that cards were used for just over half of all payments in Britain last year, a new high. Cash payments fell by 15 percent but remained the second-most popular method after debit cards, chosen for 23 percent of transactions. It is a certainty that 2020 will see cash use fall further, as the idea has taken hold around the world that banknote-handling should be avoided (cash advocates argue otherwise, noting sterilisation measures).
The net result is that ATM usage is not what it was: John Howells of the country's main network, Link, says that his company has seen "a large fall in ATM use since lockdown, with 28 percent of people saying they prefer not to use cash since coronavirus. Further research suggests that, even after the crisis, 54 percent of consumers say they will use cards more, 38 percent said they will do more shopping online and 33 percent said they will use ATMs less. Link therefore does not expect all of this decline in cash use to be reversed, and that is putting a huge strain on the sustainability of the cash system. What's needed now is legislation to maintain cash for as long as is needed as the UK isn't ready yet to go cashless."
As our new market report for Australia points out, the central bank has been looking closely at the cost to merchants for debit cards used at the point of sale. That usage soared in the last quarter, sharpening the regulator's focus while it also looks at the interrelated issues of access to cash and the resilience of payments systems. "Ultimately," said the bank's assistant governor, Michele Bullock, in a speech this week, "if market forces are not generating competition to lower the cost of debit card payments, we may need to consider lowering the benchmarks that serve as a cap on average interchange fees ".
Another structural change accelerated by the crisis has been a hastening of the cheque's decline as a payment method, with banks in Australia now considering a shutdown of the system. Processing cheques costs six times more per transaction than card-based equivalents, according to Ms Bullock.
The automated teller system could be on the cusp of significant reform too, with banks looking with renewed urgency at ways to merge their ATM networks into a smaller fleet run as a utility. The central bank, like colleagues in other markets, is concerned about its card-lacking cohort, although the number of Australians still entirely reliant on cheques and banknotes has been reduced thanks to a mass mailing of debit cards to customers that had been using passbooks.
To end, links to some other stories of interest this week...
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