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[Industry News (Repost)]

Hong Kong is heading towards a near-cashless society with FIS, a payments processor, forecasting that paper money and coins will account for no more than 1.6% of point-of-sale (POS) transactions by 2024, the lowest in the Asia-Pacific region, and down from 9% in 2019.

The disappearance of cash is in part due to Hong Kong’s burgeoning e-commerce market, which is projected to grow to US$29 billion from US$21 billion in 2019. The overall POS market in Hong Kong is forecast to increase by almost 27% to US$236 billion over the same period.

While the most popular online payment method in 2019 was using a credit card, digital wallets are projected to take the top spot by 2024. “We are approaching a new frontier of digital commerce, and Hong Kong is leading the charge across the region as they accelerate cashless payments,” Phil Pomford, Asia-Pacific general manager of Worldpay Merchant Solutions at FIS, has said recently.

Digital payments are more prevalent than ever in Hong Kong, spurred by the recent HK$36 billion in “consumption vouchers” issued by the government to Hong Kong residents this year to stimulate the economy. The city was one of the pioneers of cashless payment systems with the launch of the Octopus stored value card in 1997. Initially used for public transport, the Octopus can now be used in a range of retail outlets and has been one of four platforms used for the consumption voucher.

The voucher initiative is designed to boost local spending and accelerate the city’s economic recovery amid the Covid-19 pandemic. Retailers reported sales growth of more than 20% when the first voucher was issued on August 1, with consumers snapping up everything from Rolex watches and electrical gadgets to fast food.

To be sure, Hong Kong has lagged behind the rest of China in its embrace of digital payments. On the Mainland, digital cashless payment is so common that it has prompted the People’s Bank of China to ban businesses from refusing cash payments. But Hong Kong has proved more resistant. Even as retail has embraced cashless payments, other important parts of the economy – from wet markets to taxis – have resisted.

King Au, Executive Director of the Financial Services Development Council (FSDC), has noted how digital currency and other innovations in financial technology have changed and are continuing to change today’s business models. The city’s move towards a cashless society is driven by both the private sector and government, with a common QR code specification developed for retail payments in Hong Kong.

The FSDC has closely followed the rise of digital payments. One crucial development was the HKMA’s Faster Payment System (FPS), which makes payments simpler and quicker. The system, operated by Hong Kong Interbank Clearing Limited, allows instant money transfers and bill payments via mobile phones, regardless of the bank or e-wallet that is being used.

Chris Barford, Director of the Financial Services Advisory Team at accounting firm EY, forecast during an FSDC event in 2018 that “Hong Kong is poised on the edge of a financial services revolution” with its issuance of virtual banking licences. “I hope that the difference between a mainly cashless, mobile first Mainland and Hong Kong's more traditional models that rely on money, paper forms and Octopus will converge,” he said.

According to KPMG, another accounting firm, Hong Kong’s digital banking landscape could follow a similar path to other jurisdictions like the UK, where virtual banks have been steadily building their customer base over time. Furthermore, the Hong Kong Monetary Authority’s initiatives to usher in a new era of “smart banking”, coupled with the opportunity to enhance customer experience in the sector, is creating an environment for digital banking to thrive in Hong Kong.

Most notably, the global Covid-19 pandemic contributed to an explosion in e-commerce across several jurisdictions at the expense of physical retail, which is likely to be an irreversible trend. Hong Kong is no exception, as the FSDC has noted.

“The payment pattern is, among others, one of the key changes we have observed during the pandemic outbreak,” the FSDC said in a statement. “As people and businesses in Hong Kong attempt to reduce cash transactions, electronic payment channels have become increasingly popular. Developed in Hong Kong, FPS has become a key means of transaction in our lives, with more merchants accepting it as a means of payment.”

One of the biggest obstacles to a fully cashless payment ecosystem is privacy concerns. Not only can the currency’s issuer and controller track usage, but potentially disconnect a digital wallet if breaches are suspected or detected. This will no doubt meet strong resistance from savers, and to some extent this may also explain why Hong Kong so far has been reluctant to go fully cashless.

So how can the SAR government encourage its take-up? One way to push the adoption would be to remove high-value bank notes from circulation. In 2016, the Indian government announced that all 500 and 1,000 rupee banknotes were no longer legal tender. Amid the chaos of a cash shortage created by demonetisation, cashless payments surged.

Furthermore, car owners, for example, could be encouraged to shift to cashless payments. From petrol stations and congestion pricing to parking, in-vehicle systems could turn vehicles into payment processing platforms. Such systems could also uncover defective components and schedule maintenance automatically, potentially reducing traffic accidents and cutting emissions.

Cashless payments have wider benefits, notes Maaike Steinebach, General Manager, Hong Kong and Macau, at the Visa credit card giant. “Cash dominates and is still Visa’s number one competitor,” she acknowledged. “But sentiment is shifting to the benefits of the city. We believe that by adopting more digital payments, Hong Kong consumers, businesses and governments will benefit from greater economic growth, more jobs, higher wages, increased worker productivity, and even lower crime.”

With China, the world‘s second largest economy, on the verge of launching a central bank digital currency (e-CNY) nationwide, Hong Kong should jump aboard the cashless bandwagon. With cross-border renminbi transactions growing year on year, Hong Kong could play an important role in the launch of the digital renminbi. The first step is to build momentum to become truly cashless.

Source: Forbes

Please refer to Chinese version.

[Industry News (Repost)]

During the pandemic-driven digital transition, much of the business world has stopped using paper in B2B transactions. In response to new cash flow crunches, shifting employee work habits and digital growing pains, they have moved to making and receiving digital payments.

In fact, 76% of small and medium-sized businesses (SMBs) say the pandemic has prompted them to enhance their digital payments capabilities, according to Enabling B2B Payments For The Virtual Workforce, a PYMNTS and ConfermaPay collaboration.

These businesses are now using digital spend management tools ranging from cloud-based spend management platforms to virtual cards to reshape their payments operations to meet the needs of their decentralized workforces.

Adopting Touchless and Mobile Payment Solutions

Virtual cards have gained traction in B2B markets as firms seek out touchless and mobile payment options. In addition to providing those benefits, virtual cards enable payments automation and operational cost reductions. They automate the entire B2B transaction process, eliminating the need for manual intervention when finalizing payments to suppliers, for example.

This means they can ease the stress placed on accounts payable (AP) departments by reducing employees’ manual tasks and lowering the costs of the entire payments process. In fact, research suggests that AP teams that implement straight-through B2B processing can expect their processing costs to decrease by as much as 70%, making them especially beneficial in an economy in which 72% of SMBs do not have access to enough funds to stay open for more than a month if their revenue streams are disrupted.

Increased virtual card usage for B2B payments goes hand in hand with consumers’ rising interest in using smartphones and mobile wallets for B2C transactions. As consumers are growing accustomed to using their smartphones for everyday purchases, they are naturally beginning to desire and even expect digital payments experiences in their professional lives too.

Digitizing Procurement Operations

Businesses have also found that digitizing their procurement operations not only meets immediate needs during the pandemic, but also allows them to streamline their operations in ways that are not possible with paper-based processes.

Legacy procurement operations can severely limit businesses’ abilities to make real-time assessments with the most accurate data, especially when information is logged manually. In fact, procurement decisions based on false, inaccurate or outdated details cost U.S. companies a collective $600 billion annually.

Newer alternatives, including digital procurement systems, such as cloud-based platform solutions, can allow businesses to efficiently collect, store and analyze data to optimize their operations. Advanced data analytics and automation can help firms determine optimum workflows, reduce errors and eliminate redundancies.

Companies would therefore benefit from considering procurement innovations to be long-term investments in payments optimization rather than quick fixes to a temporary problem.

During the pandemic, companies across the nation have been faced with unprecedented financial and logistical challenges, leading them to seek cost-effective, decentralized digital processes and payments. With the adoption of such innovations as virtual cards and digital procurement solutions, they have found solutions that are both immediate and long lasting.

Source: PYMNTS

[Industry News (Repost)]

Digital engagement and flexible delivery models have long been appealing to many businesses but have historically been seen more as nice-to-haves than must-haves.

That perception changed when the pandemic emerged, forcing businesses to embrace digital transformation as a matter of survival. Now, increased consumer demand for contactless and digital wallet payment acceptance and a decline in cash usage have forced merchants to re-evaluate the types of payments they accept.

To offer additional insight into the state of payments, FIS recently released its Global Payments Report 2021. To learn more about the report’s findings and further explore the implication of cash’s decline for U.S. merchants, PaymentsJournal sat down with Christina Wagner, Head of Global Payments Products for FIS, and Don Apgar,

Consumer demand for digital payments is booming

According to Wagner, COVID-19 ushered in an era of increased demand for digital payment acceptance. “By that, I mean [it ushered in] things such as contactless and digital wallets, which have forced many merchants to re-evaluate and shift their payment acceptance mix and strategy. Digital wallets and mobile wallets are a more modern payment method that allow consumers to securely store payment credentials and payment purchases,” she explained.

The proliferation of digital wallets—which includes an array of options such as Apple Pay, Google Pay, Samsung Pay, Alipay, WeChat Pay, and Amazon Pay—has led consumers to use them more often at the point-of-sale. This rings true both globally and within the United States, where mobile payment adoption has lagged compared to other countries.

“Even in the U.S., we’ve seen that checkout at point-of-sale using mobile wallets has grown a staggering 60%. And mobile wallets in particular have gained … [as a result of] the decline of cash at the point-of-sale. We’ve seen mobile wallets rise nearly 20% over 2019,” said Wagner.

Globally, mobile wallet’s share increased five percentage points in 2020, which equates to three years’ worth of growth in a single year. This increase, which is highlighted in the graphic below, came at the expense of physical cards and cash:

Looking ahead, it’s fair to expect that this shift to mobile wallets will continue. “No doubt, the pandemic has put a lot of emphasis and raised awareness of the need to be contactless in our face-to-face transactions, and it’s actually given NFC, or near-field communication, a big boost both from card usage and also… from wallet usage,” explained Apgar.

The free fall of cash

The rise of mobile wallets came hand-in-hand with an ongoing decline in cash. While the payments industry has long flirted with the prospect of digital transformation, the pandemic was the catalyst the industry needed to aggressively embrace such digitization. 

“We’ve been talking about digital engagement and digital payments and digital transformation for a long time in the payments industry. And before the pandemic, I think there was interest in it, there was movement in that direction, but I don’t know that all merchants really saw that [transformation] as an imperative for their business to survive. And I think that has been a pivotal shift for us,” said Wagner.

Consumers around the world had nearly every aspect of their lives uprooted due to the pandemic, and how they shop is no exception. Brick-and-mortar locations shuttered their storefronts due to stay-at-home mandates and widespread health concerns, causing consumers to flock to online shopping channels. Unsurprisingly, this led to an acceleration in the decline of cash. After all, how many consumers use cash in an e-commerce environment?

“The Global Payments Report really showed that our decline of cash exceeded a three-year trajectory. So, our decline in cash in 2020 alone exceeded the projection we had for 2020. And cash in 2020 was used for roughly 20% of global point-of-sale volume, and that was a 32% reduction from 2019,” explained Wagner.

Whether or not COVID-19 fades away, this decline is unlikely to reverse. “Regardless of the ultimate trajectory of COVID-19 and the pandemic, we’re expecting another 38% decline between now and 2024, and so it’s just a dramatic change for us and a cashless future I think is appealing for merchants,” she added.

This decline is good news for merchants looking to reduce costs and streamline operations. Certain types of merchants, including retailers, quick service restaurants (QSRs), and grocery stores, will need fewer resources dedicated to storing, circulating, and securing cash.

The costs associated with the manual labor involved in counting, transporting, and depositing cash can add up quickly. Human error, security risks, and physical risks all compound to make managing cash inefficient. With less cash to manage, these inefficiencies will decrease, which can tip the scales for merchants toward higher profitability and productivity within their businesses.

“The whole pandemic environment has really brought about a reawakening, if you will, of the value that electronic payments bring to businesses of all sizes,” noted Apgar.

“The paradox of payments”

While those in the payments industry may struggle to relate, most consumers are not thinking about payment method availability as they shop. For consumers, it’s all about convenience.

Therefore, even as payment methods bring a level of convenience that lets consumers shop on autopilot, payments should continue to be top of mind for merchants. In other words, as payments are becoming more visible and relevant to merchants, they are becoming more invisible and behind-the-scenes for consumers. This contrast is what Apgar refers to as the paradox of payments.

“As payments get more complex technologically and consumers have more options on how to pay and merchants have more options on how to collect payments, the payments themselves are fading into the background and instead of being a separate workflow, the payment is becoming embedded in the workflow,” he explained.

One example of this paradox can be found at certain Whole Foods stores, where consumers can enter the store, shop, and leave with their merchandise without having to stop at a register to checkout. This serves as a strong example of how a retailer can enhance their payment acceptance strategy without introducing unnecessary friction to the customer experience.  

Payment strategies should center around the customer experience

It has been said before but is worth repeating: consumer payment preferences are changing. In response to these changes, merchants must offer payment optionality and flexibility through alternative payment methods such as ‘pay by’ links, contactless and digital wallets, and ACH.

How merchants should frame their payment strategy depends on who their customers are and what services or products they offer. For example, a consumer purchasing a service from a law firm is a far cry from a consumer heading into Target for their weekly shopping trip. These two consumers likely have very different payment preferences and needs. Even so, the customer experience should always remain at the forefront of payment acceptance strategies.

“If digital innovation is now the primary focus, I think that merchants and brands are really in a race to create the ideal customer experience amid these new consumer expectations. I think omni-channel experiences are going to be critical to the buying journey,” said Wagner.

Merchants want more from their payment providers than simply processing payments. “I think there’s a real revolution going on in the way that merchants are utilizing payments and recognizing the power of the payment technology to play a real active role in customer acquisition and retention,” noted Apgar.

Now, they are looking for ways to engage with existing customers, drive new customer acquisition, and grow brand loyalty all while streamlining operations and creating an elegant and seamless customer experience.

“To enable a true omni-channel solution, merchants will have to invest in modernizing their tech stack. They may have to look at reducing the number of payment providers they have. They may have to look at their engagement models and whether they’re leveraging data appropriately to drive loyalty in that consumer experience that they’re really after,” Wagner concluded.

Source: Payments Journal

[Industry News (Repost)]

The use of digital payment methods is on the rise as consumers look for easier and more convenient ways to spend money.

Capgemini's 2021 World Payment Report revealed that by 2025, 25 per cent of the world's cashless transactions will be made up of instant payments and e-money, an increase of about 15 per cent over the previous year.

The report also said methods such as buy now, pay later, and cryptocurrency will help spur the growth of digital payments.

According to Pankaj Kakkar, head of the financial services division of Capgemini Canada, the demand for and acceptance of digital transactions that is currently taking place is a product of the pandemic.

The demand for digital payments

Companies are capitalizing on this demand.

For example, Clik2pay, a Toronto-based digital banking payment startup, enables payment processing services for businesses that provide convenient, secure and reliable payments directly from customers' bank accounts. Recently, the company built an experience layer onto Interac's e-Transfer service so that it can be used by e-commerce retailers and billers to collect payments. The company has also implemented a QR Code Payment feature.

These new developments lower costs compared to expensive credit cards and give Canadians without credit cards more access to make purchases. According to Kakkar, digital payments are a great way for Canadians without a bank account to manage their money.

“There's a small percentage of our population that lives in areas where they have no access to banks or the banks are very far. This is not convenient,” he said.

Companies such as Clik2pay or One Feather, a digital banking service for Indigenous peoples, are solutions to this problem.

Security risks

Although digital payments seem like a seamless way to make purchases, there are still risks that accompany the process. For example, digital wallets are becoming increasingly popular, but adding credit cards and personal payment information to online portals like Apple Wallet can pose security risks.

The Capgemini report reveals that fraud and cybersecurity threats are high. Out of all fraudulent activities, the share of account takeover fraud rose from 34 per cent in 2019 to 54 per cent in 2020.

But while Kakkar said that security issues are a genuine concern when it comes to digital payments, companies are creating security measures to avoid risk. Processes to identify who is making a purchase, what they are purchasing, and how the purchase is being made are all taken into consideration, said Kakkar.

Better for the environment

Still, when it comes to digital payments, the pros may outweigh the cons. Besides the more obvious benefits of digital payments, such as faster payments and convenience, cashless payments are also much more sustainable.

“[Prior to non-cash methods] When you spend money, you either had a cheque or cash or some kind of paper,” Kakkar said. Additionally, a 2020 blog post by Pomleo Pay states that coins, too, have a major impact on the environment. Mining of the metal in them and transport of coins have led to the emission of over 48,000 tonnes of carbon dioxide. It also shows that the plastic money used in Canada and the U.K. is just as bad, if not worse, for the environment than paper.

According to a 2019 article by Mobile Transaction, the worst part of cashless transactions is the receipt. Receipts are often not recyclable and are coated with a toxic chemical called bisphenol A (BPA).

“It is estimated that globally, 300 billion paper receipts are produced annually, consuming 25 million trees, 18 billion litres of water and 22 million barrels of oil,” the article said. Normalizing digital payment methods is one step in the right direction when it comes to making purchases more eco-friendly.

Still, digital payments are being implemented globally. The Boston Consulting Group report, Global Payments 2021: All in for Growth, said that payment revenues in Europe will increase by an average of 5.3 per cent annually from 2020 to 2025, due to the increased use of cashless transactions and online shopping. European countries are joining forces to form the European Payments Initiative, which aims to develop an independent, single European payments scheme that supports different types of digital payments.

Given the benefits, the demand for non-cash payment methods continues to grow; it is more convenient for consumers, accelerates the payment process and helps combat climate change.

Source:  IT World Canada

Please refer to Chinese version.

[Industry News (Repost)]

The tectonic plates of commerce have shifted over the last decade. Goods and services have moved online, and we've all adopted more digital behaviors. That shift accelerated as we adjusted to the effects of the pandemic. These changes have been significant for all of us — both businesses and consumers: 97% of global business leaders claim the pandemic sped up their company’s digital transformation, and more than 50% of global consumers say they've become more digital.

And in this digital-first world, consumers expect to get what they want, when they want it — whether in store or online. As a result, the adoption of new payment technologies is rising as consumers embrace emerging payment innovations that enable greater flexibility and choice while keeping their transactions safe and secure. This renewed emphasis on experience and security is essential for business in our new competitive environment.

Our daily lives are already rife with examples. In many global cities, commuters access transportation by using a phone or smartwatch. Payment by QR code has emerged as a cleaner and more convenient alternative to cash in developing markets. In retail, we have a vivid example of how this space is evolving. Thanks to a combination of AI, biometrics and other technologies, consumers can now simply wave to pay or pick up what they want and just walk out.

Some businesses may be tempted to see these as emerging innovations and adopt a "wait and see" approach. However, these are all tried and tested technologies. The infrastructure is there, and consumers are eager to use them. The future is here — and a lack of knowledge or willingness to adapt could hurt business ambitions in the near term.

The Tools Of Change

Three of the key technologies driving this change across consumer transactions and interactions are contactless payments, biometrics and digital assets. Contactless experiences continue to grow in popularity because they're also fast and secure. Nine in 10 in-person transactions around the world occur at a merchant enabled for contactless payments. And contactless transaction values are expected to reach $2.5 trillion this year, up from $1.7 trillion in 2020.

With biometrics, we've replaced the password with the person. The technology is increasingly deployed to authenticate users as they go about their day-to-day activities, whether logging into a device, shopping online or signing into a bank account. And the public sentiment is positive: 61% of consumers are interested in biometric technologies like gait or walk assessments and fingerprint authorization. According to the results of a recent IDEMIA study, four out of five people globally are looking forward to using fingerprint technology over PIN codes during card transactions.

Right now, there's tremendous technological innovation going on in digital assets. We're seeing major corporations investing in crypto or expanding crypto services to millions of customers. In addition, 86% of central banks are actively researching the potential of their own digital currencies. However, with such growth, digital currency security is a growing concern, so ensuring the right consumer protection and regulatory compliance are in place will be vital.

To engender trust in these technologies, we must ensure that innovation never outpaces trust. This means building security and privacy protections into solutions from the start — not as an afterthought. In short, deploying capabilities across AI, biometrics and digital assets that work together like an invisible shield behind the scenes is vital if we're to truly embrace digital innovation without compromising privacy and protection, and if we're to actively meet the challenge of increasingly sophisticated and well-funded hackers and fraudsters.

Mapping The Future

Whether we look back on the formation of the digital economy as the creation of a brave new world or the reskinning of an existing one — revolution or evolution — we won't know for some time. What we do know is that those who are creating the infrastructure and core components of the digital ecosystem must prepare and equip the consumer with a roadmap for this unfamiliar territory.

Although the ground may be moving beneath us, the true north we must maintain is trust. To foster faith in a digital economy that works for everyone, we must strive to ensure that whatever payment choice the consumer makes, it's convenient, safe and secure, now and in the years to come.

Source: Forbes

Please refer to Chinese version.

[Industry News (Repost)]

Consumers prefer stores with contactless payment options.

Consumers and retailers agree that contact-free payment is becoming a necessary feature of the brick-and-mortar store experience.

According to the Visa Back to Business global research study of small-to-mid-sized businesses and consumers, the COVID-19 pandemic has dramatically increased consumers’ concern with touching cash and payment readers and correspondingly, increased the desire to tap to pay.

Three-quarters (74%) of surveyed small-to-mid-sized businesses around the world expect customers will continue to prefer contactless payments as much as, or more than they do currently. Two in five (40%) surveyed small-to-mid-sized businesses citied contactless payment among the top brick-and-mortar investments needed to meet customer expectations.

The survey also reveals that stores which fail to accept contactless payments could run an increased risk of losing customers as a result. More than two in five (44%) surveyed consumers say they would not shop at a store that only offers payment methods that require contact with a cashier or shared device.

In the 2020 edition of the Visa Back to Business study, just 17% of U.S. small-to-mid-sized business respondents started selling products or services online for the first time during the COVID-19 pandemic. However, 57% of U.S. small-to-mid-sized business respondents in the 2021 version of the Visa survey expect to continue to do sell products or services online in the next three months.

Yet, many small-to-mid-sized businesses surveyed said the shift to selling online has presented new challenges; with the top concerns cited as data privacy and security (33%), cost to invest in digital infrastructure (31%), and having less of a personal connection with customers (30%).

While 54% of surveyed small-to-mid-sized businesses say that the past year has been a challenge for their business, 46% have viewed it as an opportunity, up from 38% in November 2020. Among those who saw 2020 as an opportunity, their focus has been on selling new products (37%) and expanding their sales channels (34%), with 23% having started a completely new business.

The recent global Blackhawk Network Global Digital Payments study reinforces Visa's findings that consumers desire digital payment options. Sixty-three percent of respondents were more likely to shop at a retailer if it accepts the digital payments they use, and 73% said they want to be able to pay the same way they pay online and in-store.

"With a 19-month view into the pandemic, we've seen that small businesses who embraced digital commerce and cross-border sales have weathered the pandemic better," said Mary Kay Bowman, global head of buyer, seller, core and platform products, Visa. "But it's no longer just about pivoting and surviving. We're now seeing a hopeful surge in entrepreneurship."

The Visa Back to Business Study: 5th Edition, was conducted by Wakefield Research between June 15-28, 2021, among 2,250 small business owners at companies with 100 employees or fewer in Brazil, Canada, Germany, Hong Kong, Ireland, Russia, Singapore, United Arab Emirates, and U.S. The consumer portion surveyed 1,000 adults ages 18 and up in the U.S., and 500 adults ages 18 and up in Brazil, Canada, Germany, Hong Kong, Ireland, Russia, Singapore, and United Arab Emirates.

Source: CSA