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The future of cashless payments in a post Covid-19 world

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The coronavirus pandemic is having a significant impact on society and industries worldwide – and the payments industry is no exception. According to McKinsey, the ongoing pandemic is likely to have a profound effect for global economies. It predicts that global payments could drop by as much as 8-10 percent of total revenue due to the pandemic, a reduction of between $165 billion- $210 billion. That’s compared to the 10-11 percent revenue reduction seen following the 2008 global financial crash.

The pandemic has not only created consequences for our immediate lives and the economy but is already causing shifts in consumer attitudes. As a result, behaviors and purchasing habits relating to payments are likely to remain post-pandemic leading to momentum for contactless payments.

Coronavirus is accelerating a shift towards a cashless economy. Back in February, before the pandemic was declared, UK Finance predicted that the UK will become virtually cashless within the next decade - which is only likely to accelerate in the current climate.

In March, the World Health Organization advised the public to use contactless technology where possible, to prevent the spread of the disease. Since then, retailers have begun refusing cash payments and a concern around sharing potentially ‘contaminated’ cash has grown. Meanwhile, in the midst of the pandemic China has launched a sovereign digital currency, the eRMB, anticipating cash will diminish even further.

Why should we give up cash?

It seems that while a cashless world has been on the horizon for a number of years, the coronavirus pandemic has finally given the public a firm reason to give up cash. We are currently seeing a widespread change in consumer behavior propelling the desire for a cashless society forward – including for those who were previously skeptical of going cashless.

For many consumers, using contactless payments can provide much needed reassurance while shopping in stores during the pandemic. While these new purchase options may seem unusual for some, Covid-19 has caused retailers and consumers to seek touch-free payment alternatives.  It has quickly become second nature for consumers to tap their card to pay for goods and services instead of using cash or punching in a PIN.

So, now there is significant demand for a cashless society, how do we actually get there? And how do we make sure it is secure and accessible to all?

Touch-free payments

The answer is to make all payments touch-free. We already have contactless payments, of course. The limit for PIN-free payments has even risen around the world in response to the Covid-19 outbreak, reaching £45 in the UK, €50 in all EU countries and even up to $250 in Canada– allowing consumers to make more payments without having to touch a PIN pad. But in a post-pandemic world, all payments, regardless of value, need to be touch-free to protect consumers.

And while contactless methods are the most commonly available touch-free payment option, they lack added security and authentication. As Strong Customer Authentication (SCA) grows in importance, payment methods must have two-factor authentication, as well as convenience and hygiene. But with PINs increasingly recognized as insecure and PIN pads deemed ‘unclean’, consumers are now worrying about their health as well as contactless banking fraud while making a payment.

Consumers, particularly those cautious about potential fraud from transactions without a PIN, may need a greater layer of security to overcome trust issues around contactless payments. While a signature can be forged, a PIN cracked or an online account hacked, a fingerprint is virtually impossible to replicate. Therefore, to resolve fraud uncertainty, the payments industry must adopt fingerprint biometric authorization to provide greater security and protect consumers.

Balancing security, convenience and hygiene

Biometric payment cards provide the ideal balance of security, convenience and hygiene for transactions, without having to touch anything beyond your personal payment card. When paying for goods with a fingerprint biometric payment card, the consumer only needs to touch the sensor on their own bank card while holding it above the terminal for a contactless payment - just like they do today. This two-factor authentication links the person to the payment card in a sanitary way, eliminating the incentive for theft or mis-use of payment cards.

We know that consumers want a transaction process that is fast and free from hold ups. In the age of Covid-19, increased touch-free authentication with your fingerprint will secure the payment card, removing the need for PINs and reducing the need for the payment limit, all while making the transaction process more hygienic. It will also help to reduce the need for a payment limit – whether at £45 or £30.

Are we ready for a cashless world?

As we look to a post-pandemic future, the change in customer behavior during the pandemic is likely to stay with an increasing number of people using contactless payments. However, it’s important that the transition is well supported to provide all consumers with a secure and easy way to manage contactless payments. As a result of the changes to consumer behavior, research suggests that there is currently a shift towards a cashless society with cards being used in 51 percent of transactions over the past year. In addition, 23 percent of all payments were made by cash last year, a decrease from 58 percent a decade earlier.

With some high-street businesses reopening with pandemic protocols in place, many shops and restaurants are encouraging customers to use their debit or credit cards instead of using cash, to help prevent the spread of the coronavirus. For example, Wetherspoon, has suggested customers should pay by app or by card at the bar when its doors reopen. In the US, Starbucks are also encouraging customers to use their branded payment app to reduce the need for customers to touch shared pin pads during a purchase.

Biometric smart payment cards are vital to help consumers overcome trust issues around digital payments. In fact, as we shift towards a more cashless society, it’s important that the payment industry now adapt and adopt biometric technology to ensure that payments are stable, secure and sanitary.

Vince Graziani, CEO, IDEX Biometrics ASA

Vince Graziani, CEO of IDEX Biometrics ASA.