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IN THIS ISSUE
Cards Will Disappear Before Cash
Software Drives Performance: How toFutureproof Your Cash Operations
Mermbers' Newsboard Latest Storiesfrom ACMA Members
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Over the last few decades we havebeen relentlessly messaged by the
card companies about a battle fortransaction dominance between cardsand cash. The idea that “cash willdisappear” has become a meme, itsinevitability seemingly assured in ournew, high technology society.
New data shows the reality to be quitedifferent:
Today, there is more cash in theglobal payments system than everbefore.Four Important Cash Facts:• Physical euros (Source: European
Central Bank) and dollars (Source:Federal Reserve) in circulation havegrown every year during the last 15years, the volume of dollars isgrowing at a CAGR of almost 5%,while the volume of euros hasdoubled since 2002 with a CAGR ofmore than 6%.
• The European Central Bank (ECB)forecasts the volume of notes incirculation will grow by 40% over thenext 7 years.
• The Bank of England projects 20%growth in GBP notes over the next 7years.Cash is still the most popular faceto
face payment transaction method on theplanet – despite numerous articlesclaiming a cashless society is imminent.• The latest figures published in
December 2017 by the ECB showsthat in Europe 79% of all transactionsat the pointofsale were conductedwith cash.
• According to the USA FederalReserve, cash is still used for 32% ofall transactions, regardless of who ispaid (this includes mail and internettransactions which are rather difficultfor physical cash).
Cards will Disappear before CashCARLOS MOLINA | GLORY
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ACMA CURRENCY NOTES2
This is hardly a comprehensive list, butis perhaps enough reason to revisit andchallenge the meme. Today, instead, wewill introduce a new meme.
How Europeans pay?
The Impact of eWalletseWallets will have an impact on use of
cheques (already in decline), use of cards(happening now), and, yes, use of cashas well. Most important, however, is thateWallets have the potential for radicaldisintermediation of the traditional cardpayment system.
Contrast the debunked cash v card
myth with the card v eWallet reality. In thelast 5 years, eWallets have demonstratedphenomenal growth – and attention – atthe expense of card use. Many, andperhaps most, North American andEuropean users of both cards andeWallets do not really understand thedifferences between the two, except thatthey use their phone instead of a card tomake a digital payment. Their paymentfor both is still withdrawn from their bankaccount or paid by their credit cardcompany.
In China and Africa the case is quitedifferent – a separate account ismaintained with your mobile phonecompany or in your Alipay (nonbank)account, and you first place money in thataccount before you make payments. Thisis the demonstrated potential fordisintermediation.
More on this in a moment.
Continued Growth of Smartphones
Until now, eWallet and mobile walletsuccess has been driven by consumers’desire for efficient and convenientcheckout experiences. The globaladoption of smartphones, the device“always in our hand”, is naturally asolution for new alternative paymentmethods.
Most forecasts suggest that threeyears from now, at least 40% of the
world’s population, or put another way,more than 3 billion people will own asmartphone and will always beconnected. This number will continue togrow rapidly, as smartphones become abasic requirement for interacting insociety. This can be directly comparedwith distribution of debit and credit cards.
Most Americans and Europeansalready have a smartphone, as well as acredit or debit card (or many of these);56% of Chinese have a smartphone, butless than 40% have a debit or credit card;in India, 28.5% have smartphones, lessthan 25% of the population have credit ordebit cards. Smartphone possessionoutpaces card ownership in most of LatinAmerica. In Africa, a unique case exists(in many countries), where advanceddigital phones (not full smartphones)capable of local digital transactions havefar outpaced distribution of cards.
Still, smartphone use alone does notexplain the phenomenon. Two othermarket changes are required.
Factors Affecting eWallet AdoptionFirst, consumer attitudes to making
mobile payments need to change anddata indicates this is happening, slowly.
In China, mobile payments havebecome core to life in tier 1 cities andforecasts shows that 79.3% ofsmartphone users will be happily tapping,scanning and swiping at the checkout by2021. In comparison, the US will still haveonly 23% of smartphone users doing so,and in Germany it will be only 15% –despite higher smartphone penetration.
Second, merchants must acceptpayments. Since transactions require twoparties, you also must gain acceptance ofa payments system by merchants.Merchant acceptance depends on twothings: cost and consumer demand.
Success in the payments world relieson acceptance scale. To achieve therequired scale, you need not only usersseeking to pay with your system, it must
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VOLUME 3 | ISSUE 2 3
bring value to merchants, as well. eWalletsare so similar in convenience to cards, orcash, that there must be a strong incentive tothe merchant to add another paymentmethod.
The rapid expansion of mobile paymentsin China, truly a phenomenon of the last 4years, was driven by Alipay and WeChat Paywho led the market. The key is that bothcompanies are able to provide payments onthe cheap, partly by allowing smaller vendorsto make use of a simple printout of a QRcode or their phone, instead of an expensivecard reader. A backend system that stores arecord of user accounts, instead of having tocommunicate with a bank, also keeps costsdown, radically reducing costs ofparticipation by merchants.
Apple Pay, Google Pay, Alipay
Apple Pay and Google Pay, until now,have been the main drivers of the shift tomobile wallets in North America and Europe(although other notable companies such asPayPal and Stripe have also helped the
adoption of digital and mobile payments).They bring massive numbers of consumerswith them through the iOS and Androidoperating systems residing on mobiledevices. Consumers expect the wallets towork wherever they shop. So, there isdemand – and demand should convert tomerchant revenue, right?
Sort of. Merchants in higher incomecountries want to meet the demand, butalready accept payments by cash and card.Many are pushing back on the expansion ofpayment options to include eWallets,because, perversely, they are forced to payeven more to the overall traditional paymentscartel to accept these eWallets as tender.
This is a market entry opportunity for anallnew electronic payments system. eWalletleaders, in the near future, may see anopportunity to establish themselves not asfacilitators of the current payment networks,but as replacements for these networks aspopularity, convenience, multicurrency andglobalisation become more prominent inconsumer desires.
Apple and Google have said they have nosuch plans – at least not right now. Amazonhas been a bit more vague about itsintentions. All three have demonstrated theyalways, eventually, take over markets wherethey control the user experience. The two bigChinese players, Alipay and WeChat Pay –especially Alipay as part of Ant Financial –look like they are already behaving likebanks, transacting and funding while earningon float between transaction and settlement,rather than earning only transaction fees.
E-WALLETS WILLELIMINATE THE
TRADITIONAL CARDSAND THE
TRADITIONALCARTEL-LIKE CARDPAYMENT SYSTEMS
BEFORE CASHDISAPPEARS.
“Continued from previous page
The gorwing use of mobile payments in China, viewed in the context of its massive population,has resulted in a large number of users over the last 4 years.
eWallet leaders like Apple could atsome point take over as the newface of electronic payments.
”
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FORECASTS PREDICTBY 2021, 40% OFTHE WORLD WILL
OWN A SMARTPHONEAND WILL ALWAYS BE
CONNECTED.
“
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ACMA CURRENCY NOTES4
Indeed, this new, costeffective model makesAlipay a “most likely” disruptor if they learn tooperate effectively outside of China.
There are two other players also worthy ofwatching: Facebook, with their WhatsApppeertopeer payment solution that is in betarelease in India, brings a massive user base,similar in some ways to Alipay; and Amazon,whose Amazon Pay may win overconsumers with loyalty or use incentives thatmay force other merchants to accept theirsolution. Both can be counted on to bypassthe traditional 4party payments system.
So, How Will eWallets Displace Cards?1. Ecosystem Convenience
eWallets have already taken a significantportion of the online payment market. Asonline retail embraces globalisation, moreand more consumers are crossbordershopping. In fact, the trend identified inthe 2017 Global Ecommerce Study byPitney Bowes, highlights the danger foronline retailers accepting only credit cardsas a method of payment. An estimated70% of consumers are shopping outsidetheir country of residence at least part ofthe time. Traditional credit cards may notreadily work for these transactions,without secondary and inconvenientapprovals. 41% of respondents to thePitney Bowes study indicated they useeWallets as their preferred method ofpayment for these transactions,surpassing the use of credit and debitcards, and bank transfers. Essentially,eWallets can do all that cards offer, but
quicker, easier, and more securely.2. Clear and Simple Buyer Protection
eWallets often offer increased buyerprotection, such as PayPal, who willreimburse for missing and damaged items– something only required to be protectedon card payments by the Consumer CreditAct on purchases over £100 (in the UK),and is only protected on credit cardpurchases, not debit. In turn eWallets,along with mobile payment methods, mayfurther encourage the decline in use ofcards across multiple channels.
3. Reduced Cost to MerchantsToday’s electronic payment systems arecostly for merchants – existing bank andfinancial institutions have layered thesesystems on top of existing card processesas opposed to opting to establish theirown separate identity. Watch for Alipayand WeChat who are challenging thecurrent card network model in a disruptiveand massively successful way by reducingfees for the merchants.
Why not cash, as well?eWallets cannot replace everything that
cash offers in terms of tangibility and nearuniversal acceptability. People will still want anonelectronic payment method long aftercard usage declines, if for no other reasonthan a backup plan when networks are down– cash will remain a tangible and trustedpayment method that always works. Cashand digital will coexist.
E-WALLETS CANNOTREPLACE EVERYTHINGTHAT CASH OFFERS
IN TERMS OFTANGIBILITY ANDNEAR UNIVERSALACCEPTABILITY.
PEOPLE WILL STILLWANT A NON-ELECTRONIC
PAYMENT METHODLONG AFTER CARDUSAGE DECLINES...
“
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eWallets often offer a superiorlevel of customer protectioncompared to card payments whichs spells bad news for thelatter.
More and more consumers are now shopping outside their country of residence and they areincreasingly turning to eWallets as a preferred method of payment.
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VOLUME 3 | ISSUE 2 5
The conversation has shifted; thepressing question is no longer
whether digitalization will happen but,rather, how! Every member of theindustry is examining potential avenuesand the role software will play in helpingto shape the new digital landscape. Onething is clear: cash demand is strong.The challenge is how to ensure itremains competitive and relevant in adigital future.
A shift in digital mindsetMost of the world’s population live in
countries in which more than 90% oftransactions take place with cash. As theworld’s GDP increases, the volume ofcash in circulation is also expanding tomeet the demand. This reinforces theneed to keep cash simple, available andcompetitive. The adoption of new supply
chain concepts and technological trendscan help to realize this goal, while alsodrastically improving operationalefficiency.
When looking at the trends shapingtoday’s cash cycle, we see a desire for aconnected, optimized and adaptivesolutions. We need an integrated supply
ConclusionsIn summary, the traditional electronic
payments marketplace has becomecostly for merchants and is ripe fordisruption. As smartphones spread, andconsumers can access one or moreeWallet options, traditional cards andcard networks will be supplanted byconsumerfriendly eWallets that do notneed these traditional networks tofunction. The traditional market players
will evolve or collapse, as will the use ofcards. Overall market data supports thatthis transition of digital paymentsovertaking traditional networks willhappen faster, and perhaps much faster,than cards will replace cash.
Cash on the other hand, will alwayshave a unique selling point over digitalpayments: it is tangible, credible, ‘hackerresistant’ and decentralised at the pointofuse. Perhaps that’s why cash hassurvived the test of time for centuries.Innovation may always drive payments
change, but the overall popularity of cashis not really diminishing.
The talk of “the death of cash” hasbeen a hot topic for over 60 years, all thewhile banknotes in circulation havecontinued to grow, yearonyear globally,and central banks around the worldpredict no change in this growthtrajectory. In the meantime, smartphonesare directly replacing cards as the digitaltransaction tool of choice. It seemsperception and reality are differentbeasts. It is time to replace the meme.
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Software Drives Performance: How to FUture-proof YourCash OperationsGEORG ALBACH | G+D CURRENCY TECHNOLOGY
The right software solutions will be able to reshape the cash supply chain from thetraditional linear model to an integrated, interconnected model.
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ACMA CURRENCY NOTES6
(HOUSTON, TX) —
Loomis is introducing iBox, a proprietarycashintransit (CIT) technology, into its
armored car division, advancing how thecash management leader secures customercash and protects transportation guardsacross the country. Developed by Spinnaker,a UKbased company, iBox includesintelligent cash protections like passive inkdegradation, programmable operating andaccess control, and realtime asset andvehicle monitoring, among others.
Loomis will debut iBox in the Houstonarea before continuing its rollout nationally.
Each iBox feature is intended to makearmored car operations safer and lessattractive to potential threats — both from
outside thieves and internal theft —beginning with prominent messaging thatstates guards are unable to open iBox units.
In addition to preventing unauthorizedaccess, each iBox can also detect, record,and respond to physical attacks by deployingsecurity ink that eliminates cash value inseconds. And in the event a unit is stolen,installed GPS software enables Loomis toidentify and track missing units immediatelyand activate alarm mode.
The protection of the company’semployees is a critical priority for Loomis,says Randy Sheltra, SVP of RiskManagement.
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INTELLIGENTSYSTEMS, WHICH
CALCULATENUMEROUS
VARIABLES TO OFFERBEST-CASE
SCENARIOS, COULDENABLE EFFICIENTMANAGEMENT OF
STOCK AVAILABILITYACROSS THE WHOLE
SUPPLY CHAIN.
“
”
chain management approach, which iscapable of connecting the cash industrystakeholders in a way that addressesindividual needs, while also unlocking hiddenpotential for multifaceted optimization.Technology is an instrumental part ofrealizing a cashfriendly digital future as itdrives transformation away from themanagement of individual functions andtowards integrated solutions.
Embracing digitalizationIn order to move forward, we must first
replace the linear nature of today’s supplychain with a circular, interconnected andcollaborative model. In doing so, weembrace an agile, ITenabled approach thatviews the supply chain holistically andutilizes technology to exchange pertinentdata, information and insights at multipletouchpoints.
As we enter the digital age, analyticsbased on this form of collaboration are nolonger a nicetohave – they are a musthavefor driving efficiency and optimization at boththe micro and macroeconomic level. Thebenefits of such intelligent solutions rangefrom the streamlining of internal processesand realization of faster reactiontimes, topredictive forecasting. For example,intelligent systems, which calculatenumerous variables to offer bestcasescenarios, could enable efficientmanagement of stock availability across thewhole supply chain. Furthermore, insightsgained from comprehensive multiyearforecasts across the cash supply chain,could inform and help to realize enhancedcash recycling and cost savings potential. Inother words, a softwaredriven integratedsupply chain approach has the ability tofutureproof your cash operations.
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Loomis uses the iBox to providean additional level of security toits operations.
Members' newsboard - latest stories fromacma membersLOOMIS IMPLEMENTS IBOX TECHNOLOGY TO DETER ARMORED CARROBBERIES - THE NEW ADDITION DEEPENS SECURITY FEATURES TOPROTECT GUARDS, CASH, AND IMPROVE TRACKING
SPINNAKER
VOLUME 3 | ISSUE 2 7
Recent ATM attack trends, includingjackpotting and advanced side
channel attacks, show increasinglysophisticated exploitation of electronicATM locks. As technology continues toimprove and accelerate, ATM securitymust evolve to meet emerging
vulnerabilities.S&G's electronic lock design includes
modular construction and flexiblefeatures to deliver unmatched securitywith the speed and convenience of anelectronic locking solution. Our locks notonly withstand the latest hightech
assaults, but also fit into modernbusiness workflows.
Recent Events
ACMA AGM at the Asia Cash Cycle Seminar 2019ShangriLa Hotel, Colombo, Sri Lanka
ACMA Workshop at the Asia Cash Cycle Seminar 2019Topic: Legislation/Regulation vs SelfRegulation and the Impact on the Security of Cash
REDUCING VULNERABILITIES WITH ADVANCED ATM LOCK SECURITY BY SARGENT AND GREENLEAF(S&G)
SARGENT AND GREENLEAF (S&G)
“We recognize the emerging risksassociated with the cashintransitindustry and, therefore, must react byimplementing strategies that include
technology to counter the threats,” hesays. “The iBox technology complementsour current risk strategies. As the leaderin the CIT industry,
Loomis consistently introduces
strategies to minimize risks to our peopleand our customers.”
To date, iBox and other Spinnakertechnology is used in more than 30countries around the world.
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To learn more about S&G's response to these
threats please visit:
https://www.sargentandgreenleaf.com/atm
security
ACMA CURRENCY NOTES8
About ACMAMissionTo provide a platform for Cash Management Companies(CMCs) in Asia, Africa and Australia & Oceania to raisetheir professional reputation and standing in the CashHandling and Cash Management Industry, and to act as arepresentative with the appropriate authorities on issuesof common interest.
Founding MembersAB Securitas Phiroze Kevin PestonjeeCurrency Research Richard HaycockLinfox Armaguard Scott ForsterSpearpoint Group Ted Devereux
Office BearersChairman Óscar Esteban, ProsegurExecutive Director Ted Devereux, Spearpoint
GroupSecretary Tan Chee Meng, Currency
Research
Committee MembersSteven Cole, Marsh LtdScott Forster, Linfox ArmaguardStephan Kazes, Loomis InternationalHuseyin Memis, Streamcorp ArmouredBaskaran Narayanan, Brink'sPhiroze Pestonjee, AB SecuritasIman Sujudi, PT Nawakara Arta KencanaAbdul Malek Sutan, MEPS Currency ManagementBenjamin Thorpe, GloryCharles Wink, G4S
www.acmaasia.org
To become a member, write to Tan Chee Meng at:[email protected]
share your insightS
If you would like to havean article published inthe ACMA CurrencyNotes, please write to TanChee Meng at:[email protected]
Contributors to this issue:
• Carlos Molina• Georg Albach
ACMA CURRENCY NOTES is a quarterly industrynewsletter read by over 4000 professionals in the cashhandling industry globally.Advertise with us to increase your presence across Asia, Africa,and Australia & Oceania.
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