There is an old joke that bus conductors have to accept stamps as legal tender. True? No, funnily enough. What is worrying, though, is that at some point soon this joke might be put to the test. Jim Tomaney, chief operating officer at Renovite Technologies, writes.
Two significant reports have been released within days of one another which, taken together, suggest we are walking toward a crescendo of payment problems as the way we spend money changes, all of which are linked to the current state of banking technology.
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Peak Illogical
On the one hand, the Access to Cash Review warns that the system allowing people to use cash in the UK is at risk of “falling apart”.
The price of handling cash for businesses is too high – far higher than if they are paid electronically. As the saying goes, time is money, but in this case, money – i.e. cash – is also time.
Proprietary systems have stifled the development of leaner, more cost-efficient ways of managing cash. For people in rural communities without strong telecommunications networks, this is an issue; for businesses that lack both access to good telecommunications and a bank branch – the numbers of which are dwindling in record numbers – this is a major issue.
On the other hand, banks are not replacing a once-very-successful system of exchanging goods for payment tokens – cash – with something of equal measure. Consumer watchdog Which Money recently reported that there were 302 incidents that prevented customers from making payments in the last nine months of 2018, and that six of the UK’s biggest banks had at least one failure every two weeks.
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By GlobalDataUnder the current circumstances, if cash is indeed to be taken out the picture down the line, consumers and businesses are going to be left without a 100% guaranteed way receiving or accepting payments.
When TSB went down in April last year, 1.6 million people were left without access to their bank account. You cannot expect to successfully participate in an omnichannel environment if you are repeatedly faced with an omnishambles of payment complications.
Breaking the cycle
Clearly, this is a cycle we do not want to perpetuate by burying our heads in the sand.
To prevent it, banks need to use technology that can manage electronic payments without exception and without risk of failure and, at the same time, facilitate cash use for those that want or need to use it.
As published in the Access to Cash Review: “Evidence from Sweden, seen as much closer to a cashless society than the UK, suggested that infrastructure was needed before cash use declined beyond anyone’s control.”
There is no reason that cash deposits for small businesses, taken as an example, need to be so arduous and inefficient. Adding the functionality to an ATM to allow cash deposits sounds like it should be straightforward enough, but at the moment, it is not.
New services developed using modern technologies and often deployed in a public or private cloud struggle to seamlessly integrate with legacy systems, most of which were designed around the same time as Pac-Man.
Legacy infrastructure is as fervently uncompromising as it is expensive to maintain and upgrade. Adding a new service means banks are forced to patch up so they can catch up at a significant cost, diverting resources away from streamlining and future-proofing their operations. In other words, it puts them off innovating new financial services.
Bottom-up approach
Smart ATMs, or a ‘bank-in-a-box’ with the capacity to allow cash deposits, would be a wholly tangible achievement if the right technology and infrastructure were in place.
Starting with a bottom-up approach, rethinking and redeveloping banking systems that are designed using cloud-native technology means they will be more scalable, continuously available and adaptive, with the ability to add services without running the risk of an outage.
In Bank of England chief cashier Sarah John’s words: “We are confident that an effective and sustainable system can be designed which continues to support cash, enables competition, encourages innovation and guarantees resilience even in a lower-cash usage environment.”
Those in the payments industry that heed this will undoubtedly reap the benefits of the vast array of innovative payment options emerging in a new era of financial services.
