25 November 2015
Back to the infrastructure (for the future)
With the fast pace of technological change, innovations are likely to be superseded as quickly as they enter the marketplace. A nod is due here to the short-lived existence of MiniDiscs in the early 2000s, superseded by MP3 music files, the basis for iTunes and other music downloads that we all now enjoy. From a payments perspective, the Mondex card, conceived in the UK in the mid-1990s and touted as the ‘cash killer’ was itself killed off after its ill-fated trial in Swindon in 1996. Its primary existential challenge was that it wasn’t widely accepted; you could use it in one establishment, but not the next. The trial fizzled out and the challenges of ‘closed loop’ systems have persisted ever since.
To continue the film theme of some of the articles in this collection, take Back to the Future Part 2, released in 1989 but set 26 years in the future in 2015. The projections made in the film – from self-tying laces to the mass use of flying cars and an inexplicable preference for wearing two ties rather than one – were tongue in cheek and many were never intended to be a serious prediction of the future. Yet, a number of predictions have come to fruition and surprisingly some of them include payments.
Robert Zemeckis, the director, nailed it with wall mounted televisions, video conferencing and handheld tablets. He also came remarkably close with his prediction that people would pay for a Pepsi, a donation to a clock tower restoration fund or a game on an old 80’s arcade machine (Wild Gunman, if you were wondering…) with a thumb print rather than hard currency. This doesn’t seem too far off the trajectory we are currently on, although – as with flying cars – we might need a few more years to get there.
Of course, making concrete predictions about future innovation is often a fool’s errand, as viewers of BBC’s Tomorrow’s World programme will testify. If floating bicycles and robot snooker players were going to form a central part of our lives, they probably would have done so by now. However, if we had access to a Flux Capacitor, and could jump ten years into the future, what sort of payments innovation might at least be possible, given current trends and change?
It’s all about real time and certainty.
And mobile. The appeal of Faster Payments today is obvious. I can pay you in a matter of seconds. It’s as final as me putting cash in your pocket and walking away. In fact, it might actually be better as there is no need for a face to face interaction.
Until relatively recently, if I wanted to send a faster payment I had to use telephone or online banking. There were mobile banking applications but a combination of clunky apps, small phones and poor signals meant that it was almost more trouble than it was worth. However the proliferation of smart phones and a vast improvement in the quality and functionality of banking apps has meant that the potential for Faster Payments is finally being opened up.
A culture of 24/7 communication, brought about through improved mobile and computing technology, has fundamentally changed customers’ expectations of service providers and is creating demand for immediacy of service, an immediacy of payment.
Over the next ten years we will likely see an increase in the use of Faster Payments and an increase in innovations which build on this existing system. These new services will accelerate the move away from cash and cheques and start to challenge the dominance of debit cards when we pay online, on our mobiles and in store.
In the longer term it is likely that more and more people and organisations will take advantage of the fact that an immediate payment system is readily available. Larger businesses will be able to make supplier payments, particularly as the value limit on transactions rises past the current level of £100,000. And for small businesses, paying staff salaries will be increasingly easy, as a payment can be made at the end of a week to reflect the exact hours worked with the employee receiving their salary immediately.
HM Government could also take greater advantage of an immediate payments infrastructure to deliver a key facet of their policy to reduce late payments and the impact these have on SMEs.
Faster Payments is essentially the foundation that much of the future innovation in the payments system will be built upon, and will help to shape broader industries as immediate payments are increasingly expected by all individuals and organisations. As such one of the priorities of the recently established Payment Systems Regulator will be to ensure that this and other payment systems are even more accessible to challenger banks, so that they can offer you, the customer, a greater choice of service.
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