A cashless economy is burgeoning because of the COVID-19 crisis, new research has found. Two-thirds of Australians are using less cash in favour of digital payments, according to the data from MyState Bank.
SWIFT Head of Oceana Bill Doran gives his take on the cashless society, looking at everything from real-time payments to the need for greater financial crime compliance in a handy InFinance guide.
The rise of ‘cashless’ transactions
While the introduction of new payment systems, the rapid uptake of contactless and mobile payments and increasing financial inclusion efforts are already contributing to the growth in cashless payments worldwide, COVID-19 has rapidly accelerated this trend. The need for social distancing and health concerns around handling cash have led to a surge in demand for contactless and mobile payments with consumers rethinking how they shop and pay, and retailers favouring clicks over cash in an effort to reduce exposure for employees.
New services from the New Payments Platform (NPP) have resulted in faster payments for government organisations, businesses and consumers. For example, the NPP recently announced that government departments – including those managing COVID-19-related initiatives – can better respond to emergencies with the ability to access funding outside business hours and on weekends. Small businesses have also been promoting the use of the NPP’s PayID during the pandemic, providing a simple way for consumers to pay for goods in real-time. There are now more than 4.6 million PayIDs registered in Australia, an increase of 20 per cent since the start of the year.
The acceleration of digital transformation through cloud and API adoption
Over the last few years, we have witnessed entire domestic markets transform the way they move value. Many banks are now adopting cloud infrastructure and as a result, reducing the internal time and resources needed to manage payments infrastructure in-house. In addition, the agility of cloud infrastructure allows products to go from development to market faster - this is particularly important as the market becomes more crowded and competitive.
Moreover, application programming interfaces (APIs) - software code and protocols that define how two applications can interact and communicate with each other - are being increasingly utilised by the financial services industry to provide improved products and services, particularly with the introduction of open banking. While governments and regulators continue to mandate that banks allow third party access to their customer’s data (with consent), we’ll see API adoption in the industry continue to increase.
Improved cross-border payments
In a global economy, the ability to seamlessly and quickly move value across borders is now expected. At the domestic level, it is now common for consumers and businesses to have access to simple, real-time payment mechanisms such as the NPP in Australia. They are now demanding a similar experience for their cross-border payments. In addition, the G20 has demonstrated a strong interest in faster, cheaper, more transparent and more inclusive payments.
With new players, and technology like SWIFT’s gpi service, cross-border payments are set to become as fast and ubiquitous as domestic ones.
Increased focus on FCC
Unfortunately, COVID-19 has brought with it a significant cybercrime risk such as phishing emails, account takeover attempts and call centre fraud. To mitigate these risks, FCC remains a key focus for the industry.
Financial institutions must ensure payments are safe, secure and compliant, and that the core architecture to facilitate this is open, trusted and resilient. These characteristics underpin everything that we at SWIFT do in support of our members.
As a not for profit cooperative, SWIFT has been working with our members to develop products and services that help the industry meet the challenges of financial crime and compliance. By providing mutualised utility services in the areas of KYC, sanctions screening, fraud control and compliance analytics we are not only helping prevent financial crime but also reducing the costs of doing so.
A practical example is SWIFT’s sanction screening and fraud-prevention services which allow financial institutions to detect and stop transactions that may be linked to sanctioned entities or individuals as well as highlighting potentially fraudulent transactions for the bank to investigate. By adopting SWIFT’s utility services, banks can keep systems and processes up to date, while also being prepared for regulatory scrutiny.