Moorwand’s Luc Gueriane on balancing cashless and inclusion

As global economies continue to emerge from the COVID-19 pandemic and businesses adapt to the new normal, the acceleration of cashless transactions presents a host of questions. 

Luc Gueriane, Chief Commercial Officer at Moorwand spoke to Payment Expert, emphasising the key role of fintechs and the importance of financial inclusion. 

Payment Expert: Firstly, can you tell us more about the role of fintechs in accelerating the growth of a cashless society?

LG: There’s no denying cash has become more troublesome than digital payments. For businesses cash is expensive to handle, for consumers there are fees attached to withdrawing cash and checking balances, and cash costs the American economy around $200 billion each year. Not to mention cash is inconvenient. It takes time for banks to process cash for businesses and it takes consumers time to find cash points or bank branches. Since COVID-19, the unhygienic nature of cash has also been exposed. But crucially, in an era where data is paramount to decision-making, cash contains no data and shares no insights at all.  

By contrast, digital payments offer businesses and consumers ultimate convenience. Businesses can track money coming in and out from a single application, process transactions in minutes instead of days and have 24-hour access to all accounts. While consumers can pay with the tap of a card, phone or even ring and move their money across different accounts on devices at their fingertips. Digital payments also enable cost savings through increased efficiency and speed and, most importantly, offer transaction data. Digital payments allow businesses to understand where, when and how people are parting with their money. 

The role of fintechs is to drive adoption of digital payments, helping businesses and consumers alike experience the benefits above. As such, a key consequence of promoting digital payments is driving out cash and accelerating the growth of a cashless society. 

However, it is also important to note that for the larger fintech and payments players such as Mastercard, VISA etc. cash is their single biggest competitor. By driving cash out these players increase the number of transactions using their technology, helping to bolster revenues.    

PE: In terms of cash usage and transactions, what principles do you believe will transcend beyond the pandemic? 

LG: With all physical stores reopening, preparing for a wave of consumers demanding the ability to pay via contactless is essential. Consumers now want options – they want to pay via their cards, digital wallets and super-apps on their phones and wearable devices. Yet this trend extends further – if retailers and service providers did not have an online presence before, now they must. And with ecommerce comes digital payments. 

These short-term shifts in consumer behaviour are set to become long term principles. It will give rise to micro merchants setting up business banking accounts for the first time. A lot of merchants traditionally don’t have a business bank account because they aren’t in the appetite of the high street banks or they just view the process as too much hassle. However, with the introduction of fresh new fintechs, whose propositions complement small businesses, and the demand for electronic and digital payments growing stronger from consumers, the rise of business banking accounts is undoubtedly here to stay. 

PE: How important are innovations when it comes to financial inclusion especially as cashless becomes increasingly prevalent? 

LG: Financial inclusion is paramount. In fact, for every digital payment innovation there should be an inclusion solution protecting the most vulnerable who often rely on access to cash. If the most vulnerable aren’t catered for digitally, and cash becomes hard to access, many will be thrown into poverty. However, there’s a range of key innovations making headway with digital financial inclusion, and companies must continue to invest resources in spurring these innovations on. 

Some of the key innovations include:

  • Agency banking – where commercial banks offer the unbanked a selection of banking products and services, enabling them to transact via regulated financial institutions
  • Sharing infrastructure costs – the collective fintech industry must share the cost of retaining cash infrastructure such as ATMs and teller services. Starling has proved this concept to be successful through its partnership with the Post Office
  • Peer-to-peer payments – the rise of digital wallets and companion cards will enable many to use digital payments in the way they now use cash, sending money to friends and family instantly and easily

PE: Have we been too quick to rule out cash and its role in society? 

LG: Many have predicted the death of cash for some time. While cash usage will continue to decline it’s unlikely to vanish completely as it still has a place in society. Cash is most widely used among the poorest and taking cash out of circulation without properly addressing financial inclusion will push many people into poverty. Also, there must be an alternative in case digital payments infrastructure or systemically important companies go offline, as experienced with the TSB shortages and Wirecard crisis. Without cash, there’s no fallback option for people to access and use their money. 

It’s also important to recognise that many consumers desire anonymity. Some people are not comfortable with all their financial transactions being collected and stored by payments firms or governments. And their wish to remain private must be respected. While speculation around a cashless society intensifies, cash will continue to exist for the foreseeable future as it is too important for too many people. 

PE: How pivotal do you think fintech will be in the rapid bounce-back of global economies?

LG: The role of fintechs in the bounce-back of economies is two-fold. 

Firstly, fintechs have proven their agility and knowledge improves inefficiencies in legacy payments systems and traditional banking methods. This has been vital throughout the pandemic. Starling is offering access to the bounce back loan scheme, approving loans in under ten minutes, and came to the rescue of thousands of small UK businesses. And it’s a similar story with Cross River Bank in America, approving more loans under the federal Paycheck Protection Program than all three of the country’s biggest lenders. 

Secondly, the fintech industry has the potential to generate investments, employ more people and, as an industry, promote economic recovery. In fact, in 2019 KPMG estimated that the UK accounted for 80% of Europe’s total fintech funding reaching $58bn, showing just how valuable the sector is. However, it will only promote economic recovery in those markets which already value and invest in fintech innovations, such as the UK, US and Singapore. As such, we’re likely to see more markets start to prioritise and invest in fintech as an economic growth driver. 

PE: Do you think cashless payments are elevated by globalisation? LG: It’s true that the more that is done to help the unbanked get access to digital payments the less there will be a demand for cash. But this has to be a global effort – if I’m sending money from the UK to another country where people don’t have digital wallets, they will still have to physically visit a foreign exchange retailer or bank to withdraw cash. However, if digital wallets and payments were global, it would then be possible to send money from one digital wallet to another directly, regardless of geography. As such, cashless payments can only promote globalisation at the speed countries are willing to invest in digital payments.