The Future of Money
Transactions in society are transforming. We live in exciting times and the very ideas of value, exchange and currency are being disrupted by systems that trade in trust, social currency and data.
Recent research by Starcom reveals a third of Brits believe we will be cashless by 2031. Londoners believe it could be sooner, perhaps within the next 10 years. The speed and scale of disruption the financial sector is facing mirrors many of the challenges the media, publishing, music and film industries continue to encounter. These traditional business models have been challenged and transformed almost overnight. Across the finance sector we believe there are four key areas of disruption on the way: how consumers choose to pay and earn, the proliferation of competitive intermediaries and the new responsibilities businesses must accept and adopt in this era of electronic/digital payment.
These disruptions are happening across the globe, but the UK is a particularly interesting marketplace for all observers. The UK has an established banking system, but perhaps the fact that we are smaller means it has been less burdensome to update our payment systems (e.g. introduction to contactless terminals). This has led to less reservation and reluctance to adopting new innovations. The FinTech50, now in its fourth year, aims to celebrate the most exciting and innovative companies shaking up the traditional finance industry. Impressively, almost two-thirds of businesses they cited this year hail from the UK. An EY study also found that the UK had the strongest fintech “ecosystem” in the world, beating rival hubs in California and New York.
Other key markets to watch are Africa and Asia. They have leapfrogged many of the lumbering legacy finance systems in place across Europe and the Americas, to be very much at the heart of innovation and change.
New Ways to Earn
Today’s booming entrepreneurial spirit — born from a mix of technology, a tough economic climate and the fact that we live much longer — means we are on the brink of unlocking potential value in the world around us. With a rise of 38 per cent between 2011 to 2015, the flourishing base of startups shows no sign of abating, despite the recovering economy. Brands and media businesses need to embrace the growth of the startup community and start thinking of new ways to engage with consumers as contactless payments increase.
Assets that were formerly owned and static can now be used as part of the dynamic sharing economy. The scale in which we embraced the ability ‘to Airbnb our spare rooms’ and ‘Uber our cars’ has meant that the chancellor’s budget this year had to look at ways of taxing these earnings.
Actions from customers can also unlock credit which in turn builds engagement with advertisers. It could be an extended happy hour by giving the brand a #shoutout. Lyft, a competitor to Uber, rewards customers with additional credit for being a polite, decent five-star rated customer.
We are all traders now. We do what we can to earn what we want. And, this exchange doesn’t have to feature money. All businesses must find ways to tap into this pioneering new world of trading.
New Ways to Pay
If customers are re-evaluating value then it is essential for brands to do the same. Perhaps brands don’t need to spend long with a customer to provide them with the service they want. When it comes to payment, the shorter the time it takes to “I see, I want, I have” the better. We should imagine a no-click world in which customers see something they like, take it and their account is immediately debited. Shopping will feel so easy it will feel like stealing. Juniper research this year forecasts contactless payments via mobile to reach $95bn by 2018. Just look at Burberry’s latest shows. These are no longer teaser sessions for fashion’s future designs but rather the shop windows and till all rolled into one. Guests can now order designer wares from Burberry before the model has even reached the end of the runway.
Yet people demand experiences from brands more than ever before. For advertisers this is ideal, because the more immersive the brand experience the higher the brand recall. Experiences then can act as either a payment in themselves, for example paying for your happy meal with a happy hug, or a new approach to charging as one Spanish Comedy club charges per laugh.
And, of course people pooling resources has always been a means to pay for things. Today it is just a lot easier. WeChat in China is fast becoming the format to order and pay friends or for services. This only heightens the value of good brand social messaging. Apps that allow you to split bills for shows or meals (Wahaca/Jamie’s) with friends demonstrates a much more sociable and less awkward means of calculating who owes what.
Visualising what you’ve spent and gained is vital, whether its tracking your invisible purchases or recording the ways we create memories from shared experiences. Ultimately, brands must make payments tangible.
New Intermediaries to Fight
Should we enter a cashless society, or one at least dominated by a digital currency, then we are no longer limited to traditional financial resources (coins, banknotes) or banks for funds. Fintech developments are developing at an accelerating pace and are providing alternatives to traditional banking systems.
Peer-to-peer investment is kick starting projects across the world by funding a whole array of businesses and projects. The five main sharing economy sectors could be worth £9bn by 2025 (PWC). Entrepreneurs can find like-minded individuals, millions if necessary, to fund a dream. Just like Brewdog, the craft beer brewery, who for the last three years has been the fastest growing bar and pub chain in the UK, now with a staff of over 500. They are poised to launch their flagship brewery in the States.
Unless tech is your partner it poses a threat. Young people have claimed they would rather go to the dentist than the bank (US Millennial Disruption Index) demonstrating customer perceptions that tech provides novelty, credibility and glamour which traditional financial corporations have to be aware of. Mpesa is a new currency model by Vodafone which enables people with access to a mobile phone but no bank account, to send and receive money. It currently has 18.1 million customers worldwide and is quickly becoming a banking phenomenon across Africa.
International digital currencies too are gaining traction in the financial community. Block chain technology behind the Bitcoin could fundamentally change our international banking system by transforming current inefficient and delayed transactions to a system that is instant. Barclays backed the UK launch of Circle, a money transfer app, where customers are able to send currency with messages and emojis using the blockchain technology. Airbnb, one of the major disrupters of the travel world, have themselves recently acquired employees from the startup ChangeCoin.
At the other end of the spectrum, local currencies such as the Bristol Pound promote local businesses and culture. These transactions engage and build meaningful relationships with a business beyond just the product and into the payment process itself.
Never have the stakes been higher for innovation and exploration. The game changer in the financial landscape might not be a bank. It could be someone outside of the sector, or someone we haven’t even heard of yet. Brands, therefore, must be visionary and brave to remain relevant and succeed in today’s world.
New Responsibilities to Face
If all of this isn't intimidating enough, whilst digital finance may offer ease and convenience, it also brings businesses a big headache. Future leaders in this space will be those who tackle the barriers to entry as much as enjoying the perks of electronic global payments.
A key concern for people across the board, regardless of demographics, is that our electronic payments can be tracked in a way that hard cold currency cannot. It isn't just businesses that have access to this data, but governments too. Brands need to demonstrate that their customers’ privacy is protected in order to avoid a potential Black Digital Market going mainstream. Apple’s confrontation with the FBI has illustrated how much the company value privacy while acknowledging how much they really know about us. Whataspp at the beginning of the debacle began to publicise its encryption of all messages. Going forward greater transparency around the whole subject of privacy will be essential in order to build consumer trust around a brand. Without that trust a brand risks everything.
And, of course digital payments require you to be part of “the system”. Yet two billion people around the world are known as “the unbanked” who are unable to find a job, a house or credit. They exist outside of this system. Mastercard in Nigeria has been able to link payments to ID cards while Lendo in Asia offers an alternative credit rating system by using a user’s social network to prove identity and credit rating.
Finally, in this new world of peer-to-peer, invisible transactions we also must recognise that, as Ikea put it, we in the West have reached “peak stuff”. The capitalist world in which we live is based primarily on a desire for services and experiences rather than just products. This could mean that you flip your product on its head. Are you selling coffee or selling a creative space to work? Coffee shop Ziferblat charges individuals by the hour rather than the coffee they drink. Similarly, drinking Red Bull is a means to fund the next Felix Baumgartner rather than a transaction in itself.
We must also acknowledge that we still live in a world with issues such as climate change, famine, war and extreme poverty. Businesses have options. Either compete in tough, saturated markets, or support those who have nothing to grow new markets for your products, and in the process make the world a better place. Coca Cola’s initiative to help five million female entrepreneurs by 2020 answers precisely this brief.
The implications, both now and in the future, are whether brands decide to use their customers as data to be traded or alternatively provide valuable data to their customers to allow them to trade and thereby create new revenue streams. In a world of increasing digital payment, brands, and indeed all media businesses, must take on these responsibilities in order to excel.
First Published The Drum 19th May 2016
