Digital World

Digital worldSometimes Americans are accused of failing to realize there are other countries outside its borders. Whether or not the reputation is deserved, this American is well aware of the rest of the world. This week, I’m taking a look at the state of going cashless in others’ backyards.

Going cashless seems to be moving forward at a rate that suggests the word snowballing. I should add a note of caution: It can be in a country’s and its banking system’s best interest to produce glowing reports, so it may be wise to filter claims through an appropriately skeptical lens here or there.

I’ll start with the United Kingdom, for which the Daily Mail predicts 2018 will be “… the year that the UK reaches “‘peak cash,’ in which debit cards are used for more purchases than coins or notes.”

In 2006, 62 percent of payments in Britain were made [using] cash, while in 2016 this figure had dropped to 40 percent, the data shows. By 2026, its predicted cash transactions will make up just 21 percent of the UK’s payments, according to UK Finance, which represents leading banking firms. …

Bank of England data shows that while the volume of cash in the economy continues to rise each year with inflation, it is now doing so at the slowest rate since 1972.

Speaking of the UK, British Overseas Territory and picturesque island nation of Montserrat has signed a “memorandum of understanding” with Barbados-based cryptocurrency company Bitt. The goal is “… to launch a digital payments ecosystem in the Caribbean island.”

Montserrat Premier and Finance Minister Donaldson Romeo said: “The decision to move closer to a cashless society is in keeping with our overall development strategy, and also that of the ECCB [Eastern Caribbean Central Bank].

Looking to the Middle East, the United Arab Emirates (UAE), according to Mastercard’s Girish Nanda, GM, UAE & Oman, as quoted by Pymnts.com, is “…fast emerging as the FinTech hub of the Middle East.” Futhermore,

“There isn’t a more fertile ground for digital transformation than the UAE,” according to Promoth Manghat, CEO, UAE Exchange …

… the UAE being an expatriate hub with travel requirements rampant, Gocash is just the answer to the market’s needs, according to Manghat. Users of the Mastercard-powered card have a choice to load up to six different currencies from a bouquet of over 20, providing a boon of convenience to travelers.

In Venezuela, digital payments may offer not just an alternative but a much-needed solution. With the country’s ongoing hyperinflation, every day the same transaction requires more bolívars (about 4¢ U.S. as of this writing) than the day before. Unable to crank out currency to keep up with demand, Venezuela’s central bank has capped the amount of currency that can be withdrawn in a day. Digital payments, which I need hardly point out do not require physical production, alleviate the problem.

An exception to the glowing-claims trend is a recent study by the Internet and Mobile Association of India. As I reported last year, the Republic of India has committed to a cashless future, but the study reveals that “only 16 percent of rural users access Internet for digital payments.” As reported by LiveMint, the cause may be identifiable:

Lack of electricity to charge devices, poor network quality and affordability of Internet service packs are the reasons for such behaviour and unless this trend is reversed, usage purposes will remain skewed and offtake of digital payments will remain restricted, the report said.

While reports are for the most part encouraging, each contains a caveat: Concern for populations whom going cashless threatens to exclude. Usually that’s the elderly, the poor, and the unbanked.

In that regard, reports Emily Price in Fortune, progress toward digital payments in Sweden has been perhaps too good. There, a proliferation of retail businesses no longer accepting cash threatens to place in a bind the elderly, many of whom may not be technologically adept, and the poor, many of whom don’t have bank accounts at all.

Yet in Rwanda, Dr. Jaya Shukla, writing for The New Times, claims that digital payments could ultimately put more money in the pockets of the poor—or at least take less money out:

One of [the] reasons for success of mobile payments is low transaction costs. In Kenya M-Pesa was routinely one-third to one-half as expensive as alternative systems. Lower costs directly translate into money the poor can keep …

… digital payments are making financial services more universally affordable and accessible and, therefore, have the opportunity to drive financial inclusion in developing countries.”

Shukla does not address one sticking point. According to Internet World Stats, in mid-2017 only 30.6 percent of Rwandans had even Internet access, let alone mobile devices. Shukla may be promoting an official state position, not necessarily a research-based one.[1]

Overall, the trend toward cashlessness in general and digital payments in particular appears strong. Even outside my home country.


[1] The New Times claims it is an independent newspaper, however, the Human Rights Watch has called it a “state-owned newspaper.” Clicking the Times’s About us tab wasn’t terribly helpful in sorting that out. Here is the page’s text in its entirety: “Saturday 25th June, 2011 / Page being updated.”

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In celebration of tax season: How alcohol and women’s rights helped create the IRS

Toasting the IRSRevised March 29, 2018

I’m going to go out on a limb here and suggest that one of government’s brand values is not “up-to-date office equip­ment.” If you don’t believe me, ask if a PDF will do the next time your local government requests a fax. There’s a good chance the answer will be, “What’s a PDF?”

But when it comes to collecting money, the United States government keeps fairly well up with the times. In an age where our best prospects for digital payment adoptions are Millennials and younger, the folks in charge of the Internal Revenue Service introduced electronic filing way back in 1986. (Little known fact: Many working at IRS headquarters back then were not spring chickens.) Though taxpayer convenience may have been a motivator, I would suggest, at the risk of cynicism, that speeding collections and lowering costs may also have played a part.

Of course, you knew the IRS uses direct deposit. Here’s what you may not know:

The curious tale of how alcohol and the women’s movement led to the IRS

In 1913, a scant 73 years before the IRS began accepting direct deposit, the United States ratified the 16th Amendment, permitting Congress to impose an income tax.[i] Congress had already taxed incomes from time to time, but the 16 Amendment made its authority to do so official.

Ratification, however, had taken four years. During that time, the “income tax amendment” found a pair of allies who might, at first glance, seem unlikely: the Prohibition Movement and the Woman Suffrage Movement. Indeed, passage of the “income tax amendment” laid the groundwork for Amendments 18 and 19, which, respectively, banned the manufacture, sale, import, and export of alcohol and gave women the right to vote.

It was largely women, with the support of sundry male Protestant ministers, who championed Prohibition. But before they could persuade the then all-male Congress to ban alcohol, a practical problem would have to be solved: Alcohol taxation, permitted under the Constitution as an indirect tax, accounted to a good 30 to 40 percent of the nation’s revenues. Before it could pass Prohibition, the government would need a new revenue source. Decades earlier, the Women’s Christian Temperance Union (WCTU) had already championed an income tax as the answer. Author Daniel Okrent cites it in his book Last Call: The Rise and Fall of Prohibition:[ii]

 … to those in the dry movement who understood political and governmental reality, imposition of an income tax was also an absolutely necessary step if they were going to break the federal addiction to the alcohol excise tax. This had been obvious to the leadership of the WCTU as early as 1883, when the editors of the organization’s official organ, The Union Signal, coyly asked their readers, “How, then, will [we] support the government” if the sale of liquor is prohibited? The editorials had a ready answer for their own question: an income tax, they wrote, was “the most just and equitable arrangement ever made for the equalization of governmental burdens.”

The 18th Amendment, ratified in 1919, took effect in 1920. Chances are it was not lost on members of the U.S. Congress that Prohibition might displease a good deal of men, who now had the power to vote them out of office in retaliation. This was thanks to the 17th Amendment, passed two months after the “income tax amendment,” which took the election of the U.S. Senate and House out of the hands of state legislatures and placed it in the hands of voters. So perhaps giving women the vote with the ratification of the 19th Amendment in 1920, which just happened to be the same year Prohibition went into effect, was for Congress an act of job retention as much as or more than of fairness.

Prohibition, as you surely know, was an abject failure. About 11 months after the 19th Amendment accorded voting rights to women, the newly ratified 21st Amendment repealed the 18th Amendment. Once more, alcohol flowed freely through the land. The repeal, however, wasn’t a complete reversal. Congress left the federal income tax in place. So it is that the United States Treasury is able to have its tax and drink it, too.

I for one am grateful for the 21st Amendment. The Super Bowl just wouldn’t be the same without the Clydesdales. 


[i] Utah, where I live, is one of six states never to have ratified the 16h Amendment. The other holdouts are Connecticut, Rhode Island, Virginia, Florida, and Pennsylvania. If you happen to live in one of them, I recommend against letting that stop you from paying.

[ii] Okrent, Daniel. Last Call: The Rise and Fall of Prohibition. Scribner, 2011.

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Darwin, cockroaches,
and payments

evolution-2780651_1280Everyone knows that Charles Darwin introduced the phrase survival of the fittest.

Well, almost everyone. It would take Darwin by surprise, however, since in fact he didn’t say it. He didn’t even imply it.

Which is just as well. Survival of the fittest doesn’t quite work. Fittest is a superlative, meaning there can be only one. If only the fittest survived, the world would have only one species of cockroach, not 4500, only one brand of airline, not 5,000, and only one football team, the Denver Broncos.

Survival of the fit-enough is more like it. You can have only one fittest, but you can have untold numbers of fit-enoughs.

I need hardly point out that we are seeing a proliferation of fit-enough payment options. Any list I could produce—Zelle, Google Wallet, Apple Pay, Venmo, Paypal, GoPayment, Square, and others—would not just fail to scratch the surface, but fail even to gently caress it.

I neither presume to know nor venture to guess which is the fittest of them all. But since they’re all still here, it’s safe to assume that they are all fit-enough to continue hanging on and duking it out. At least for a while.

Meanwhile, retailers keep complicating things.

Take Walmart. When the retail giant introduced Walmart Pay in 2015, it made the strategic decision not to play ball with Apple Pay. According to Torrey Kim in a recent article for The Balance, Walmart Pay …

… allowed customers to download the app to their phones and use their own phones as scanning devices.

Trouble was, Kim added,

The program was a terrible failure, with customers complaining about the app and its issues.

But Walmart stuck with it, which, when you’re as fit-enough as Walmart, you can do. Today, the gambit may be paying off. Walmart Pay is now within striking distance of surpassing Apple Pay in U.S. mobile payments.

Not bad for an app that can be used only in one store. Of course, it helps to have 5,412 U.S. locations of that one store.

Walmart recently announced that it is upping its game. A new version of its Scan & Go app is headed for testing in 100 stores. For consumers wary of downloading yet anther app, Walmart tells us that some of its stores …

… have been outfitted with Scan & Go kiosks where customers can pick up easy-to-use handheld devices. This allows them to try out the service before downloading it to their phones.

One reason retailers like having their own payment systems is to track customer purchases, which broader-base payments apps don’t permit them to do. Proprietary apps also relieve customers from having to stuff their wallets with loyalty cards and go through the hassle of presenting them at checkout. What remains to be seen whether consumers will go for trading a walletful of cards for a phoneful of apps.

“Phoneful of apps” is no exaggeration. From McDonald’s to Cinemark to Starbucks to CVS to Bestbuy to … well, and so on … there is no end to the number of retail apps you can stuff into your mobile device.

When will the proliferation end? Beats me, but it is sure sooner or later to at least slow. How soon remains to be seen. Right now, according to Retail Drive’s Chantal Tode, consumers seem to prefer retail payment options to Apple Pay and Google Wallet.

Like all species, payment options are subject to environmental pressures. These will inevitably lead to modified species, hybrid species, new species, and, yes, some extinctions. But since fit-enough is all that’s required to survive, there’s no reason to suppose the environment will ever prune the market entirely of all but one. On the contrary, there is ample reason to suppose that a wide variety, though perhaps not quite as wide, of payment options will persist. On a planet with billions of people holding billions of bank accounts, there are necessarily innumerable niches to fill. Odds are a one-size-fits-all will never be possible.

As for what Darwin never said, he’s not alone. Neither did Winston Churchill ever say, “Madam, if you were my wife I’d drink it.” But I digress. 

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Only 2 months out!
Fiserv Forum
2018 / Las Vegas

Fiserv 2018

Click the image to register now

Here’s great news: Fiserv Forum 2018 is upon us!

It’s your chance to experience experts, visionaries and world-class speakers … the latest fintech innovations … exchange ideas with Fiserv product experts … and engage with other financial services professionals.

While you’re at it, you can explore the latest Fiserv innovations and have hands-on access to our products and solutions.

I urge you to mark your calendar and then click here to register now, while it’s on your mind. I’ll be there. Please grab me and say hello.

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Why loyalty programs
don’t create loyalty

dogs-2222801_1280Financial institutions began catching on to loyalty programs a couple of decades ago. Now they’re so common­place that “loyalty program” is part of everyday speech. Banks can even advertise with headlines like “Join our loyalty program” without fear that consumers will say, “Join your what now?”

But I submit that loyalty programs don’t create loyalty.

Most loyalty programs award points toward freebies and privileges. The digital age has made them a cinch to manage by automating accounting and obviating membership cards. Of course, that’s a two-edged sword. When a program is too effortless, it’s easy to forget you’re  in it.

But that’s not why I said loyalty programs don’t create loyalty. I said it because frequency, which they can create,* isn’t the same thing.

Frequency vs. loyalty

Frequency doesn’t mean loyalty. It’s not even a measure of loyalty. Loyalty is altogether something else.

To illustrate the difference, here’s an experiment you can try on your own, provided you have no regard for your personal safety. Simply do one of the following:

  • Tell a Harley owner that BMW makes a better motorcycle.
  • Tell a Steinway artist that Kawaii grand pianos are just as good.
  • Tell an iOS devotee that AOS is better, or an AOS devotee that iOS is better.
  • Tell a deli owner to substitute generic mayo for Hellman’s.
  • Tell a person in Guess jeans that Wranglers would look better.
  • Tell a Broncos fan to cheer for any other football team.

Chances are you’ll get a reaction that falls somewhere between, if you’re lucky, mocking disdain and, if you’re not, outright violence inflicted upon your person. That’s because there are some brands whose customers you just can’t drag away.

That is loyalty. And it wasn’t created by handing out points.

I must now bring up what isn’t on the above list or any list like it. A financial institution. I have to wonder why the heck not.

Don’t tell me it’s because all financial institutions deal with dollars, and that one dollar is like any other dollar. It is equally true, or nearly so, that a motorcycle is a motorcycle, a smartphone is a smartphone, and jeans are jeans. To be sure, the above are quality products, but building wild-horses-couldn’t-drag-’em-away loyalty takes more. By “more,” I refer to an unbeatable, overall experience. The kind that customers latch onto and cannot find, or believe they cannot find, anywhere else.

Don’t get me wrong. Short of loyalty, frequency is a pretty danged good second best, so I’m all for points programs. It’s just that I am also for not stopping there. The financial institution that delivers an unusual, relevant, substantive, positive experience will do more than increase adoption and frequency. It will produce bona fide loyalty.

The goal isn’t just to be different. That’s why banks haven’t had much luck trying to set themselves apart with contrivances, such as designing lobbies that don’t look like lobbies and calling tellers something cooler than “tellers.”

The goal is to be the kind of different that actually matters to customers.

I’m not saying it’s easy. Even less easy is being the first in your vertical to pull it off. But then, that’s why there’s only one Harley-Davidson.


* It’s not a given that a loyalty program will increase frequency. If you award points for transactions customers would have made anyway, you’re not increasing frequency. You’re increasing cost-per-sale.

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