Putting digital payments where your mouth is

Computer DiningHere’s how my grandparents dined out:

They sat, ordered, ate, and, when the check arrived, gave the server cash. The server returned with change, hoping some or all of it would remain behind, thanks to America’s curious practice of underpaying servers and expecting diners to make up the difference.

By the time my parents were dining out, paying with cash had declined to the point of being almost quaint. It was more common to slap down a credit card. The server would return with a slip of paper sporting a blank for writing in a tip amount.

Now we have portable mag strip readers brought to your table by a server; tabletop tablets from which you can order, pay, and tip; and direct payment via the portable device of your choice.

McDonald’s even lets you use your portable device to order and pay before you leave home. Only upon your arrival at the store is your food prepared and your account charged. This gives you the convenience of waiting in a designated parking space instead of waiting a roughly equal amount of time at the drive-up window.

Of course, fast food vendors have long mounted card readers outside the drive-up window. Surely someone has used one sometime, but I’ve never witnessed it.

And now MasterCard has issued a press release boasting that in the U.K.,

Diners at Pizza Hut restaurants across the country will be able to pay through their mobile without having to ask a waiter for the bill, saving them 12 minutes on average.

The news packs a double surprise.

The lesser surprise is that it takes about 12 minutes to pay your Pizza Hut server the new old-fashioned way.

And the greater surprise? That there are still parts of the world with sit-down Pizza Hut restaurants. Such are all but a relic in the U.S.

Server-less payment comes to U.K. Pizza Huts via the MasterCard app Qkr with Masterpass. It is designed to make a cinch of “…splitting the bill at a restaurant, ordering food to your seat at the cinema, or pre-ordering your child’s lunch.”

Besides offering a customer convenience, tableside POS systems promise a profitability boost for the restaurant industry as a whole. It has to do with table turns, that is, how fast restaurateurs cycle diners. Hospitality Technology places the average time saved per table by tableside POS systems at about 10 minutes, suggesting that …

… Cutting down that wait time by bringing the payment device to the table not only leads to more table turns and increased face-time, but also higher customer satisfaction. The result is better tips for servers. We witnessed this firsthand in Canada, where Pay-at-the-Table became the standard shortly after that country’s EMV migration in 2010.

In The Benefits of Tableside POS for Restaurant Owners and Servers, FSR reports:

Deployment of tableside POS can help streamline the dining experience and even increase tip percentages for servers. Casual-dining chain Olive Garden has already adopted tableside payment systems and is pleased with the results. According to The Los Angeles Times, a spokesman for Olive Garden said wait staff using the payment tablets see a 15 percent increase in tips and turn over their tables seven to 10 minutes faster. A spokesperson told the newspaper, “Guests can set the pace of their meals by ordering drinks, appetizers, and desserts as they want them and pay their checks with ease whenever they are ready.”

It will be interesting to watch how speeding up table turns plays out in the U.K. Americans tend to associate good service with swiftness, such as the whisking away of plates no longer needed or wanted, the prompt sweeping away of breadcrumbs, frequent check-ins (“How is everything?”), dessert suggested mid-meal, and having the check arrive before you ask for it. Sometimes visitors from the U.K. find the swiftness and attention rude, as if they’re being hurried along. Which, in fact, they are.

Besides speedier table turns, the restaurant industry agrees that tableside POS systems reduce human error and chargebacks. Plus they benefit servers in the U.S. by providing suggested, percentage-based tip amounts (including zero as an option). The result has been what The New York Times referred to as “tip creep” in its 2015 article, “$3 Tip on a $4 Cup of Coffee? Gratuities Grow, Automatically.”

Digital payment has sped and improved restaurant pick-up and delivery services as well. Websites like Eat 24 let you order, pay, and tip online, so you needn’t wrestle with tipping at your front door while your food cools. Pick-up restaurants like Papa Murphy’s let you order and pay online so you can duck in, grab your take-and-bake pizza, and duck back out while others stand at the counter deciding whether they want extra cheese.

Unlike many industries where technology eliminates jobs, it seems the high-end restaurant business will always need servers. The burgeoning supply of hospitality apps makes the job more efficient but doesn’t obviate it. Smartphones can take orders and receive payment, but it will be a while before they can drape a napkin over their arm and, with a flourish, deliver a hot meal to the table.

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How Elon Musk may revolutionize Internet access

Tesla in space

The fellow who gave this dummy his car hopes to turn broadband on its head.

Remember the guy who, about a month ago, let a literal dummy take his car on a prolonged spin through outer space? Now, he may be making the folks at Comcast, AT&T, and other broadband service providers nervous.

But those of us who are into digital banking should cheer him on.

Said guy is jillionaire Elon Musk, CEO of Google-owned SpaceX and CEO of Tesla, Inc. It’s only fitting, then, that the car tooling around in space with a dummy at the wheel would be a red Tesla Roadster, Musk’s favorite sports car.

Musk, you may recall, made his fortunes selling Zip2 to Compaq and founding an online payment company that morphed into PayPal, which eBay picked up for a mere $1.5 billion. Since then, he has turned the automobile industry on its head, which he now hopes to do for broadband Internet.

Just two weeks ago, SpaceX sent two test satellites into orbit, literally and metaphorically launching its Starlink satellite network.

The purpose of Starlink? According to CNBC:

Starlink will offer broadband speeds comparable to fiber optic networks, according to FCC documents, by essentially creating a blanket connection across the electromagnetic spectrum. The satellites would offer new direct to consumer wireless connections, rather the present system’s redistribution of signals.

Assuming the test satellites work as hoped, SpaceX plans to have a total of 800 of them in orbit by the end of 2019. And assuming they work as hoped, CNBC reports, SpaceX plans to launch “… an additional constellation of 7,518 V band satellites, situated in a ‘very low’ Earth orbit at just over 200 miles.”

The Starlink system could bring three important changes to the digital landscape.

First, Starlink promises to make broadband Internet available in geographic pockets where laying cable has to date not been economically feasible. This is no small thing. About a year ago, the FCC reported:

10 percent of all Americans (34 million people) lack access to 25 Mbps/3 Mbps service …  39 percent of rural Americans (23 million people) lack access to 25 Mbps/3 Mbps … [and] … only 4 percent of urban Americans lack access to 25 Mbps/3 Mbps broadband.

Second, it will offer an alternative in markets now dominated by a single major broadband provider.

Third and perhaps most threatening to existing broadband providers, Starlink won’t just be an alternative. It will be a blazingly faster alternative. Its speed and quality are predicted to rival those of a fiber optic network.

I might predict one of two fourth changes

Somehow I don’t expect the likes of Comcast et al to take the new competitive threat lying down.

If they respond the way Adam Smith would have preferred, they will move fast to improve their own delivery and pricing. I hope that happens.

Unfortunately, another option exists. They may seek legislation tying SpaceX’s hands. Musk is no stranger to this method. When the Tesla automobile was ready for market, established automakers and dealer associations went straight to work keeping Tesla out of their states. The battle is ongoing.

Why I’m cheering Musk on

On the philosophical side, competition is the foundation of our economy. That alone is plenty of reason to cheer him on.

Moreover, making broadband access available worldwide should strengthen economies, improve communications, and raise education levels for all.

Musk’s success would be great news for digital banking.

It would allow us to deliver digital banking services to once inaccessible markets. Moreover, Starlink’s fiber-optic quality and speed will mean better service, less waiting time, and, therefore, less frustration for digital banking clients.

Let’s hope the likes of Comcast et al respond by improving their product and service rather than through legislative tampering. Then, everyone wins.

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Smartphone sales slowing
My two cents as to why

PhonebrakesThe data on smartphone sales for Q4 2017 are in, and it looks like two Chinese companies have reason to celebrate.

In a recent press release, research company Gartner, Inc. reports that …

Huawei and Xiaomi were the only smartphone vendors to achieve year-on-year unit growth (7.6 and 79 percent, respectively) and grew market share in the quarter.

Having thus opened on a positive note, I shall now proceed on less positive one.

While Huawei and Xiaomi did well, 2017 marked a drop in Chinese smartphone shipments overall. That’s according to global technology market analyst firm Canalys. In a recent press release, Canalys reports:

The growth story of the world’s largest smartphone market, China, came to an end as it suffered its first-ever annual decline, with shipments down by 4% from 2016 to 459 million units in 2017. This drop was partly due to China having one of its worst year-on-year performances in Q4 2017, with shipments plummeting by over 14% to just under 113 million units.

Yeah, you might say, but that’s just in China. Worldwide, sales climbed from 1.496 billion units in 2016 to 1.537 billion units in 2017. That is true, and that’s great. Unless, that is, we zero in on Q4 2017, the time of year when things are supposed to be picking up as a sign of hope for the year to come. Reports Gartner:

Global sales of smartphones to end users totaled nearly 408 million units in the fourth quarter of 2017, a 5.6 percent decline over the fourth quarter of 2016 … This is the first year-on-year decline since Gartner started tracking the global smartphone market in 2004.


There is no shortage of proffered explanations for the slowdown.

Gartner’s research director, Anshul Gupta, offers this one:

First, upgrades from feature phones to smartphones have slowed down due to a lack of quality “ultra-low-cost” smartphones and users preferring to buy quality feature phones. Second, replacement smartphone users are choosing quality models and keeping them longer, lengthening the replacement cycle of smartphones. Moreover, while demand for high quality, 4G connectivity and better camera features remained strong, high expectations and few incremental benefits during replacement weakened smartphone sales.

International Data Corporation (IDC) mobile phone research manager Anthony Scarsella suggests:

The latest flock of posh flagships may have had consumers hitting the pause button in the holiday quarter. With ultra-high-end flagships all the rage in 2017, many of these new bezel-less wonders proved to be more of a luxury than a necessity among upgraders. Even though we have seen new full-screen displays, advanced biometrics, and improved artificial intelligence, the new and higher price points could be outweighing the benefits of having the latest and greatest device in hand.

If wading through the last two excerpts tested your patience as a reader—you’re not a marketing professional unless your sentences are complex, right?—you’ll appreciate ZDNet’s senior reporter Danny Palmer’s refreshingly plain English:

… it’s because consumers increasingly don’t see good enough reason to spend money on upgrading to a new handset.

Short and clear. No wonder Palmer is a senior reporter.

If the decline has taken people by surprise, it shouldn’t have.

Notwithstanding the recency of the other above-cited comments, Palmer penned his warning back in June. And two months before that, under the headline “The smartphone market declined for the first time EVER,” Arjun Kharpal, reporting for CNBC, wrote:

Global smartphone shipments fell 3 percent year-on-year in the first quarter of 2016 to hit 335 million units, according to a Strategy Analytics report on Wednesday.

I have my own thoughts about the decline. A new product can take the world by storm only until it reaches a saturation point, which the smartphone may be approaching. And, to echo Scarsella, non-essential, incremental improvements may not be worth the price of an upgrade.

But here’s a possible reason I haven’t seen addressed.

Superfluous technological changes in smartphones aren’t new. If that failed to slow sales before, why would it slow them now? Maybe it’s because phones have ceased looking like new models.

Portable phone marketers took a page from the auto industry’s playbook in making phones not just tools but fashion items. In much the same way you can tell with a glance if your neighbor drives a later model car than yours, it used to be easy to tell a current from a prior year’s phone. Features aside, there was motivation to upgrade just to avoid pulling out a phone that was “so last year.”

But in the last few years, not so much. Recent variations in size and dimensions have been insignificant—there is, after all, only so much you can do with a rectangle—and just about every color option is out there. It takes a keen eye to pick out the vintage of a smartphone purchased within the last four years, to the point that these days most people have to ask what model you’re using. The result is that, for the first time in years, you can hold your head high while hanging on to your older phone.

Still, it’s important not to confuse sales of smartphone units, which is slowing, with smartphone usage, which is accelerating. Only a few weeks ago, Pew Research Center reported:

The vast majority of Americans – 95% – now own a cellphone of some kind. The share of Americans that own smartphones is now 77%, up from just 35% in Pew Research Center’s first survey of smartphone ownership conducted in 2011.

Or, as a very smart guy wrote—well, okay, actually, it was me—not long ago for The Financial Brand:

The day is nearer than anyone thought when children wonder aloud what on earth their forebears did with those folded, leather things — “What’s a checkbook? What did you use wallets for?”

Saturation may be bad new for phone marketers. For those of us in the digital banking arena, it’s good news. There’s nothing we’d like better than a market saturated with smartphones.

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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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