Moving to a cashless society (and how smarter payment systems benefit cities)

Wed, 2013-12-18 06:00 -- Liz Enbysk

Salvation Army bell-ringers – a familiar site outside retail outlets in some parts of the world this time of year -- aren't getting as many donations in Toronto this holiday season, according to a CBCNews report. One of the reasons, a spokesman for the charitable church organization suggests, is the trend toward a cashless society. A lot of people simply don't carry coins and small bills any more.

In fact, a study released by Council Lead Partner MasterCard this fall ranks Canada along with Belgium and France as the three nations closest to cashless societies. But the study -- The Cashless Journey – says there's still a long way to go, noting that today around 85% of all retail transactions are done with cash.

According to MasterCard, cash persists, but it may be costing us:

"Even though much of the world's population has access to many different options for making payments without it, cash still persists. As a way of making payment, cash takes time to get at, is riskier to carry, and by some estimates, cash costs society as much as 1.5% of GDP. Electronic payments on the other hand have been proven to boost economic growth, while advancing financial inclusion. It is for these reasons that countries around the world are working to make their payment systems less dependent on cash."

So what does this trend toward smarter payment systems mean for cities? Actually, quite a lot, according to payments experts who helped develop the Council's Smart Cities Readiness Guide released last month in Barcelona. Payments are the heart of a city's economic activity – forming the core of every economic flow including salaries, consumer spending, business procurement and taxes.

Here are just a few ways smarter payments can benefit cities and their residents:

Seamless and highly secure form factors. Connected, mobile citizens will benefit from innovative digital payment form factors. Examples include digital wallets that give them a single interface for all their payment mechanisms, loyalty programs, transportation tokens, movie tickets and so on. And the ability to use that wallet on any device, any place.

A fully advanced smart city will foster development of such form factors and extend them to the city’s key services. A resident’s key information will thus be stored in a one-stop, highly secure interface. Using technologies such as near-field communications (NFC), contactless wallets of the future will be the repositories for ID cards, social and health programs, transportation cards, sport subscriptions, etc. Livability will be enhanced by having everything at hand and recognized in a second.

Fully customized service. Digital payment instruments enable city administrations to capture citizens’ behaviors in an anonymous way. By doing so, they can instantly deliver the right offer, service or information. Or imagine New York during Black Friday: public transportation companies could leverage payment data analytics to adapt transportation capacity in real time, thus allowing a smooth journey for users.

Reduced time and inconvenience. Managing citizens’ frustration towards public services is often a challenge for city leaders. Smart payments can help by offering faster, more convenient solutions for their city transactions. As an example, consumers in Delhi no longer have to travel to their city’s utility office during office hours and stand in a queue to pay their bills. They can now pay from home, on their bank’s website. In South Korea, consumers can now do their grocery shopping during their daily commute at the city’s subway stations. Using their mobile phones, they can shop and pay at Tesco’s virtual grocery stores and the groceries are delivered by the time they reach home. In London, services such as PaybyPhone enable consumers to pay for parking from their cellphone; consumers no longer have to worry about having sufficient change. They can even top up the meter remotely, saving a trip back to the parking spot.

You can read even more examples of how cities around the world are incorporating smarter payment systems in the Readiness Guide – from Toronto's switch to prepaid cards for social service recipients to Hong Kong's Octopus card that encourages mass transit usage.  Learn how to download your free copy of the Readiness Guide.