Payments & Infrastructure - Part I. Verifone
1 like191 views
The document discusses the transition to cashless payments in emerging markets, where 90% of transactions are currently cash-based. It highlights the importance of infrastructure, internet connectivity, and electricity access as critical factors for successful cashless payment deployment. It emphasizes that without addressing these variables, the adoption of cashless technologies could be hindered, impacting financial inclusion and economic growth.
Payments & Infrastructure - Part I. Verifone
- 1. Fundamental Considerations for Cashless Payments in Emerging Markets 85% of the world’s population lives in emerging markets, where as many as 90% of transactions are cash-based. However, the future of paper- based payments in these areas is changing due to growing demand for financial inclusion among increasingly tech-savvy populations and government initiatives to increase tax revenues and stimulate economic growth. These and other driving forces are behind the move towards cashless payments (or “less cash”) in developing markets today.
- 2. 1 Fundamental Considerations for Cashless Payments in Emerging Markets While there is a seemingly endless variety of technologies for merchants to accept cashless transactions, there is no “one size fits all.” This can make finding the right payment solution a daunting process—especially in emerging markets where many obstacles can stand in the way of digital commerce. This four-part series highlights the following variables that stakeholders in developing markets should consider when introducing or expanding cashless payment technologies, as well a look at some of the cashless projects taking place today: I. Infrastructure II. Merchant and Consumer Trends III. Processing and Acquiring Capabilities Considering these variables can increase the chances of successful payment technology deployment and the ability to manage, service and grow cashless payment assets in the future. Part I: Infrastructure “Accepting” cashless payments—whether credit/debit, contactless, pre-paid, mobile wallets, person-to-person (P2P) or NFC—is merely one piece of the puzzle. Payment acceptance devices must be able to relay data to all parties involved in the payment system, and electricity and internet access are crucial. While obvious and often taken for granted in many parts of the world, both demand special consideration as their strength and availability can sharply vary among developing countries. Internet Access The internet can be accessed through wired or wireless connections. Common wired connections include high-speed DSL, cable and fiber optics, as well as and telephone lines that support relatively slow dial- up modems. Different types (generations) of wireless connections, such as 2G, 3G and 4G, and WiFi, are supported by satellites and cellular towers. Internet connectivity can present a serious obstacle to cashless ecosystems in certain parts of world that, according to the Center for Strategic & International Studies, are home to more than 60 percent of the global population that doesn’t have regular internet access. Regional internet connectivity should be considered in terms of type, strength and availability, since many payment technologies have specific bandwidth requirements and internet connection configurations.
- 3. 2 Fundamental Considerations for Cashless Payments in Emerging Markets This consideration was important during Egypt’s modernization of its entire retail petroleum system with digital payment acceptance capabilities—an initiative aimed at gaining market transparency for better control over domestic petroleum pricing and distribution. Certain regions had reliable internet access, while others only had dial-up or limited wireless networks. With this in mind, the vendor in charge of the project selected payment devices featuring Ethernet, dial-up and dual 3G and WiFi connection capabilities. Many were also configured to automatically recognize and switch to the strongest available network—helping to ensure optimal performance and fast processing times. In addition to multiple connectivity options, some payment technologies also have “store and forward” capabilities, which allow them to accept—and sometimes even validate—cashless payments when wired or wireless networks are down. Payment data is stored in these devices and can be relayed accordingly once networks are back online. Global internet accessibility and usage. Source: http://www.prototypingengineer.com/elon-musk-international-interplanetary-internet/ Internet connectivity can present a serious obstacle to cashless ecosystems in certain parts of world that are home to more than 60 percent of the global population.
- 4. 3 Fundamental Considerations for Cashless Payments in Emerging Markets Electricity Electrical infrastructure is another obvious, yet important consideration, as 1.3 billion people around the world do not have access to electricity. In India, for instance, more than 300 million people do not have power, and in Africa and certain Asian countries such as Burma and Cambodia—those without electricity represent as much as 70 percent of the population, according to a 2015 Washington Post report. Even those with power are prone to frequent outages due to problems with local grids. This is the case in much of the Middle East, North and Sub-Saharan Africa, the Arabian Peninsula, and South Asia—where businesses experience as many as 26 power outages each month. Outages can result in “dropped” transactions—just like cellular network interruptions can result in dropped calls. Unfortunately, lost revenues from failed transactions can quickly add up for merchants, and the inconvenience can be very frustrating for their customers. 0 5 10 15 20 25 30 South Asia M iddle East North Africa & Arabian Peninsula Sub-Saharan Africa East Asia & the Pacific Caribbean Nations Latin America Approximate Number of Monthly Outages Source: http://www.worldatlas.com/articles/power-outages-in-places-of-business-around-the-world.html
- 5. 4 Fundamental Considerations for Cashless Payments in Emerging Markets In regions prone to blackouts, technology searches should focus on devices with A/C electrical connections in addition to re-chargeable batteries that can provide back-up power. “Knuckle busters” could also be issued as safeguards. Once standard in developed countries, merchants can use knuckle busters to manually imprint customers’ card information on slips of carbon paper. These devices can also give card acceptance capabilities to merchants in areas that do not have electricity whatsoever. Up Next Infrastructure is critical to the successful deployment of cashless technologies, which can bring financial inclusion to consumers and increased commerce and annual savings for merchants. However, deployment is futile if merchant and consumer adoption does not occur. Part II of this series will highlight key merchant and consumer trends that stakeholders should consider to help ensure cashless payment adoption by both audiences.