The transition from cash to cashless

in the latter.

In my perspective, there are two factors to this: firstly it is the infrastructure – obviously, you need to have the right infrastructure deployed across suppliers, clients and retailers, to be able to move into a fully-digitised world.

Second is behaviour. I say behaviour because culture is a wide term and so I prefer to narrow it down to behaviour. We all need to change the way we operate. For example, I am an Italian and one of my markets also happens to be Italy. About a couple of months ago, I was on business at Milan airport – literally the most advanced business city in Italy. As usual, I was just about to pay for my newspaper with my card when I heard the lady in front of me talking to the cashier. The cashier was telling her that this British guy yesterday wanted to pay for his paper with a credit card. Hearing this, I tucked my card away and walked off because I didn’t have any cash. This is a missed opportunity for the cashier. Same goes for transport tickets, coffees and low-value items. All of these are not only missed opportunities but also a question of cost.

Are there examples that Malta can emulate?

There are economies that are moving in a completely opposite direction. We can look at the Nordics. Governments there really like to keep minimum cash reserves and are really turbo-charging their digital innovations. First it’s a question of cost. The Nordic economies have learned that counting cash, moving cash, delivering cash, storing cash, means a very big infrastructural cost. Some analysts even put this as high as 1% of the GDP. However, it is important to bear in mind that in the Nordics, this succeeded because there was great collaboration between the local banks, governments and the retailers as they all understood the value of going cashless.

The second consideration is client experience, such as how fast you can pay with your mobile phone or with a contactless or regular card compared to a cash transaction. Think about it: when you pay with cash, you need to count, wait for the change, wait for the receipt. All of this lengthens the overall transaction. Wouldn’t it have been quicker to pay by card?

What are the benefits to retailers to offer digital payments to customers?

Apart from the obvious costs of managing cash and the customer experience, another good reason is the audit trail. As a business you will have full visibility of transactions on the day. That helps in many different ways, for example, during the budgeting process, you know where your flows are going, who your suppliers and retailers are, so you can look at those behaviours.

And there are benefits such as lack of risk that comes with handling cash compared to electronic payments and the ability to have tighter control on fraud.

There are also demonstrable numbers which show that when a consumer is able to purchase a coffee or a paper with his or her mobile or contactless card rather than queuing, the spending goes up. So there is a real value in moving towards a society with less cash and more digital payment options.

What can a bank like HSBC do to help the society realise these benefits?

HSBC is investing hugely in the digital space. We are spending $2bn from 20152020 in our HSCBnet platform which is the key platform for businesses to receive and execute payments, monitor their cash flow and trace their payments. We are also adding functionality to make the life of the CFO much easier, simplify their processes and make them more convenient and cost efficient for them.

In fact, in Malta, HSBC was the first bank to introduce biometric features such as the Touch ID on HSBCnet.

Around the world, most of our initiatives are generated from our innovation lab in Asia and then quickly deployed in Europe. I already mentioned Contactless, which is now in Malta. Another is a social payment application called WePay. This app is used between family and friends to share, let’s say, a dinner bill. Since its launch, it has become the number one app in Hong Kong.

What does the future of payments look like?

First of all, regulations are changing to allow this digital transformation to happen so take the example of Payment Services Directive (PSD) in Europe, also known as open banking. This regulation creates an open environment where customers will have accessibility to the banks’ propositions, costs, and prices so it becomes a fully transparent environment where the customer is at the centre of the proposition. The new regulations make it easier to use the new digital technology, offer better competition, as well as open up data analytics to understand their spending behaviour. Both the banks and the customers need to be ready for these changes.

In Malta, it all depends on how you structure the economy. Nearly 40% of tourists come to Malta from France, the UK and the Nordics. These places are highly digitalised already, and the customers, unlike the newspaper vendor I met in Italy, are used to pay their 0.99 cents for coffee via a card.

We will miss these opportunities if we don’t embrace these changes in Malta as customers might walk away from retailers in the absence of digital options.

Then think about the future. The millennials want to do everything from their phone. They are used to operate differently and do not like cumbersome processes. We need to put ourselves in customers’ shoes and they want three things: convenience, speed and control. If we don’t embrace this change, we will be left behind. At HSBC, we are ready to support our clients, retailers and colleagues to make this transition possible.

HSBCnet offers efficiency, convenience and control which are important ingredients to run a business successfully.