Spend­ing is chang­ing re­ally faster than ever

Khaleej Times - - BANKING & FINANCE - MUFAZZAL KAJIJI The writer is the head of re­tail bank­ing at Noor Bank. Views ex­pressed are his own and do not re­flect the news­pa­per’s pol­icy.

Devel­op­ments in the pay­ments in­dus­try are driv­ing nu­mer­ous changes to tra­di­tional re­tail bank­ing as we know it. While cash un­doubt­edly re­mains king in the UAE, con­sumers are be­com­ing less re­liant on pa­per money. Fur­ther­more, in­vest­ments in in­no­va­tion and dig­i­tal in­fra­struc­ture are now bear­ing fruit, and there are a num­ber of ways that con­sumers can ben­e­fit in the fu­ture.

Dif­fer­ing spend­ing habits

Ac­cord­ing to the lat­est global pay­ments sur­vey by the World Bank, the value of credit card trans­ac­tions in the UAE rose 224 per cent per cent from 2010 to 2015, reach­ing Dh87.57 bil­lion in the lat­ter year. Debit card us­age roughly quin­tu­pled over that same span to Dh35.96 bil­lion. But peo­ple have been fill­ing up their wal­lets with ban­knotes at a slower rate of growth: from 2010 to 2015, ATM trans­ac­tions rose 71 per cent per cent to Dh129.92 bil­lion.

The sands are shift­ing and re­tail­ers have to adapt. In the United States, many brick and mor­tar re­tail­ers, from JC Pen­ney to Kmart to Crocs, are shut­ting out­lets as online sales in­crease. In the UAE, the shift to dig­i­tal shop­ping has been slower, but is pick­ing up pace too. Car­ry­ing cash isn’t a ne­ces­sity any­more and many peo­ple re­frain from car­ry­ing too much be­cause of se­cu­rity con­cerns. Gov­ern­ments share these wor­ries too, and some are en­vis­ag­ing a world with­out cash, or at least with­out its higher de­nom­i­na­tions — such as the de­mon­eti­sa­tion scheme in In­dia. Con­ve­nience is key for con­sumers, who now pre­fer to pay through online chan­nels or mo­bile apps. The currency shift af­fects how we travel too. Nu­mer­ous sur­veys have shown that in an era of glob­al­i­sa­tion, to­day’s con­sumer is of­ten on the go, and banks are thus of­fer­ing nu­mer­ous so­lu­tions for them on their jour­neys. In the UAE there are a num­ber of pre-paid travel cards which of­fer dis­counts as well as ex­clu­sive deals with ho­tels, air­ports, restau­rants and cer­tain leisure ac­tiv­i­ties. Some banks even ar­range trans­port to the cus­tomer’s dream des­ti­na­tion for free, and en­able re­pay­ments dur­ing the fol­low­ing year.

New tech­nolo­gies in trans­ac­tions

But the reliance on plas­tic is also fluc­tu­at­ing, and a num­ber of coun­tries in Europe and Asia have adopted pay­ment and near field com­mu­ni­ca­tion tech­nolo­gies, mak­ing it eas­ier for peo­ple to make pay­ments on the go. The emer­gence of fin­tech has seen banks part­ner with technology providers to see what they can do to im­prove their so­lu­tions, and in­crease pa­per­less trans­ac­tions. In the UAE, some ATMs do not ask for a debit or credit card when with­draw­ing money; in­stead sim­ply ask­ing for a code which can be ac­ti­vated by the cus­tomer, through a touch of a but­ton on their mo­bile de­vice.

Bio­met­ric ver­i­fi­ca­tion is also de­vel­op­ing rapidly and fin­ger­print scan­ners in par­tic­u­lar could have a huge im­pact on the fu­ture of pay­ments. Ja­pan for ex­am­ple, an­nounced its de­sire to en­able pay­ment trans­ac­tions for tourists via fin­ger­print scan­ners, na­tion­wide by 2020. This plan elim­i­nates both plas­tic and cash, and con­sumers sim­ply have to pre-regis­ter their de­tails and sign up for the ser­vice to make pay­ments with a swipe of a fin­ger. Given the unique na­ture of fin­ger­prints, this is now be­com­ing a way of se­cur­ing ac­counts and de­vices — erad­i­cat­ing the need for pass­words, pat­terns, PIN codes, and re­duc­ing the mis­use of data.

From voice ac­ti­va­tion, to real-time pay­ments and ATMs that al­low in­stant card top-ups and other ser­vices, it has become so im­por­tant for banks em­brace technology, stay rel­e­vant and har­ness best prac­tices from other in­dus­tries in or­der to be at the heart of this change.

Stay­ing rel­e­vant in fu­ture

The his­tor­i­cal con­text of all this is fas­ci­nat­ing. While nowa­days it feels like currency up­heaval is hap­pen­ing at a blink-or-you’ll-miss-it pace, for most of hu­man his­tory it was far more leisurely.

As the Har­vard econ­o­mist Ken­neth Ro­goff noted last year in his book ‘The Curse of Cash’, early cur­ren­cies once in­cluded “whale’s teeth in Fiji, rice in the Philip­pines, grain in In­dia, cowrie shell money in large parts of Africa and China as well as wampum beads in the United States”. Roughly 15 cen­turies then passed be­fore the next great mo­ment in fin­tech, the in­ven­tion of pa­per money in China. But to­day, the race is swift. Savvy banks have em­braced in­no­va­tion labs, crowd­sourc­ing plat­forms or var­i­ous other ways to stay rel­e­vant. Ul­ti­mately, em­brac­ing core ideas from other in­dus­tries is cru­cial as the world be­comes more glob­alised — and keep­ing up with dis­rup­tors such as technology is be­com­ing more im­por­tant to meet the needs of a new gen­er­a­tion of tech-savvy cus­tomers.


It has become so im­por­tant for banks to em­brace tech. —

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