The now, seemingly distant 2012 holiday season proved to be fertile ground for advocates of a cashless society and new ways to virtualize payments – and eventually your wallet. Online sales and electronic transactions continued their steady ascent, fuelled by the emergence of mobile commerce via smart phones and tablets and a widening preference for plastic over paper.
The potential for growth in this burgeoning payment sector is truly stunning: MasterCard, for example, estimates that nearly 85 percent of global commerce remains reliant on paper changing hands. In Canada too, cash and cheques are widespread even as competition to go digital intensifies: new payment schemes thus enjoin financial institutions, telecommunications and online service providers, and a host of upstarts. Accordingly, Silicon Valley’s latest darling, Square, makers of virtual payment platforms, is widely regarded as the IPO to watch for 2013.
Yet despite the fanfare, a cashless society has proven to be a remarkably trepid work in progress both domestically and abroad. Since the advent of e-government, proponents of paying virtually have invoked expanded and more efficient commerce on the one hand, and more inclusive and empowered communities via new and innovative lending and support services on the other.
Neither has occurred outright. The steady increase in electronic commerce and mobile payments lessened but hardly quelled holiday shoppers flocking to retail outlets and surrounding malls, many still with cash in hand.
With respect to social empowerment, in some instances the opposite may be true. Much of the world’s poor maintain an attachment to cash, viewed as tried and true and safe from collapsing banks, while the United Kingdom recently abandoned its plans to phase out paper cheques due to deepening fears and concern among the country’s most disenfranchised.
The case of Sweden, a digital and mobile bastion according to any e-government survey, is instructive. One recent survey by the SBAB Bank, however, found that roughly one half of all Swedes shun mobile commerce: security fears and expectations of hidden fees the deepest reasons for doubt. Yet paradoxically, Sweden is a world leader in reducing usage of paper bills and coins and much like its Scandinavian counterparts, the Swedish public sector is steadily phasing out paper-based transacting and payments for public services.
The Canadian scene is equally unsettled. Though in its infancy, mobile banking outpaces the initial uptake of online banking two decades ago. Undoubtedly a sign of things to come, the Royal Canadian Mint is replacing the penny with a ‘MintChip’ and coffee retailers such as Starbuck’s and Tim Horton’s are similarly competing for a more seamless counter experience.
The coffee scene is telling. For every person thrilled to wave their smart phone, another remains equally determined to rid themselves of coins. At least for now. Airlines going cashless for all onboard purchases suggests a sufficiently robust and trusted infrastructure that may one day render cash and currency mainly digitized formations. Still, easy to forget that only a small portion of the world’s population actually knows the “pleasure” of air travel.
While payment innovation is being driven mainly by industry, the role for government is paramount. In addition to macro-economic stability and regulatory oversight, two specific areas of public sector action (or inaction) will shape the acceptance of cashless payments and the emergence of mobile wallets: first, the underlying conditions of cyber-security jurisdictionally in an increasingly cloud and mobile-centric world; and second, the evolving apparatus of public sector service delivery.
On both counts the absence of more aggressive leadership on the part of federal and provincial governments is worrisome. The federal government in particular has been more cautious than most of its OECD counterparts in its exploration of cloud-based infrastructure, while recent Auditor General reports in both 2012 and 2010 expose the decrepit condition of antiquated IT systems. Most public sector providers, moreover, remain committed to providing a full suite of delivery channels: the politics of both place and paper loom large.
Indeed, central to the pursuit of a more cashless economy are complex and fluid societal matters such as privacy and security. In the absence of governmental leadership and public dialogue, a more splintered and polarized marketplace is certain. The Swedish government has an aggressive strategy to cultivate a paperless culture in a steady and inclusiveness manner. It is far from clear that the same can be said for its Canadian counterpart.
Jeffrey Roy is professor in the School of Public Administration at Dalhousie University (roy@dal.ca).
