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COVER STORY


Cashless: not the complete solution


JCM Global considers what a cashless system could mean for the future of payments


O 26 DECEMBER 2020


ver the past several decades there has been a steady shift towards cashless payments, from magnetic strips to chip-and-pin (EMV) to completely digital wallets. This year, the trend has accelerated due to COVID-19. But,


while people aim to limit physical interactions through cash-handling, they could well be overlooking some of the bigger flaws of a completely cashless society – from lack of accessibility to merchant costs. There are many aspects to consider when it comes to


cashless payments, so let’s take a look at what cashless transactions actually are, some of the risks of a cashless world, and how the future of payments might look.


Popular types of cashless payment


While it may surprise some, cashless payments are actually nothing new – arguably, even cheques could be considered cashless payment! Debit and credit cards have been in use for decades, and offer secure transactions attached to a bank account. In more recent years, many of these cards have transitioned to chip-and- pin (EMV) and eventually to contactless systems, which rely on NFC (near field communication) or RFID (Radio- Frequency Identification) technology. Bank cards as a whole are still the most preferred method of cashless payment across all age groups. However, cards are increasingly being folded into


digital wallets, which are able to store the card data with contactless capability, meaning there is no need to carry a physical card. While “digital wallet” is often used to


refer to any non-physical payment program, there are actually three distinct types: Digital Wallets, E-Wallets and Mobile Wallets. Digital wallets, as mentioned, store information from credit cards, debit cards, and more. A user’s money stays in the bank account associated with that information, and the digital wallet replaces the physical cards. An e-wallet, on the other hand, is a method of prepayment, whereby money is loaded onto and withdrawn from the platform via a bank account proper. Mobile wallets refers to apps that can be either of the previous models (or a mixture of both) and use a phone’s NFC capabilities or QR-reading abilities to make cashless payments in the physical world — two of the best-known examples of mobile wallets are Apple Pay and Google Pay. In addition to bank cards and digital offerings, there


are also prepaid cards (the physical precursor to e-wallets), gift cards and vouchers. While often overlooked, they make up a notable part of the cashless ecosystem, whether open-loop (which allow users to spend money in multiple places) or closed-loop (location-specific, such as within a gaming operation).


What drives the trend of cashless transactions


Regardless of the type of cashless payments people are using, there is a broad shift being driven by larger trends and specific players. First, there is the general digitalisation of society, with numerous aspects of our everyday lives being shifted either online or to apps.


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