Kigali – Ever since the world was shocked with the emergence of the coronavirus pandemic, most countries have experienced a state of lockdown, which also reduced access to cash. Rwanda went through the same and we have seen most local banks in concerted efforts to encourage their customers to opt for cashless payments, as a safety measure due to fears of contracting the virus through touching infected surfaces. This psychological effect may be long-lasting. Could this be the end of cash in our society? Are local banks fully ready to go cashless? Getting set for digital-only payments For the past few years, many Rwandan banks have been in a race to change the way they do business in order to keep pace with the changing demands of their customer base, as well as the threats from mobile operators. With their sprawling network of resellers, mobile operators have grown considerably in the space of a few years, the race has been on for banks to act like a digital giant before mobile operators could act like a bank. Studies quote exceptionally high failure rates – sometimes as high as 84 per cent – for traditional businesses attempting digitalisation projects. So why are failure rates so high? Many traditional banks are still struggling with their digitalisation efforts due to the complexity of their legacy IT systems and infrastructure. On top of this, businesses often have insufficient expertise internally to run the project and there can also be cultural barriers to embracing digitalisation efforts as employees fear for their jobs and stall the progress. Some banks are registering great success with digitalisation despite the challenges by partnering with more agile and digitally skilled Fintech companies who catapult their progress. These partnerships bring the best digital skills and agility together with the experience, brand, trust and reputation enjoyed by traditional banks. Banks are realising the benefits of e-payments The case for digital payments is clear; for banks that can implement the technology successfully, transactions can be processed faster at a far lower cost, with fewer errors and with less employees to manage them. Without the need to store and distribute cash there is a reduced need for physical branches and ATMs, which again saves money. The infrastructure that we built to manage a high cash society is not viable to maintain to serve a low cash society. Is banking technology robust enough to move away from cash? The concept of moving to a cashless society has raised concerns about what would happen in the event of a technology failure affecting the banks. There have been significant technology incidents here and there in various banks within the last few years which are still fresh in the minds of customers who were negatively impacted. It is not easy to convince a customer who transferred his last penny from his bank account to his mobile money wallet and it didn’t go through on the last night of the lockdown. In a cashless society there is no room for these kinds of errors. Banks must ensure both the security of their digital channels from fraudsters and the resilience of their testing systems before new technologies and upgrades are launched. Systems must be capable of handling greater and greater volumes of transactions as the use of cash decreases. Even if banks are themselves set for the transition, it’s clear that not every customer is. Who will be left behind? In Rwanda, cashless payments have been readily adopted by the more affluent consumers, the tech savvy and the younger generations. Most service providers are increasingly directing their customers to make card or mobile money payments due to the increased costs and risks involved in handling cash. However, there are fears that the removal of cash from circulation would negatively impact several groups in society including the less affluent customers who keep on top of their spending through a cash budget, customers with learning disabilities, customers who live in more remote communities with less reliable internet connections and those who need others to make purchases for them. A few banks have invested resources in educating their customers on how to safely use banking technologies. More will need to be done to support small business owners who have traditionally opted for cash because they find payment terminals to be complicated, non-re-liable and a costly way to transact in lower profit margin businesses. In most businesses, ‘cash on delivery’ remains a popular option for customers who prefer to pay on receipt of the product or service. However, this comes at a high risk to the seller who would be better protected by an electronic payment option. Businesses selling services or items at a relatively low cost in general, such as fast food vendors, motorcyclists, cabs, mini-markets and many others are likely to benefit from installing point of sale (POS) terminals that allow cashless payments. These are now widely found to be convenient for customers, including the elderly. The banks have work to do There is now a wealth of viable alternatives to cash payments beyond traditional card payments, from internet and mobile banking, to digital wallets, to Open Banking and payments made within apps. The strategic decision on which route banks should focus on lies with their Heads of Digital & Technology and Customer Experience Officers. Certainly, Open Banking coupled with instant payments has clear benefits over card transactions, which would be felt by the merchants who opt-in. While the necessary infrastructure for a cashless society is now in place, banks need to ensure that their systems are secure and able to withstand the additional volumes of digital payments they will be processing. Each bank should also consider offering education and training for groups in society who are currently reliant upon cash, to ensure that they are not left behind. Financial services providers need to review their physical footprint to ensure that branches that they decide to keep open still have a profitable way to contribute to the communities they are based in, and the staff is focused less on processing and more on the human interactions that make the most difference in a banking relationship. Technology & Digital Officers in banks have an even bigger weight on their shoulders in the dawn of a cashless society. Plan A has to work when there is no Plan B. The author is a Marketing, Communications and Public Relations specialist based in Kigali. The views expressed in this article are of the author.
