17 December 2020

Thriving in a new cashless normal

Kostas Georgoulas, our Regional Commercial Director spoke to Payment Expert about the growth of cashless payments, the regional differences as well as the payment trends that have arisen following the pandemic. 

PE: Firstly, can you tell us how OKTO has adapted to the new normal and accelerated shift to cashless payments?

KG: While a cashless world has been on the horizon for several years, the coronavirus pandemic has pushed the public to adapt and change their behavior towards cash usage, accelerating the trend toward a cashless economy.

For us at OKTO, cashless mobile payments are not something new. We identified this shift prior to COVID, developing proprietary solutions with the digitization of payment processes as our core mission. Many predictions have been made recently that we will become virtually cashless within the next decade, however, it’s important to be realistic.

The adoption will not be universal across the world as current cashless penetration and rates of change or acceleration as you posed it are different region to region, country to country.

Southern Europe countries, like Italy, have shown that cash use to be more resistant, with less rate of decline, whereas Nordic states and the UK have appeared to be seamlessly adopting digital payments at a great pace. Nonetheless, with onset of the pandemic, we’re likely to see a decline in cash payments on a global scale.

That brings me to the point that a localized approach is must, and at OKTO, we are well-prepared to provide our merchant partners with reliable and seamless digital payment solutions tailored for their market’s needs. Whether it’s end-to-end cashless mobile payment or voucher-based payments, we aim to make them for both, operators and users, faster, simpler, effortless and secure while being resilient and reliable.

To stay competitive in today’s new normal, merchants need to be able to cater to different needs and demands as well as to different demographics that are growing even more diverse. That means providing payment services that meet the demands not only of the mobile-first consumers but also those who enjoy the benefits of transactions in the real world.

PE: How significant has the increased engagement in cashless payments been and do you anticipate it will remain after the pandemic?

KG: Consumers are driving the cashless engagement, and we’re currently seeing a widespread change due to the pandemic in their behavior propelling the desire and demand for a cashless society forward – including those who were previously sceptical of going cashless.

With lockdown restrictions not going away anytime soon, we will have a longer period to adopt these new behaviors, and they are likely to hang around long enough to make them stick. We anticipate this broad behavioral change to cashless will remain after the pandemic and will become a self-fulfilling prophecy leading to again increased cashless payments.

Our merchant partners from various sectors, from retail and hospitality, to gaming, are adapting to the consumer change and demand for cashless, and asking OKTO to help them adapt their operations to the current digital cashless payment market needs to cover immediate social responsibility requirements, while also positioning themselves for dominate cashless future.

We always design our solutions with users’ experience in mind. OKTO.WALLET is not only a safe payment method but also a universal open-loop payment app, that aims to reduce payment friction, enhance the user experience and boost retention rates, allowing real-time money funds transfer in a cashless, secure and fast way.

Opting for cashless payment in many cases is a one-way street both in terms of compliance and player’s preferences. Adding here the regulatory pressure and the changing consumer habits that are straining day-to-day operations, it is evident that cashless becomes a necessity today and beyond. That being said cashless and cash will co-exist in operations for some time, a merchant is unlikely to change from cash to full cashless operation one day to the next, it is about extending payment choice for consumers that are increasingly moving towards cashless.

PΕ: How quickly has the regulatory framework had to adapt and what challenges has this presented?

KG: The European PSD2 framework has helped a lot to harmonise regulation across Europe and establish a clear digital payments foundation to build on for both payment companies and financial regulators and enabled adaption (within the framework).

Despite this though, consultation on innovations can be hampered by difference in understanding of PSD2 and its application. Hence, education is key across the industry.

While the vast majority of both merchants and consumers agree that money management apps have made it easier for them to manage their finances, they are still unaware of the purpose of the legislation and how this has opened the door to a new world of financial tools. And it’s clear that the industry must go further to increase the levels of awareness of the new regulations and ensure consumers and merchants understand PSD2 and how beneficial it is for them.

For merchants, the education process seems streamlined. PSD2 contains some provisions that merchants will want to take particular note of since it offers a better customer experience, and therefore increases customer loyalty. There’s no better way to get the customers than by enhancing the quality of services, making payment transactions faster, more secure, and more transparent, providing seamless digital payments, eliminating fraud, and reducing chargeback rates.

But, none of the development that regulators are hoping will result from open banking regulation will be achievable without a strong buy-in from consumers. Customers aren’t aware of the benefits, and without customer awareness and demand, it may be hard to generate interest. It’s imperative to build on customers’ relationships to grow trust and raise levels of education around the changes and explain them explicitly what to expect before they have to do it.

In fact, the regulation is creating an integrated and frictionless European payments system, that provides the customer with more choices, control, and security than ever before, and we should communicate this to the end-users.

A primary goal is also to provide greater protection against fraud and enhanced security through the use of Strong Customer Authentication.

Outweighing the challenges with opportunities is also a key here and this is exactly what we do at OKTO. Major factor that we should emphasize and give more insight is the security side of payments, for both online and in-store. It’s on the notion of security, compliance and frauds. We have to be responsible about this for both the merchants and the consumers, providing payments solutions in a convenient, compliant way through a future-proof model without fraud or legal issues.

PE: In terms of trends, what regional differences have you noticed, have some countries been quicker adopters of cashless payments?

KG: Unsurprisingly, the sheer volume of digital payments has continued to grow at a double-digit pace, but, there are geographical differences in adoption. Asian countries, the Nordics and the UK are quick adopters and are ready for the transition to a cashless society and definitely will be the cashless leaders of the decade ahead.

While these countries predicted to become the first cashless societies, there are others where we are likely to see a transition to less-cash societies rather than a complete cashless switch in the near term, as there are established alternatives to cash like cards and voucher-based payment methods. There are also markets where it is hard to imagine that cash or cash-based payments will be either a commonplace or even a requirement.

It is essential to adapt to local cultures to be successful. Understanding customers’ payment preferences and offering payment methods adjusted to each regions’ needs and demands creates an optimal payment experience for the user. To effectively reach the audience, you need a local approach, that can offer customers next-gen payment solutions that support all the ways consumers expect to pay through their smartphone. 

PE: Are there any other Payment trends that have arisen following the pandemic?

KG: The pandemic has accelerated existing trends rather than creating new ones, changing the financial landscape. These include shifts towards digital and mobile payment services, but also we observed the rise of touchless transactions, cash displacement and instant, real-time payments.

Real-time payments are the talk of the town and have become the new normal along with cashless solutions! This trend is expanding fast as is being driven by customer expectations and experience as part of the digitization. Consumers and businesses are increasingly demanding services to interact with them in real-time, and of course, payments, cannot be out of the equitation.

To keep pace with the industry movers and shakers, you need to provide real-time payments whether that be cashless mobile payments, retail solutions or cash-based gaming. People, after all, expect to be gratified instantly. Our payment solutions, OKTO.WALLET and OKTO.CASH, are uniquely designed to cover also that demand while our services’ success lies in the fact that it meets all the trends, fully aligned with customers’ needs, by providing mobile-first solutions that are simple, secure, convenient and fast.

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