covid-19 & payments
TRANSCRIPT
WHITEPAPER
COVID-19 & PAYMENTS
ContentsIntroduction 1
Dirty money 2
Desperate measures 3
Shift to digital 3
The payments divide 4
Contactless doesn’t always mean contact-free 5
Going mobile 7
Reducing the risk 8
References 10
More from Bluechain 10
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IntroductionIn March 2015, Bill Gates delivered a TED talk about global preparation for the next big outbreak. The world had just avoided a global outbreak of Ebola. Twelve years earlier, in 2003, the SARS epidemic had spread to more than two dozen countries in Asia, Europe and the Americas.
In 2020, what Gates had described as the “greatest risk of global catastrophe” became reality. Governments around the world were spurred into action to contain the threat, and both business and government began to seriously look at long-term changes to protect the community against communicable disease in the workplace, public transport, restaurants and bars, and other public spaces.
As the health crisis intensified and lockdowns came into force, the COVID-19 pandemic impacted almost every facet of daily life, and cash and payments have not been immune and quickly became a focal point for disease control.
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Dirty moneyAccording to the G4S Global Cash Report, in 2018, cash was still the most widely used payment instrument globally. In many Asian countries, three-quarters of online purchases are paid for by cash on delivery (COD). And in Europe, 79% of POS transactions are in cash.
Concerns over whether banknotes and coins played an active role in carrying and spreading the virus spread around the world almost as quickly as the virus itself. And a widely shared article from a UK news agency, which misreported that the World Health Organization (WHO) had warned against using banknotes, didn’t help.
The intensity of Internet searches on 21 March 2020 related to COVID-19 and use of cash shows that there are substantial differences between countries in these concerns. Overall, Australia, France, Singapore, Switzerland, Ireland, the United Kingdom, Canada, the United States, Jamaica and Kenya have the highest search interest.
These fears are supported by earlier research on pathogenic agents (Angelakis et al. 2014; Thomas et al. 2008; Lopez et al. 2011), which showed that viruses, including influenza, can survive on banknotes and coins for hours or days and that non-porous surfaces, such as plastic, readily transmit viruses and bacteria .
In a cash transaction, not only do both parties handle the cash, but cash can easily be passed through multiple parties in a day. In the age of polymer banknotes, the window for a viable COVID-19 virus could easily see a note pass through the hands of a dozen or more people.
Added to this, there have long been issues with people involved in food preparation handling cash. Many people will have experienced receiving food from an employee behind a counter with gloves on, only for them to then accept cash with the same gloved hands.
Search intensity related to COVID-19 and cash use 21 March 2020 (source: Auer et al. 2020)
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Desperate measuresCentral banks responded to the public’s rejection of cash by urging retailers to continue to accept cash and, in some instances, began destroying, sterilising or quarantining used banknotes.
The Bank of England, Bundesbank, Bank of Canada, and South African Reserve Bank were forthright in their assurances that banknotes posed no special risks to consumers.
In mid-February, the Bank of China ordered all banknotes collected by hospitals, wet markets, and buses in the hardest-hit regions to be removed from circulation and destroyed.
And many other central banks, including the Central Bank of Kenya, Bank of Korea, Bank of China, US Federal Reserve, Central Bank of Kuwait, and Magyar Nemzeti Bank started to sterilise or quarantine used banknotes.
Shift to digitalDigital payments were catching on even before the COVID-19 pandemic, but the fear of infection from banknotes, coins and ATMs has accelerated the trend away from cash towards digital payments. Irrespective of whether these concerns are justified or not, the perception that cash could spread pathogens has changed the payment behaviour of consumers. Historically, in times of crisis, consumers have hoarded cash. This time, however, appears to be different.
“We are hitting a tipping point across the world where people are seeing just how simple and easy it is to use digital payments to pay for services,” PayPal CEO Daniel Schulman said May 6 in a conference call with analysts. He said the company had its largest single day of transactions ever on May 1, beating out heavy shopping days like Black Friday or Cyber Monday.
To encourage the use of contactless payments, banks and card networks in many countries have set higher transaction limits for contactless payments and others have lowered fees on mobile and contactless payment services.
The Central Bank of Iran, for instance, is expanding the infrastructure for contactless payments via QR codes and e-wallets in an effort to limit the coronavirus outbreak via “circulation of banknotes among the public or exchange of debit cards in retail outlets.”
And Banco de Portugal advised that, “whenever possible, citizens choose to make their purchases online [and], in face-to-face purchases, the use of contactless should be preferred.”
As the impact of COVID-19 has accelerated, banks and credit unions have encouraged customers to use remote alternatives instead of visiting their local branch. Many have also increased their remote support services and reduced or waived fees to help with day-to-day banking transactions.
“We are hitting a tipping point across the world where people are seeing just how simple and easy it is to use digital payments to pay for services”
Daniel Schulman PayPal CEO
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The payments divideIf cash is not generally accepted as a means of payment, this could open a “payments divide” between those with access to digital payments and those without. This in turn could have an especially severe impact on unbanked and older consumers.
The Bank of Canada issued a statement on 18 March urging the nation’s retailers not to ban cash transactions over coronavirus fears. “Refusing cash could put an undue burden on people who depend on cash as a means of payment,” said the bank.
And the next day, 19 March, Reserve Bank of New Zealand’s Assistant Governor Christian Hawkesby said, “Businesses are not obliged to accept cash, but declining it may end up disadvantaging people who rely on its use. These people are more likely to be young, elderly, poor, disabled or financially excluded. Have respect and care for each other.”
“Businesses are not obliged to accept cash, but declining it may end up disadvantaging people who rely on its use. These people are more likely to be young, elderly, poor, disabled or financially excluded. Have respect and care for each other.”
Christian Hawkesby, Assistant Governor, Reserve Bank of New Zealand
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Contactless doesn’t always mean contact-freeAlthough concerns over the use of cash spreading the virus have been pervasive, scientific evidence suggests that the probability of transmission via banknotes is low when compared with other objects that are frequently touched by the public.
When consumers in developed countries think about contactless payments, they probably think about tap-and-go or payWave technologies in-store, using a card with a chip or a phone with a card emulator. These payment processes include credit cards, Apple Pay and Google Pay and use near-field communication (NFC) technology to initiate the payment.
A recent study reported in the New England Journal of Medicine (van Doremalen et al. 2020) found that COVID-19 can persist for three hours in the air, 24 hours on cardboard, and even longer on other hard surfaces like stainless steel and plastic.
The reality is that credit card terminals and ATM keypads carry a greater risk than cash. Not all digital payments are contact-free, and any payment method that involves touching a common surface, such as keying in a PIN on a POS terminal, or handling printed invoices or receipts, are just as “dirty” and prone to transmission as cash.
In low-value transactions, a contactless payment may be truly contactless. In other cases, regulations or transaction limits require the consumer to enter a PIN into the retailer’s terminal. As soon as this occurs the transaction is no longer contactless.
Many payment environments require staff to operate the terminal. And many payment scenarios will also result in a printed receipt. For example, when a business traveller pays for taxis, restaurants and other business expenses using a chip card or smartphone, they collect a physical receipt for their expense claim. And, whenever the operator hands them a receipt, the payment process is no longer contact-free
Some major retailers, like Woolworths in Australia, are addressing this by presenting the customer with a digital receipt in their store loyalty app; however, this is not practical across all merchants and all customers.
Others are requesting an email address for the receipt to be sent to. But this is time-consuming and error-prone as a mistyped email address can easily result in the customer not receiving the receipt and preventing them from claiming the expense from their employer or for tax purposes.
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Top Mobile phone subscriptions as a percentage of population (source: G4S 2018)
Bottom Percentage of population with access to a bank account (source: G4S 2018)
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Going mobileLong before the pandemic began to shift consumer habits, the big trends in digital payments were in mobile payments solutions and digital on-boarding of new account holders. In recent years, the increased use of mobile phones, especially in Asia, has propelled the use of electronic payments over cash.
As the payments industry acts to take advantage of coronavirus-inspired consumer preferences, it can expect healthy competition with the tech giants and mobile carriers tapping into the $6.5 trillion global cash economy.
This is especially true with smartphone users who are unbanked and excluded from traditional financial services. With over 1.7 billion of the world’s population still unbanked and 3.5 billion owning at least one smartphone, there are 1.8 billion smartphone users who do not use a credit or debit card. Importantly, for as long as these consumers remain unbanked, they are owned by non-financial service providers, such as telcos, social media companies, and mobile phone manufacturers.
The emergence of smartphones as a mobile POS device (mPOS) will be especially attractive as merchants and consumers move away from cash. By removing the need for expensive POS hardware and licences, and the ease with which merchants can set up on their own Android or iOS device, the shift to mPOS is inexorable.
PCI Security Standards Council (payment card industry body) and EMVCo (manages EMV card specifications) have “tap to phone” strategies. And WorldPay, Samsung and numerous banks in Europe, Australia and North America have already commenced mPOS pilot projects.
Financial institutions that create intuitive, easy-to-use mobile services, which utilise existing customer data with frictionless digital on-boarding, will be the winners. Whereas, financial institutions who are looking for a slower transition to digital risk being overtaken by fintechs and mobile carriers who have the technology and capability to offer financial services.
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Reducing the risk
IssueNFC contactless (e.g. EMV cards, Apple Pay, tap-to-phone) Bluechain R2P
Merchant supplies a contactless invoice to customer
–Entering an email is time-consuming with first time and one-time customers. Tendency to rely on paper.
+Customer can receive invoice by proximity, email, phone number without registering with merchant.
Low-value transaction + No PIN required and payment authorisation is contact-free. +
Authorisation level is set in-app by customer. When required, customer authorises payment on their own mobile device.
Large transaction amount –Customer is required to enter PIN on merchant’s terminal, which needs to be cleaned after each customer.
+Customer uses their own phone to authorise the transaction and never touches a common surface.
Merchant supplies contactless receipt to customer –
Receipt is often printed by terminal. Digital receipt is often not available. When available, entering an email is time-consuming with first time and one-time customers.
+Receipt is part of the transaction and is stored on the customers device.
Cash on delivery required ±If mPOS not available, delivery driver needs to carry an expensive POS terminal.
+mPOS transaction with standard smartphones for delivery driver and customer.
The COVID-19 pandemic is “highlighting the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats.”
Bank of International Settlements
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The Bank of International Settlements (BIS) states that the COVID-19 pandemic is “highlighting the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats."
Although online payments are not susceptible to the threat of viral transmission, the delivery of goods and COD payments still pose risks to consumers. But the transactions that pose the greatest risk of transmission are in-store. Payment platforms of the future need to support regulatory and security requirements for the payer to validate their identity or right to use a payment method. They need to include the ability to issue an invoice and a receipt. And they need to be truly contactless.
This might seem like an impossible list of requirements, but the solutions are available. For example, a consumer can enter a PIN into their own device to avoid contact with a payment terminal. But even that’s “old school”. Most smartphones now support some form of biometrics, which are arguably far more secure than a PIN. Using fingerprint or face recognition to complete a payment process from the payer’s device is faster, easier, more secure and completely contactless.
Solving the issues of invoices and receipts is a little more difficult, but again can be addressed using technology that is available today, such as Bluechain’s Request to Pay (R2P) technology.
Existing NFC and card-based technologies use a simple, one-way communication protocol to identify the cardholder and secure the payment. Unlike these traditional technologies, Bluechain R2P uses intelligent, two-way communication between the parties, which is inherently more secure and, importantly, enables the merchant to transmit a digital invoice before the payment is made and a digital receipt on completion of the transaction.
The reality is that any payment method that requires the consumer to enter a PIN or to touch a device that is not their own personal device or requires a merchant to handle a printed invoice or receipt is fundamentally unsafe in the age of coronavirus.
Bluechain R2P is a truly contactless digital payment platform. Not only does it address the requirements for payments that avoid the spread of communicable diseases, but it also allows governments and national domestic switches to implement an inclusive, mobile-based digital payment platform that supports all payment channels.
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ReferencesAuer, R, Cornelli, G & Frost J 2020, COVID-19, cash, and the future of payments, Bank for International Settlements (BIS), BIS Bulletin No.3, April 2020.
Angelakis, E, EI Azhar, Bibi, F, Yasir, M, Al-Ghamdi, A, Ashshi, A Elshemi, A & Raoult, D 2014, “Paper money and coins as potential vectors of transmissible disease”, Future microbiology, February 2014, pp 249–61.
Erban, B 2020, “Payments in the Age of Coronavirus”, Central Banks Payments News, March 2020.
Bank of England 2020, “Banknote Frequently Asked Questions (FAQs)”, <https://www.bankofengland.co.uk/faq>, accessed 15 March.
Lopez, G, Gerba, C, Tamimi, A, Kitajima, M, Maxwell, S & Rose, J 2011, “Transfer efficiency of bacteria and viruses from porous and nonporous fomites to fingers under different relative humidity conditions”, Applied Environmental Microbiology, vol 79, no 18, pp 5728–34.
Thomas Y, Vogel, G, Wunderli, W, Suter, P, Witschi, M, Koch, D, Tapparel, C & Kaiser, L 2008, “Survival of influenza virus on banknotes”, Applied and environmental microbiology, May 2008, pp 3002–3007.
van Doremalen, N, Bushmaker, T, Morris, D, Holbrook, M, Gamble, A, Williamson, B, Tamin, A, Harcourt, J Thornburg, N, Gerber, S, Lloyd-Smith, J, de Wit, E & Munster, V 2020, “Aerosol and surface stability of SARS- CoV-2 as compared with SARS-CoV-1”, New England Journal of Medicine, March 2020.
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