EPayments Project Final Report of Initial Project Work rnib innovation Unit
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- 4.2.2 The role of Visa and MasterCard
- 4.2.3 The UK banking sector and economic climate
- 4.2.4 Incentives
- 4.3.1 Credit
- 4.3.3 Loyalty Cards
- 4.3.4 Ageing population
- 4.3.5 Environmental impact
4.2 Economic4.2.1 The UK Payment SectorStandards for the payment sector in the UK are established and controlled by the UK Payments Council. The Payments Council are responsible for payment systems such as CHAPS, BACS and Faster Payments. Their core objectives are to:
They are responsible for the development of the National Payments Plan (published in May 2008) which included a commitment for them to monitor the development of contactless and prepaid card markets. The UK Payments Council decided in December 2009 that the cheque payment method should be withdrawn from the UK economy. This decision was made based on the decline in use of cheques as new payment methods have become more established, combined with the high cost of processing cheque payments (estimated to be 4 times the cost for electronic payments like direct debits). The target date for the withdrawal of cheques was set at 2018, however, there has been a great deal of pressure on The Payments Council to move the date back to allow time to develop and roll-out suitable alternatives. Charities supporting older people, as well as small businesses are particularly concerned about the lack of realistic alternatives that people are comfortable using. Key findings of Payments Council research16:
4.2.2 The role of Visa and MasterCardThe payments sector is heavily influenced by two major infrastructure providers. Visa and MasterCard operate the systems that enable payments to be processed securely. As such, any changes to the services will have to work with the infrastructure imposed by Visa and MasterCard. Since they are international organisations, both UK Payments Council and RNIB are likely to find it difficult to engage with and influence them. It is essential that the project has an understanding of what can or cannot be changed to improve accessibility. Visa are also the payment provider for the 2012 Olympic and Paralympic Games. The only payments accepted at the Games will be via Visa cards (credit or debit) or cash. 4.2.3 The UK banking sector and economic climateAnother significant factor will be the position of the UK banking sector. The recent financial disruption in the UK has been attributed to the banking sector's seemingly irresponsible decisions about lending. As a result, the sector is facing very heavy scrutiny and the possibility of fines and other restrictions are being discussed. This could mean that banks are very reluctant to get involved in innovative projects that can be costly and not yield significant returns. On the other hand, they will also be keen to improve their public image so working with charities to improve services for marginalised groups of society is likely to be appealing. Following recent discussions with RBS, Santander and Lloyds TSB there seems to be a lot of interest in promoting financial capability. Another key factor is the current financial climate in the UK. With record levels of government debt, high unemployment and much tighter controls over credit, all areas of the economy are struggling. This is likely to make it very difficult for organisations to invest in new systems. Innovative systems are often costly and unpredictable. In order to effect change, we are likely to need a very robust business case for any pilot systems. 4.2.4 IncentivesThere seems to be little information about economic advantages to the majority of people paying bills using electronic systems. The main benefits for individuals include: a) Money is transferred very quickly, allowing for easier management of finances b) An account can be created making it more convenient for the payment of goods and services when returning to the same vendor multiple times (the customer only needs to enter their details once) c) Most state benefits in the UK are paid by direct credit transfers, making the money available to the recipient more quickly The main driver for the development of e-payment systems seems to be with benefits to businesses. "Businesses paying bills electronically using ePayment methods benefit from lower overall payment costs, better payment-timing predictability, better cash management and greater bill payment efficiency. Vendors getting paid via ePayment methods benefit from faster access to funds, reduced collections and remittance processing costs, reduced merchant fees for accepting credit card payments, and fewer trips to the bank to deposit checks." With the opportunity to reduce costs and improve payment efficiency, most businesses will be keen to pursue ePayment methods. The payments industry will need the infrastructure to support business to business (B2B) payments, allowing for further cost reductions if individuals can be encouraged to make greater use of these payment systems. 4.3 SocialElectronic payment systems allow for much greater traceability. Whilst this is designed to reduce fraud, some consumers will still not feel comfortable about the security of their personal information. Complex fraud prevention systems can be difficult for users, with numerous passwords having to be remembered or stored somewhere. Mobile payment systems could make these processes a lot easier - the user enters their mobile number to a website, receives a text from the vendor and then simply confirms that the transaction is genuine by texting a reply (as in Paymo, see 4.1.4.3). The payment sector is aware that education programmes will be essential to raise consumer confidence and these will be taking place. 4.3.1 CreditAs the UK and world economies struggle to recover from the recent financial crisis, credit is becoming more difficult to obtain. There is a strong link between credit and a person's ability to shop freely as without credit one subconsciously limits one's spending to the money in one's pockets or bank accounts17. The process of applying for credit can be difficult to access, with online applications complicated and confusing to complete. Any form of credit relies heavily on demonstrating to the creditor that the applicant has the ability to repay any money borrowed. This is normally done by providing evidence of employment. Current statistics indicate that 66% of blind and partially sighted people of working age are unemployed18. Unemployed people with sight loss are therefore left with limited options; either take out a credit card with a higher rate of interest, or avoid using credit at all. If they take out a credit card with a higher interest rate, they are likely to find it difficult to maintain repayments causing further debt problems. Not using credit at all represents a difference in someone's ability to shop when compared with the rest of the population and further isolating. 4.3.2 FraudThere is an argument that the introduction of ePayment systems will have a dramatic impact on black market activity which relies heavily on cash transactions. Whilst cash is expected to remain the main method of payment, any reduction in its use is expected to have a significant effect on the black market economy19. There is anecdotal evidence of significant concerns over fraud and security when using electronic payment systems. However, the alternatives that people use are often less than ideal, with friends, relatives and even strangers being asked to help people manage their finances. The main barriers identified by RNIB research are around the complexity of the systems being used and a lack of awareness of what is available20. 4.3.3 Loyalty CardsThese work in a number of ways, but essentially offer the consumer a discount based on repeat business with the same retailer. Issues with these systems include the use of self service kiosks (as in the Boots Advantage Card21 scheme) with accessibility concerns as covered in 3.1.3 of this report and the complexity of way the schemes operate. Loyalty card schemes often use misleading names for the reward points, such as Air Miles22 which do not actually relate to the distance they can be used to travel. This is likely to be confusing and frustrating for all customers, but those with sight loss are likely to have more difficulty reading the small print that explains how these systems work. Having a complicated system for claiming the rewards can mean that the consumer either forgets to claim them or finds the process too long-winded and gives up. These schemes offer significant benefits for the retailer (in terms of gathering data on habits and encouraging repeat business) and rely on the consumer's desire to find a bargain. However, they often give very little actual benefit to the consumer unless the person fully understands how to take advantage of what is being offered. 4.3.4 Ageing populationBy 2034, 23 per cent of the population is projected to be aged 65 and over compared to 18 per cent aged under 1623. The ageing population in the UK is likely to drive demand for products to be designed to cater for people with age related impairments, including sight loss. Older age groups are generally recognised as a significant customer group. The retail market for the over 65's was estimated to be worth £37 billion in 2007 with an expectation that it would rise to £64 billion by 2017 (according to a study by Verdict Research in 2007). 4.3.5 Environmental impactThere is a strong drive to reduce the environmental impact of all of our activities. The creation of a so-called "paperless society" is a significant part of the plans to make this possible. The Labour government while in power outlined plans for many public services to be delivered by digital means, resulting in a reduction in the use of paper and wood, but perhaps more importantly real financial benefits24. This trend is further reinforced through the Conservative pre-election pledge to introduce high-speed broadband throughout the UK and broader global initiatives25. 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