In a 2013 pilot study in the US, US$1 bills obtained from a New York City bank were swabbed and tested using shotgun metagenomic sequencing to profile the communities found on their surface. Another goal was to test whether viable microbes could be recovered from bills.
Shotgun metagenomics identified eukaryotes as the most abundant sequences on money, followed by bacteria, viruses and archaea. The currency investigated harboured a diverse microbial population, including human skin and oral commensals, such as Propionibacterium acnes, Staphylococcus epidermidis and Micrococcus luteus.
At a wet market, I noticed a store with two buckets of monies – one for coins and another for bills. Customers are asked to drop their payment into the appropriate bucket and pick their change accordingly.
Given the paranoia around the spread of COVID-19, it is natural for people to want to take additional measures to protect themselves. And washing cash you get from strangers is not exactly practical at this point.
Digital payments offer the potential to mitigate against the risk of contagion spread via cash changing hands.
By the numbers
In a story on Finews.asia, HSBC’s managing director and head of PayMe Kerry Wong Chu Po-yin acknowledged an above-average growth in registration and more active usage of its PayMe app during the COVID-19 pandemic.
According to SCMP, the Hong Kong Monetary Authority noted a 60% rise in transactions via its digital payment system in the first quarter of 2020. Irfan A. Qureshi, an economist attached to ADB’s Economic Research and Regional Cooperation Department, recounts how digital payments and e-commerce took off in China in the aftermath of the 2003 Severe Acute Respiratory Syndrome epidemic. He predicts COVID-19 will have a similar effect.
FutureCIO spoke to Tristan Chiappini, vice president, head of Partnerships (APAC) at PPRO on the evolution of payments, and how start-ups like PPRO must evolve and differentiate themselves to find relevance in a rapidly crowded payments landscape.
What is PPRO?
Tristan Chiappini: PPRO is a backend provider of alternative payment methods. Whether online or instore, shoppers make millions of purchases every day using digital forms of payments. All of these local payment methods are dominant within those markets, accepting these forms of local payment are incredibly complex.
What PPRO does is it removes the complexity. It works with companies that provide the platforms that facilitate digital payments, we work directly with the local payment methods themselves. Here in Singapore, GrabPay, Nets or PayNow.
We aggregate these methods onto our single platform so that payments provider which is servicing online merchants or e-commerce merchants – it allows them to remove the complexity of offering those local payment methods. We’re a regulated company out of London and Luxembourg – we have offices and people in multiple markets in the US, across Europe, in China and here in APAC
Does having an aggregator introduce additional cost either for the merchant or the customers? Or even the consumer?
Tristan Chiappini: When it comes to payments people are cost-sensitive. When I say aggregator – we are not a network of networks. We don’t look to work with other aggregators to increase our offering. We do direct integrations and have that relationship with the underlying local payment methods themselves.
The reasons for this is that the large merchants of the world require customisations that would not be possible without those direct relationships. So then we pass on the scale that we can achieve with more than 170 PSPs on our network, PSPs being payments service providers on our network.
We’re able to aggregate all of the volumes globally to drive the best possible deal with the local payment method and at that scale, we’re able to offer the most cost-effective solution to those underlying customers.
How has COVID-19 impacted payments?
Tristan Chiappini: Social distancing and lockdown have had a significant impact on the way people transact in financial terms. So I’ll speak about two areas where we’ve noticed the greatest impact when it comes to COVID.
Firstly, the acceleration of cashless payments. Our CEO has long said cash is dead and if you look here in Singapore, more people buy their groceries and get food delivery using apps. The volume of cashless transactions has nearly doubled in the first 3 months of this year compared to last year. But at the same time, the volume of cash withdrawals and deposits has fallen by 11%. So you are seeing changes In the way people transact.
There’s also been a huge growth in e-commerce. Countries are in different stages of opening up and loosening the lockdown restrictions and its been a bit stop-start with countries having to reimplement since the pandemic situation continues to unfold.
So there’s an argument to be made that the shift from in-store to online will continue to grow at its current rate for some time. This means that the adoption of digital payments will continue to grow for some time.
PPRO’s recent COVID report revealed a couple of surprises. The one I always laugh about is that we’ve seen an increase in the following areas – there’s a 3 x increase in women’s clothing, a 3 x increase in food and beverage and healthcare.
And as people continue to work from home e-commerce will play a vital role in providing the safest and easiest way for people to access what they need. So its no surprise we’re seeing transaction volumes flourish and we believe that this will continue for a long time to come.
If we look at the b2b side of payments do you see any trends in infrastructure, governance and regulation?
Tristan Chiappini: From a b2b point of view, b2b payments will increasingly form a big part of any governments digitalisation strategy, particularly for SMEs. Here in Singapore, the government’s PSG is providing subsidies of up to 80% for SMEs that adopt digital solutions.
The digital resilience bonus has made e-invoicing a condition of payouts. With this in mind, it’s a significant trend in b2b payments in the area of e-Invoicing. Lots of companies big and small are moving this way instead of traditional paper invoices.
In South Korea, there will be a national e-invoice system by 2022. The driving factor behind this is that it helps businesses reduce costs, shorten payment cycles, improve cash flow and from a regulatory perspective it reduces the risk of tax fraud.
You can see why businesses are being pushed toward this – it’s a win-win situation.
What has worked so far for payment platforms and what needs fine-tuning?
Tristan Chiappini: In terms of what needs to change, we can expect to see the payment ecosystem become more democratic over time. There will be more alternative payment methods and locally preferred payment methods.
These will become more readily acceptable across merchants. This is happening because of the growth in e-commerce. Merchants have adopted e-commerce platforms and consumers have shown less tolerance toward sites that are not easy to use or sites that don’t let them pay with their preferred payment methods.
Ultimately payment methods vary from country to country.
Blockchain and crypto – will they impact payments?
Tristan Chiappini: I often refer to blockchain and crypto as the solution looking for a problem. That is essentially another form of payment if you are talking about crypto – and we can accept crypto on our PPRO platform. So that’s the cryptocurrency itself, in terms of the infrastructure itself – it can create massive efficiencies and speed up the process of making payments.
You see a lot of banks experimenting with blockchain technology but in terms of changes, crypto is not mainstream yet and the backend infrastructure will probably be used in the future, but no one has a truly good understanding of how it can be used now in payments.
Challenges – what’s PPRO’s biggest challenge?
Tristan Chiappini: It is our business model to remove the complexity in facilitating payments in 100 markets around the world. This is a continual process to remain on top of up and coming payment methods.
We see around 450 relevant payment methods around the world and we aim to ensure we have coverage of these by 2023 which presents challenges in itself with reforms of payments and new wallets springing up all the time.
Our main challenge is having these integrations and in a timely way.
What is your advice to customers as they look to tap the growing e-commerce trend?
Tristan Chiappini: Today a lot of merchants have already shifted their operations to online, to cater to consumer preferences. We’ve seen shops open but consumers remain cautious about resuming pre-COVID-19 shopping habits.
We expect new users and others to continue using digital payments and e-commerce. In terms of advice to those merchants and their suppliers, I think the pandemic will encourage them to adopt more digital solutions to maintain their competitive advantage.
To survive they need to strengthen the user experience and analyse their cart abandonment rate, they should look at expanding to new markets too. These insights are all in our COVID-19 Whitepaper, but essentially, it’s all about ease and convenience for the consumer. And any business that can do this and give the consumer what they want will be in a good position to sustain their growth beyond COVID-19.
I advise merchants of all sizes to partner and collaborate with others, they can’t do it alone, they need to leverage the expertise of their PSP’s to ensure they are competitive and that they are capturing the opportunities the explosion in e-commerce has given them.
What is your expectation when it comes to considerations merchants need to make concerning payments over the years to come?
Tristan Chiappini: Because of the rise in e-commerce a lot more platforms and businesses will digitalise. This won’t stop. It is being driven by consumers who are shopping online more than they have done previously – this won’t change.
Once someone starts experiencing the e-commerce world with more variety and financial savings to be made, they will continue. For merchants to continue to take advantage of this, they will need to ensure they make good customer experiences and cater to all payment methods for people who are shopping cross-border.
Do you see a future for all these different payment companies?
Tristan Chiappini: There’s two categories - Fintechs that provide payment services to merchants and those that are consumer-focused. In terms of the Fintechs – they tend to cater to some sort of niche.
And given that e-commerce is rising at such a rapid rate, and everything is going up, for the immediate future I don’t see a big risk or any downside to moving into e-commerce focused business.
But consolidation will take into account the eating up over time of those smaller businesses that provide a good service in some niche. In terms of e-wallets and loyalty providers – I see them as catering to niche markets too. If you go to Malaysia there are 37 e-wallets, not all will survive.
You mentioned regulation, part of the reason they won’t survive is that new regulations make it hard for all business models to fit these. From a wallet point of view, there will be churn. New e-wallets will start and close or be consumed by others.
