Data is driving the cashless economy – and that’s big news for all of us


A recent report from Fjord touched upon the future of money and how the role it plays in our lives is changing at an incredible pace. At the centre of this movement is the prospect of a cashless economy.


We have seen a squeezing of cash throughout this recent COVID-19 crisis and it is right that we question the role cash has to play in our society. And, in fact, ‘cash’ and the value and purpose of money is also changing as with cashless payments at scale comes data which has inherent value in itself if used correctly. 


As Fjord sets out:


“Now, in a new wave of change, it’s evolving towards invisible value exchange ecosystems powered by digital – a fundamental shift that enables us to do more than just buy things and opens up a host of new product and service opportunities. In this evolution, money can carry other information with it and represent multiple forms of value that aren’t national currencies. At the same time, banks (old and new) are innovating the ways we think about our personal finances not only now, but in our near future, using Artificial Intelligence.”


If we break down what the cashless economy is, and how it is being driven and shaped by data, ML and AI, we see how it can benefit all of us. And that’s an exciting prospect.


Cashless is now king


Cash dates back to about 3,000 BC when the Mesopotamians began trading silver, bronze or copper for barley. And for 5,000 years, coins and notes remained the dominant form of money. Right up until the 1980s, cash and a small number of credit cards covered all retail banking requirements. Today, they remain popular but their dominance is threatened by alternatives. 


Since the rise of digitisation, the number of payment methods has increased and more and more payments have been happening online. It’s staggering to consider the proportion of banking services that are now being carried out with cash playing no part in the process. 


For example, in China, mobile payments are now so common that taxi drivers don’t accept anything else. In Europe, 1% of Sweden’s GDP circulates as cash and, in the UK, the collapse of cash saw 11.5 billion fewer cash transactions in 2018 than in 2008. Millions of ‘unbanked’ people in developing countries are now being reached by technological solutions


As COVID-19 raises people’s fears about hygiene and forces people to work and shop from home, a cashless economy gets closer. This means more electronic payments and more data. 


We have been moving toward a cashless economy for some time but the recent acceleration and technological innovation is an exciting one for the data industry. 


Technology meets banking


Digitisation gave birth to a range of new payments providers, like PayPal. But tech entrants (such as Google, Apple and Facebook) are joining the sector as they see the value of what sits beneath the payments layer – and that value is derived from the data that’s gathered from the increasingly high proportion of transactions that are being made electronically. 


Apple launched Apple Card in 2019 as a credit card with accompanying software that connects to an iPhone user’s Wallet app and can pop up as a default option whenever they use Apple Pay. Facebook is also working on a global cryptocurrency, Libra, and has launched Facebook Pay, offering their 2.6 billion users banking services.  


And the reason these tech behemoths can begin to roll out banking solutions is that they already own so much of our data. Via our phones and social media accounts, we’ve been providing them with this intel for years, and now they’re looking to use it. 


The vitality of data 


The fact that technology companies are queuing up to challenge banking providers proves the incredible power of data. And that power is only just beginning to be harnessed correctly. 


So much of our banking life takes place online, and new data is being produced every day. It is now up to providers – be they banks or tech companies – to make the most of it. The depth of data can help them better understand customers, enable retention strategies, cross-sell products and rewards whilst also being a valuable tool in fighting financial crime and fraud. 


These benefits are being fast-tracked due to regulatory changes (e.g. Open Banking and ISO20022) that are only going to help companies to provide banking solutions. 


AI and ML in action 


At Mudano, we use ML and data management expertise to help companies to get the most out of this payment data. 


We do this by consolidating multiple data sources into a payments data layer. We then assess this layer and the payments data that a company already has, anonymise it and use ML to derive new insights from this data. As clients gain value from each set of insights, the next step towards an analytics capability is to incorporate additional datasets.


We then move on from anonymised data and our ML offering shows clients bespoke customer insights, finding ways that solutions can be matched to customer needs. As richer datasets become available, through Open Banking and ISO20022, we can incorporate these, too. 


As datasets become more enriched, the data becomes more valuable in terms of the enhanced experience you can offer to your customer and the improved experience across your business value chain. 


An evolving industry


Whether working with a company like ourselves or looking to optimise their approach alone, payments providers need to adjust their business models, optimising for the cashless economy, which is only going to become more entrenched in all of our lives. 


It is a case at the moment of ‘there is a lot of data’ but we don’t know what to do with it. This needs solving quickly in order to be able to push forward. 


The new paradigm we’re entering offers opportunities for forward-thinking companies who know that ML and AI will help them get the most from their data, allowing them to better understand customers, fostering loyalty and trust. The cashless economy – and the data it creates – is to be embraced and companies brave enough to truly understand and engage with it will benefit.

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