What is the price of a cashless society?
Convenience always comes at a cost or, at least, a compromise. As the world turns digital we’re running a surprising bill and someone has to pay.
The credit card vendor formerly known as Virgin Money has rebranded as SPOT Money and is now an all singing, all dancing financial service offering.
At its core there’s what is effectively an eWallet and a QR code scanning payment app that combines the powers of MasterPass and WiCode. Payment options will be expanded to NFC tap-to-pay in the near future with compatible Android phones.
Reports about this move started in 2019 and Absa officially cut ties with the Virgin Money credit card at the close of 2020 with cards ceasing to function at the stroke of midnight on New Year’s Eve. This is one of many small steps the Virgin Group is taking to simultaneously move into the fintech space and divest in its South African operations.
Then there’s the added benefits. No, not the rewards you get from shopping at Spot partners. The service will happily act as a broker for loan applications or insurance products. There’s a brief explanation on the website (linked a couple paragraphs earlier) that says SPOT earns a finder’s fee when you agree to terms.
This product joins TymeBank and Bank Zero in a crusade to offer financial services with simplified sign-ups, no monthly fees and a strong focus on electronic transactions by leveraging smartphone technology and the app ecosystem. The real money is made through the interest that these banks earn while holding your money.
It’s a similar idea that drove Starbucks into one of the the biggest banks in the world: you load money onto a Starbucks card/app to buy coffee more conveniently, but you can’t withdraw the cash and can only buy coffee. That leaves Starbucks with a stack of capital to invest how it sees fit because the credit transaction is paid in coffee, not cash.
You deposit cash into your account for the convenience of not paying monthly fees, using smart digital payment methods and, in the case of SPOT, peer-to-peer money transfer. You then pay small fees on “cash outs” and transactions beyond a certain threshold.
More traditional transaction services vendor and the original fintech peddler MasterCard will soon be welcoming cryptocurrency into its payment options. This move comes as no surprise since crypto is just another way to bank wealth, so naturally MasterCard has been sniffing around for a simple way to throw itself onto the blockchain.
That announcement and Tesla’s $1,5-billion Bitcoin purchase (currency, not the, erm… company?) should drive the price up and make Bitcoin traders – sorry, I know dangerously little about crypto and investing – very rich. It will unfortunately also inspire a boom in Bitcoin mining activity.
Mining Bitcoin consumes a lot of energy and with the tide of extra interest in crypto lifting the entire market, mining activity for other cryptocurrencies will increase as well. That means crypto miners here in Mzansi will be drawing even more electricity from the already shaky national grid, which means more coal and diesel is burnt to cope with the demands.
A recent study revealed that the pollution from fossil fuel consumption is the root cause of 1-in-5 deaths worldwide. Increased energy use only pumps more deadly clouds into the sky.
Mass adoption of electronic/digital banking means that smartphones need to be charged more frequently to meet the demands of the lifestyle change, and vendors need to devote more resources to powering additional devices to manage the electronic transactions or digital side of the business.
My read: While I’m an advocate for the convenience of cashless transactions and a dedicated Samsung Pay user, the reality of not having change to toss to a car guard or homeless person is not lost on me, especially during this pandemic.
It’s far easier for the NSRI or Medecins Sans Frontíères stands in shopping malls to coax a spare R20 out of your pocket than to convince you to do an electronic transaction. Those organisations also cannot justify the extra spend on Yoco POS machines or SnapScan licenses because the return on investment isn’t there.
Removing cash from society cuts off income for many people and it’s the homeless and informal vendors (fruit and flower sellers) who lose potential customers because of it. Ironically, the people who lose the most are the target demographic for the growth and long term sustainability of these new digital financial services.
Getting more people into the banking economy is a nett good for society, but we should also offer solutions for the ultimate losers in this incessant march to digital transformation.
Something you should know about:
Audi launched the e-Tron GT this week and it’s pretty much a rebadged Porsche Taycan with Ingolstadt styling cues. I’m hypercritical of the VW group’s forays into the electric vehicle market because as the world’s biggest car manufacturer I expect them to be leaders in the pursuit of a better future and the long term survival of the auto industry.
Instead the cars that have been pushed out from the group have been luxury vehicles that do nothing more than pay lip service to a promised move away from the internal combustion engine.
While I understand the labour challenges the company faces in its native Germany, the people’s car manufacturer should be making moves to get the people into better alternatives.
A network effect of a market shift to EVs will mean mass unemployment because electric cars use very little consumable fluids, are less mechanically intricate with fewer points of failure and require less mechanic intervention. Entire industries are at risk of disruption and it probably isn’t in the world’s biggest carmaker’s best interest to dramatically reduce its potential income from internal combustion engine maintenance.
There are many forces at play slowing the progress and mass adoption of EVs.
A number that may only interest me:
The percentage of the South African population that will have died as a result of COVID-19 when we celebrate the anniversary of our country’s first documented infection (this assumes that we lose lives to this disease at the current rate of 350 a day). More than half of the over 47 000 deaths to date were recorded during the second wave.
Testing, contact tracing and community screening/education programmes remain a challenge in South Africa with strong resistance to participation in the electronic measures like downloading and using the COVID Alert SA app that is zero rated on all networks. Alongside mask wearing, physical distancing and regular hand washing, contact tracing and widespread testing is the only way we can get ahead of the pandemic.
A quote that seemed profound when I read/heard it:
“If we ever had to pay her back, the whole earth would be broke…”
– Chance the Rapper
Context: It’s the final line of his guest verse on the new Vic Mensa track Shelter which also features vocals and production by Wyclef Jean. The song offers some scathing commentary on the US government response to the multitude of challenges facing Black and Hispanic communities during this pandemic and also highlights the wrongful arrest of Julius Jones.