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What could a deep transformation of payments look like?

What could a deep transformation of payments look like?

David Daly

Deal Assurance Manager

In one of my previous posts, I talked about how regulation can be one driver for organisations to use digital technology to transform their business models, fundamentally changing how they create value.

This highlights an important point about digital transformation: technology is often only a small part of the story. Without the right changes in strategy, business models, customer experience, leadership, organisation structure, resourcing, and innovation, digital transformation can become little more than the creation of a thin digital veneer. This is something I have been aware of for some time, but until I co-authored “Deliberately Digital: Rewriting Enterprise DNA for Enduring Success”, I had not appreciated just how true it is.

Let’s take an example from our industry. Most would agree that how we complete transactions to pay for goods and services has transformed beyond recognition over the last 30 years. I still remember, in the 1980s, my parents going into the bank before we went on holiday to withdraw £100 in cash, which would be our entire method of paying for things whilst we were away. These days my wallet (still physical rather than virtual) rarely contains more than £10 in cash, and I would never make a special trip to the bank to withdraw hard currency before a trip away!

And yet, despite these changes, most electronic payment mechanisms are still mimicking the physical exchange of money that has existed for seven thousand years: a person presents something (a card, a phone, etc.) at the point-of-sale to get access to the goods or services they wish to consume. The money transfer that is being represented digitally, can still be converted into the physical world as paper (or plastic) bank notes and metal coins. Even Bitcoins can still be exchanged for a material currency.

It may seem fanciful today, but we can imagine a time when some currencies will be digital-only, with no possibility for conversion to cash. We can expect that someday, payments will be made autonomously on our behalf, triggered either by detecting what products or services we are consuming, or by autonomous AI bots negotiating and paying on our behalf. We can even foresee a growth in the sharing-economy, with a possible return to the pre-cash concept of peer-to-peer bartering, but enabled at huge scale by digital technology.

Of course, these types of changes will raise significant ethical challenges and their realisation is likely to be tempered by existing and future regulation. In the book we provide examples of where “regulatory sandboxes” have been created in other industries: temporary targeted relaxation of regulations to enable new, innovative use-cases to be tested. I would be very surprised if we do not see such sandboxes appearing to support further innovation in how we trade and pay for goods and services in the future. Whilst recognising that we have seen huge changes in payments over the last 30 years, my view is that “we ain’t seen nothin’ yet”: the next 10 years will see even faster, more radical changes than we have witnessed so far.