In the 1970s, when a timber ship pulled into the London docks, it took 108 guys some five days to unload it. That’s 540 man days. By the turn of the century, when a timber ship docked into the same wharfs in the same city, it took eight guys one day to unload it. That’s eight man days.
This journey of ‘containerisation’ is evidenced in Malta too. While shipping and maritime activities were a mainstay of the Maltese economy 40 years ago, today, such value-added knowledge services as financial services, IT and other professional activities play an equally vital role in the national GDP.
The catalyst for this transformation in just a few decades is no doubt the adoption of automation, backed by technology – technologies that brought on efficiency and offered convenience, technologies that streamlined processes and enabled greater control, and, yes, technologies that disrupted one sector but spawned other, thriving ones.
If change is the only constant in the universe, then this shift towards the digital world is now irreversible. By applying this premise on the transition from cash to cashless, one can see clearly that cashless is the future.
However, is ditching currency really just about ‘putting it on plastic’ and ‘no more counting the change’?
On a consumer level, cashless means a lot of different things to different people: It can provide an unfettered experience on daily-life transactions, it can switch seamlessly between online and offline, it can represent prestige, it can be used to advance book a hotel room.
If change is the only constant in the universe, then this shift towards the digital world is now irreversible
On an enterprise level, the bona fides of cashless are even more salient. By adopting cashless measures, businesses reduce costs and improve efficiency, as well as respond to consumer expectations. They of course also reduce the environmental footprint. This all adds up – the overall economic cost of counting, storing, transporting as well maintaining the cash infrastructure – are estimated at around 0.5 to one per cent of GDP. This is not an insignificant sum for economies like ours, which currently tops the ranks in the European Union in use of cash as a form of payment.
According to media reports citing the Central Bank of Malta, cash drives a massive 88 per cent of transactions in this country. By contrast, some societies such as Sweden are considering doing away with cash altogether not in 20 years not in 10 years, but possibly in five years’ time.
Financial institutions, stakeholders and other social partners need to join together to help consumers see the benefits of the move away from cash. In my point of view, it is not just consumers and businesses that benefit but the economy as a whole – one study by Moody’s, for instance, showed that developed countries that shift to more electronic means of payment stand to boost their GDP by 0.3 per cent.
Banks can also invest in new payment tools that offer safety, security, convenience, and control, attributes that were once synonymous with cash. The HSBC Group is working with partners on numerous innovations that will enable our clients to take full advantage of developments in the digital economy and is investing over $2 billion in digital transformation between 2015 and the end of 2020. Our partnerships not only focus on the end-user experience but also look more fundamentally at new means of settlement and currency issuance to improve efficiencies at a wholesale level and create greater transparency for the industry as a whole.
So taken in, the round of moving to a cashless society seems to have merit. A clear example for Malta would be in the area of tourism. Three out of the top five countries visiting Malta in 2016 (UK, France and the Nordics) are seeing increasing usage of electronic payments versus cash; combined they make up 40 per cent of all visitors to Malta. If Maltese businesses can provide familiar ways to payments, they facilitate an opportunity to make a sale that otherwise might not have happened.
Given the ongoing expansion of the Maltese economy and news about the use of technology in banking such as artificial intelligence and Blockchain, these are exciting times for Malta. It is a fact that Malta has been successful in moving from the 1970s and into the 21st century. Now it is time for us to move from cash and cheque towards electronic payments.
Steve Zarb is Head of Global Liquidity and Cash Management at HSBC Bank Malta plc.