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Is The Current Banking/Online Payment Infrastructure Fit for Purpose?

Everyone makes payments. Thanks to online banking, it is now so much easier to transfer money from one place to another. But while cash payments make sense to regular consumers, they don’t always add up for businesses.

In recent years, we’ve seen a number of service providers enter the frame and improve the ways in which cash is transacted. Stripe is among a line of groups that have developed a new standard in online payments. Their technology offers an easy way for money to be passed from consumer to business and vice versa.

Cash is effective at being able to transact money when the volume is at a low level. As that volume increases (e.g. when a business needs to send multiple transactions) the problems start to emerge.


Current issues

Businesses have flocked to services like Stripe and PayPal as a way of transferring money. Each service applies a charge to the transaction, which varies depending on where it’s sent.

One transaction only costs a small amount to process, and that keeps businesses happy. From their position, if it makes sense to incur a small charge to process a cash payment, it makes sense to incur it thousands of times. Of course, many forget this is happening and lose track of the total expense.

Cash payments are also reliant on key factors, like the receiving party having a bank account. Over 1.5 million people in Britain are “unbanked”, according to recent figures, contributing to a global tally of two billion. That leaves nearly one third of the entire population without a bank account.

Online payments are cumbersome, at least for companies that have to send hundreds over the course of a month. Each one requires different information from a different payee. They need up-to-date account details to function and companies have to wait on their customers to provide them.

Cash takes days to find its way into the recipient’s account, leaving them in limbo until their payment arrives. Anyone that has transacted cash knows the impact this has on customer service teams. In every FAQ field, you’ll find notes about the time it takes to process a payment. Yet, people still contact the business for reassurance.

Finally, given the targeting of online payments by cyber criminals, it’s hard to present cash as the most secure method of transacting value.

We’ll opine that the current era is fit for a certain purpose. That is, the transacting of large amounts to a small volume of people. With the emphasis now firmly on transferring small payments at a high volume, the situation has changed, and the infrastructure needs to change with it.

E-gifting the value

Businesses are starting to look into other ways of transacting money and there are a few strong routes to go down.

Let’s take the example of e-gift cards. If we told you in the early 2000s that gift cards would represent an effective way of storing value, you probably wouldn’t have believed us.

The last 10 years have brought plenty of change around this space. E-gifting in its current guise can power cheap, fast disbursements of money to any customer. All it requires is an email address and the payment can be made.

Simple technology takes the lead here. E-gifting platforms offer a way of sending small tokens out to users, who can choose where they’re redeemed. These solutions are packed with hundreds of potential retailers to select from. This allows the recipient to get a reward to spend with a brand of their choosing, but without the unnecessary problems.

Cost is a key segment of an e-gift card’s value to businesses. Regardless of whether someone is transferring £10 or £1,000, the charge does not rise or fall. The business simply purchases an e-gift card at the specified rate and sends it across.

Better still, they can buy these rewards at a discount between 2-25%. A saving is made on just a single payment. After 10 or 100, the total grows. Then consider the thousands made by businesses every year. We are talking about a potential money-making exercise from what many view as a routine task.

Not only this, but each token can be fired off in seconds and delivered to the user’s email at the speed of a regular message. There are no five-day delays; no feedback from customers when they don’t receive a payment. Just one transaction, sent with the click of a button.


A rising issue?

We all know the world is becoming more connected. It is now so much easier for money, and people, to cross borders into other territories. And that’s a good thing, at least in some cases.

Thanks to online banking, consumers now have a way of transferring money to friends and the companies they purchase from. No one can argue that online payments do not have a purpose, especially given the ease at which people can buy products around the world.

Businesses, however, must realise that the same framework has its limitations. It is not conducive to sending numerous small payments, where issues around cost and efficiency rear their head. Better options are available, but will they be taken?

At it stands, we’re bound to see even more businesses getting caught up with the underlying issues around online payments. Platforms like Upwork have given rise to the ‘gig economy’, bringing even more credence to the idea of passing small payments around the globe.

We will undoubtedly see a rise in online banking transactions as new business models start to emerge. That’s why the current market needs a better way of passing money between different parties.

E-gift cards represent one way of being able to improve the speed of passing and storing value. They are more secure, cost-effective and efficient than cash, and can settle payments in the space of an email. At a time when consumers are preferring fast, convenient services, they really could be the way forward.

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