- David Eacott - Head Banking Supervision, Malta Financial Services Authority
- Christian Farrugia - Director, 247Pay
- Kenneth Farrugia - Chief Business Development Officer, Bank of Valletta
- Godwin Schembri - Co-founder & CTO, Know Me Now
A survey shows carried out by Grant Thornton shows that 76% of the Maltese population are willing to avoid the use of cash after the pandemic. As noted by Christian Farrugia, this phenomenon was already on the increase before the pandemic, as people have been using mobile phones to make payments. This is still on the low side when compared to other European countries, such as the UK where 2/3 of adults are using contactless forms of payment. Small shops were quite reluctant to use such systems due to charges and lower margins. However as noted by Godwin Schembri merchants had to take drastic measures to be able to operate during the pandemic, such as setting up online shops. Nonetheless, statistics show that 60% to 70% intend to continue using cash and cheques, outlining an attachment problem.
One needs to spend a certain amount to be able to make a digital payment: A Misconception
As noted by the panellists, consumer habits have a great impact on the outlets’ progress and if outlets are not equipped to handle contactless payments, they might lose business. Furthermore, this limitation is not completely logical since charges are based on a percentage of the amount paid even if 10 euro or less is paid.
Products and innovations available
Nowadays, customers are at great ease to participate in digital transactions. For example, as noted by Kenneth Farrugia, mobile payments such as BOV pay are becoming more popular. Another system mentioned by Christian Farrugia, is the use of a payment link sent by the merchant directly to the client, where the client can pay for the item by following instructions found on this link. Once the client enters the details, the merchant will receive the payment immediately. Websites are also used for directing payments.
Customers may be reluctant to use cards since their details could be stolen and reused much easier than using cash. Merchants may on the other hand, be defrauded by foreign issued cards. As a result, “know me now” was set up to help minimise these risks. It allows customers to send only verified data when making a payment. Furthermore, the EU improved and clarified standards of electronic payments and the roles and responsibilities of the different actors. It also improved the legislative framework. The banks and other institutions are also investing in their resilience of fraud issues, both for them and the customers.
Measures by the Government to promote cashless payments
The government, together with employers, can play a better role in supporting the shift to contactless payments. For example, the government introduced paper-based vouchers, as a response to the pandemic, rather than digital vouchers. This has led to unnecessary time consumption. People are still receiving cash even from employers and governments, such as the government cheques handed out, which promote the further use of cash. Hence, governments and employers must better embrace a shift towards digital transactions and lead by example. This shift will lead to various benefits such as a reduction in money laundering, which is easily done with cash unlike with digital payments. Panellists emphasised the importance of the government to educate society to simulate the shift. Previous government initiatives have proven to be successful towards the use of digital payments. For instance, a major shift occurred when the government introduced the final withholding tax on income and capital gains (15%) which led people who used to keep money at home to open bank accounts. Moreover, reality shows that there are tax driven reasons why people use cash instead of digital payments. As a result, countries started to introduce advantageous tax regimes for turnover channelled through EPOS machines. Furthermore, the MFSA is working with all the banks on the range of measures that both them and the government introduced to help support the economy.
Is the shift towards contactless payments here to stay?
Society is becoming accustomed to the use of cards and digital payments due to its “frictionless experience.” David Eacott outlined how customer frustration occurs due to the long process of cashing cheques, while online transactions take a few seconds to be executed. Both customers and merchants are realising the degree of comfort that cashless payments bring with them.