A guest post from Ziad Alshobaki, Managing Director of Quisk Middle East
There is a famous saying that “Cash is King”. It is right up there with “A tree begins with a seed” and “The smarter you are the less you speak,” as one of those universally understood phrases that seems to exist across every language of the world and people of every background.
Unlike my young son, who has learned to ignore his father’s warning “if you don’t finish your food, the devil will eat it”, there are lessons we can learn even today from our wise old King Cash–even in a world of flashy smartphone wallets and bank apps, of plastic cards, digital payments and crypto-coinage of every description, cash remains the payment medium of the people.
Cash is the king we pay. However, it comes at a cost: the more it’s worth, the more it costs governments and treasuries to produce and secure. A recent report by The British Bankers Association estimates that its members are collectively spending over 24 billion dirham annually to reduce the risks of crime in the UK. It costs governments throughout the Gulf in lost taxes and fees, it is the vehicle for graft and corruption, and it moves through black market economies in the hands of cartels, arms smugglers, and among counterfeit goods of all kinds.
But cash has another cost that is far greater: The cost to our unbanked and our poor, to small businesses trying to grow and to new immigrants working to make ends meet. If you are travelling for days to settle a bill or deliver funds to a relative, paying outrageous fees to transfer or exchange money, or worrying about robbery or theft and the impact it might have on you or your family, you are likely well aware of the many hidden costs our King levies on the unbanked. Late last year, McKinsey estimated India lost 4.4 billion dirham in forgone income from time spent travelling to or from a bank or exchange house, and emerging economies around the world would see a 13.5 trillion dirham annual benefit to GDP, or over 7.7% across our neighbors here in Africa and the Middle East. As the chart below implies, as it is largely the unbanked who bear these costs.
If Cash is a king, he is also a heartless one. Cash users are less resistant to economic or financial shocks, less able to save to reach a solid financial footing or book travel home, and studies have shown they spend less on housing, education, food, health care, and transportation than account holders at financial institutions while remaining more likely to become the victims of crimes.
So why, given all these costs to banks, governments, businesses, and people, is the old saying still true? Why is cash still king?
The answer is, cash is the only way both the banked and the unbanked can communicate today. Cash is king because despite all the payment technologies and systems that have been introduced thus far, it is still the only instrument that brings people together and is truly accessible to all.
It doesn’t have to be this way. You probably have the solution in your pocket or purse right now—almost everyone has a mobile phone suitable for delivering a comprehensive mobile money payment network, and yet the existing systems and payment services that have been introduced for use with phones have tried to be exclusive and have failed to include all.
Some have tried to replace the king with electronic payment systems designed for smartphones alone, or only for Apple or Samsung devices. They have arrayed all customers of a single bank, or single phone company to challenge him. Even others have tried to challenge banks themselves, or establish cyber currencies or business models built on a specific transaction type.
“Cash is the only way
both the banked
and the unbanked
can communicate today.”
These are not true mobile money ecosystems, but walled gardens. None of these systems is designed for banked and unbanked alike; for smartphone owners and regular feature phone users; for customers of any bank, via any account or method of exchange.
But it is coming. The technology powering mobile money exists today.
At Quisk, we have shared a road map and vision to digitize cash via a smart payment network designed for all. We designed our end-to-end, cloud based digital transaction processing platform to leverage the existing POS networks and existing bank and ATM systems to create an inclusive payment ecosystem. Throughout this process, we worked with partners to reduce interchange fees, issuing and service costs, and transaction fees that often serve as barriers for adoption.
In short, we think cash can only be replaced by a payment type every bit as inclusive. Our deference to colored paper can only truly be substituted by a mobile money ecosystem designed to be used by just as many people, in many more ways. We think there is truth and wisdom in that other famous saying too: “Unity is power”.
The King’s days are numbered.
MD, QUISK MIDDLE EAST