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Transcript of The changing face of payments - Rapidata Services › wp-content › uploads › ... · 2016. This...
Foreword
When we look at the advancements in payment technology, it’s quite astounding. Who’d have predicted a decade ago that we would be using contactless cards and mobile phone apps to pay bills, carry out banking and donate to our favourite causes?
Rapidata is front and centre of the payments industry for not for profi t organisations, uniquely positioning us to consider this changing landscape and the impact it is having within our sector. By sharing our thoughts and research, we can offer an insight into how technology and attitudes are driving change, and how not for profi t organisations can respond and adapt.
This is part of our commitment to sharing and being an active contributor within the third sector community. I hope you will fi nd this report useful in encouraging discussions and focus.
Scott Gray | CEO
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Two-thirds of people say they make more payments digitally now than they did fi ve years ago.
The number of transactions made every month have grown by nearly twenty times in the three years to June 2017.
Growth of new payment technology and platforms
It goes without saying that rapidly advancing technology goes
hand in hand with the shift in payment trends. The public, who
are increasingly time-poor, have embraced the ability to set up or
make payments quickly, easily and securely – often while on the
move – and this offers huge potential for businesses and charities
alike. Two-thirds of people say they make more payments
digitally now than they did fi ve years ago.2
Among a new wave of electronic and digital payments,
contactless is perhaps the most notable area of growth, with
the number of transactions made every month having grown by
nearly twenty times in the three years to June 2017.
The popularity of social media, crowdfunding and online retail
has also resulted in a new raft of payment options. Social media
giants Facebook and Google have both brought payment
platforms to market and others like Venmo, hugely popular in the
US, now enable payments to be made within mobile apps while
also allowing users to follow each other’s accounts and pay their
share of a bill. Shopping platforms like Amazon are adding a
new philanthropic edge to online retailing and Amazon Pay
has now launched voice-activated payments, via Alexa, in the
UK. Meanwhile, more and more people are using banking apps
to access their accounts and are making or changing payments
from there.
The decline of cash
While cash remains important, it is no longer king. People are
rapidly moving away from cash payments as other options
become more familiar. In 2017, cash payments were for the fi rst
time overtaken by debit card payments, mirroring the rise of
contactless technology.
By 2015, cash represented only 15 per cent of the total value of
consumer spending in the UK, according to Government’s recent
cash and digital payments consultation, while the volume of cash
payments reportedly fell from 62% to 40% between 2006 and
2016. This is expected to continue declining in the coming years,
to an estimated 21% by 2026.1
By 2015, cash represented only 15% of the total value of consumer spending in the UK.
How the payments industryis changing and why
1 UK Cash & Cash Machines 2017 Summary and UK Payment Markets 2018 – UK Finance2 Cash and digital payments in the new economy 2018 - HM Treasury4
In 2017, cash payments were for the fi rst time overtaken by debit card payments, mirroring the rise of contactless technology.
Research shows that 85% of the UK population now use a smartphone, surpassing laptops (78%) and tablets (68%).
73% of bills are paid via Direct Debit.
Nine in ten people who hold a bank account in Great Britain have at least one Direct Debit mandate set up.
The growth of smartphones has undoubtedly played a
crucial role in making digital payments more accessible
through a huge range of apps. Research shows that 85%
of the UK population now use a smartphone, surpassing
laptops (78%) and tablets (68%) and almost a third of
consumers now use their phone to make payments. In fact,
in 20174 Brits used their smartphones to spend nearly
a billion pounds in stores via contactless Digital Wallet
systems alone, and services like Apple Pay and Google Pay
continue to grow.
And, let’s not forget that while SMS texting may have
lost favour to messaging platforms like WhatsApp and
Facebook Messenger, it offers quick and easy payments on
the move, routinely used for carparking, public transport,
and of course charity appeals. That said, SMS itself is fast
being overshadowed by in-app payment functionality – a
testament to the speed of the payment revolution.
Meanwhile, blockchain and cryptocurrencies like Bitcoin
and Ethereum are gaining interest as ways of transacting
and investing in a digital sphere. But, we have some way to
go before cryptocurrencies gain public trust and become
more viable considerations for every day payments.
Continued growth in regular payments
Even though consumers have more payment choices than
ever before, recurring or regular payments continue to be
an essential requirement. Research from Bacs shows that
Direct Debit is the most popular way for Brits to pay their
household bills, with 73% of bills being paid using this
method.5
Bacs research also shows that nine in ten people who
hold a bank account in Great Britain have at least one
Direct Debit mandate set up, and the popularity of Direct
Debit continues to grow with over 4.2 billion Direct Debits
processed in 2017, up from 4 billion in 2016.6
Strengthening security and innovation in the payments industry
Given the explosion of digital technologies and changing
consumer attitudes and behaviours, it’s no surprise then
that Government has responded with the launch of the
New Payment System Operator (NPSO), a new umbrella
organisation for the core industry payment bodies – Bacs,
Faster Payments, Cheque & Credit Clearing and UK
Payments Administration. The NPSO has a remit to work in
the public interest to develop the capability and capacity
of the UK’s retail payment systems. Every year, the UK
moves more than £6.4 trillion through Direct Debit, Faster
Payments and other remote banking methods.7 The NPSO’s
responsibility for maintaining and developing payment
systems and standards will bring a continued focus on
security, as well as proactively encouraging innovation.
3 Global Mobile Consumer Survey 2017 - Deloitte4 Tipping point for ‘Tap and Go’ as mobile payments top £975m 2018 - Worldpay
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5, 6 , 7 Half a century of Bacs payments 2018 - Bacs
As retail and banking customers increasingly expect slicker,
faster and more convenient payment experiences, the same
expectations apply for those who donate to charity. People carry
less cash with them and some 70% of charities say they have
seen a decrease in the percentage of donations given in cash
over the last three years, according to survey figures from the
Institute of Fundraising. Most respondents (86%) also predicted
that cash donations would decrease further over the next
five years.
Inevitably, this means that charities must ensure they are not
relying too heavily on cash, but exploring other payment
options for their supporters.
Making more payment options available to supporters
Contrary to common conceptions that older demographics give
most, recent research from Barclays shows that it was people
aged 35 to 54 that gave the highest average donations last
year, followed by the under-35s.8 The research suggests that
younger people are more likely to donate than they used to be,
making it increasingly important for charities to offer a range of
trusted payment options to supporters. This means appealing
to all potential supporters and enabling them to give in a way
that suits their payment preferences, offers them greater control
over their giving journey and ultimately, improves their giving
experience.
This might range from building more sophisticated payment
options into a charity’s website, to social platforms such as
Facebook Donate that allow users to give to causes directly from
the app page they are viewing.
Communicating the importance of regular giving
Let’s not forget that regular giving is critical for so many charities.
While there will inevitably be many new ways to give, the default
option is often to make one-off and sporadic payments, and
charities will want to drive a more committed and reliable income
stream for stability and long-term planning.
Direct Debit was the fourth most popular way that
people gave to charity in 2017, with almost one-third (32%)
of people saying they donated in this way and another
18 per cent paying a charitable membership or subscription,
compared to donations by debit card (11%), SMS text (10%)
and cheque (7%).9
Consideration must be given to how Direct Debit is
communicated and promoted to supporters and, ideally,
integrated so that a regular donation becomes even more
accessible.
The impact on charities and regular giving
86% of charities predicted that cash donations would decrease further over the next five years.
70% of charities have seen a decrease in the percentage of donations given in cash over the last three years.
People aged 35 to 54 gave the highest average donations last year, followed by the under-35s.
8 The future of giving 2018 - Barclays 9 UK Giving 2018 - CAF
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Recognising that regular donors want greater control
With all these developments, the public has far greater access to,
and control over, their payments and banking than they used to.
The same technology that allows them to set up payments at the
touch of a button also means they can cancel them just as easily
- both a blessing and a curse. But how would supporters react
if we gave them even more control and more options for their
donations?
When Rapidata surveyed 2,000 people that make Direct Debit
payments10, the majority (74%) thought they should be able
to fully control their payments each month. Regular donors said
they’d welcome the option to adjust the level of donation (43%),
skip a payment (44%) or take a payment ‘holiday’ (32%).
Our research also highlighted that more than four in ten
respondents (44%) had previously taken the decision to cancel a
Direct Debit payment in order to reduce their monthly outgoings.
From a fundraising perspective, a skipped payment or payment
holiday would be infinitely preferable to a cancelled Direct Debit.
Giving supporters greater control poses a clear opportunity
to both retain and build those vital supporter relationships.
Conversely, it also makes it even easier for supporters to increase
donations in response to an emergency appeal.
74% of survey respondents thought they should be able to fully control their Direct Debit payments each month.
Direct Debit was the fourth most popular way that people gave to charity in 2017, with 32% of people saying they donated in this way.
Four in ten respondents had previously taken the decision to cancel a Direct Debit payment in order to reduce their monthly outgoing.
Looking to the future
The payments industry is evolving at a rapid rate. While it’s
difficult to predict what the future will hold, it’s safe to say
that cheques will – at some stage – disappear, and cash
payments will further decline, while digital and electronic
payments continue to become increasingly important and
more widely used.
Indeed, seven in ten charities see online fundraising as ‘the
way forward’, and half of all charities are actively exploring
investment in new ways for their supporters to donate.11
As cost and barriers to entry diminish in the near future for
contactless payments, all charities will be able to gain access
to this payment channel.
With the NPSO proactively opening up access and
encouraging innovation in this space we should expect
an accelerated development period. In addition, Artificial
Intelligence (AI) has for some time been influencing consumer
spend, payment behaviour, and delivery preferences and
there is no doubt this will translate into the charity world and
fundraising technologies.
Cryptocurrencies may well gain ground, but recent
instability in the marketplace has shaken the public’s trust
and there is some scepticism about how quickly or secure
such systems are. We should remember though that
complex or pioneering payment channels can come at a
cost and may be out of reach for some charities and may
not suit all target supporter groups. As always, it’s about
offering the right payment options for your supporter base.
10 OnePoll survey 2018 - Rapidata 11 The future of giving 2018 - Barclays
As cost and barriers to entry diminish in the near future for contactless payments, all charities will be able gain access to this payment channel.
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The good news for charities is that Direct Debit is set to
continue growing as the trusted and secure mainstay of the
regular payments industry, remaining a critical facility for
organisations that rely on monthly, weekly or other regular
payment cycles.
With the first anniversary of the NPSO, a more joined up
payment landscape will start to emerge with new innovations
and connectivity between banks and payment providers.
We would hope to see a review and change to the current
three-day Bacs settlement period to same-day, to bring it more
in line with other payment methods. With greater innovation we
can expect to see faster and easier sign-up processes for online
Direct Debits utilising the technological advancements within
the banking, payment service and fintech communities.
Giving regular supporters the reins
The public is becoming more active in relation to their finances.
By offering supporters choice, like an alternative to a straight
cancellation of their Direct Debit, a charity could prevent
unnecessary attrition, hold on to them for longer and gain more
opportunities for further dialogue. The same webpages that
would allow a supporter to manage their Direct Debit could also
share updates about the charity’s work, promote a campaign or
an emergency appeal, weave in additional messaging around
the impact of donations, and the difference a top-up gift, or
even a legacy pledge, could make.
What this means for regular giving
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Offering greater fl exibility
Payments should be fl exible, both in terms of the amount
given and timings. Direct Debit offers the ability to meet the
needs of the supporter in terms of how or when they choose
to give. Similarly, for charities running lottery or raffl e
programmes, there is the ability for supporters’ payments
to be actioned weekly (coinciding with the lottery itself)
rather than monthly. This may better suit some supporters,
spreading what would otherwise be a larger monthly
payment into smaller amounts over the course of the month.
By being more adaptable as a sector, we’ll also be better
positioned to engage with harder-to-reach demographics,
such as participants of the growing ‘gig economy.’ There
are an estimated fi ve million people currently working in
the gig economy in the UK, comprising around 15.6% of
the total full and part-time workforce12. With their freelance
and independent contractor status, these workers often
have unpredictable incomes, making a regular Direct Debit
payment on a set day each month less convenient than a
fl exible alternative. Embracing new payment technologies
and adapting a more open attitude to the regularity of
donations could help to ensure that charitable giving is an
attractive and tangible option for new supporters.
The growing gig economy accounts for 15.6% of the total UK workforce
12 Independent work: choice, necessity, and the Gig economy 2016 - McKinsey
By offering supporters choice, like an alternative to a straight cancellation of their Direct Debit, a charity could prevent unnecessary attrition
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The future of the payments industry is an exciting one, and
charities and fundraisers should feel rightly optimistic about
the opportunities that digital payment advances and changing
consumer attitudes offer.
Ultimately, today’s supporter is in control: over the way charities
communicate with them, over their data, and also over their
donation payments. Charities must recognise this and ensure
they are making the most of all engagement opportunities,
including those touch points presented at payment. This will
help to optimise the donor experience and safeguard the
reputation of a forward-thinking and innovative charity sector.
Achieving this is about listening to supporter preferences and
offering greater flexibility and choice right across the payment
journey, presenting them with multiple ways of paying as well as
options for managing their giving. The fast-changing payments
environment also demands that we keep up with advances in
technology, meaning that charities must regularly review their
infrastructures and processes.
The world is changing, and with it consumer behaviour and
expectations. Offering supporters more control over their
payments ultimately benefits both sides, and with growing
consumer and regulatory pressure to do just this, it is also
increasingly necessary. It is imperative then that charities
embrace these changes and give supporters the flexibility
they require.
Closing thoughts
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At Rapidata, we champion innovation and best practice, which
both lie at the heart of the work we do and the new initiatives
we are continually developing. We are continually monitoring
the changing face of the payments industry and responding with
new solutions to help our clients adapt.
Guided also by our recent Direct Debit poll, we have introduced
an innovative new product, Control my Payment.
Control my Payment has been designed to give supporters
greater flexibility over their regular giving Direct Debits.
In a nutshell, it allows supporters to control their Direct Debit
amount, collection date and frequency, as well as offering
additional options, such as skipping a payment or a
payment holiday.
By giving supporters more control over their regular giving, we
believe we are enabling charities to meet requirements of the
changing payment and consumer landscape, while responding
to the calls within our sector to improve the donor experience.
Control my Payment also offers a platform for charities to further
engage with their supporters, highlighting the impact of their
donations and suggesting ways in which they could help further.
For more information about Rapidata’s expertise and services,
please visit rapidata.com
Rapidata’s response
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t: +44 (0)1293 601111 | e: [email protected] | w: rapidata.com