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Economics

Are cashless payments now the rule and not the exception; An overview of cashless payments in today’s globalised economy

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Physical currency has been in use since ancient times. Historical civilisations such as the Roman empire are well known for their use of coins. Indeed, the unique characteristics of physical currency established its acceptance by central banks as legal tender to facilitate trade in various global economic systems demonstrates just how essential it is to everyday lives. The rise of cashless payment has of course been greatly beneficial, but is it so successful that physical currency is threatened with extinction?

Cashless payments are defined as digital methods for exchanging financial transactions between two parties. Cashless payments are however not legal tender on their own; they are a backing to existing physical money controlled and owned by a consumer and provide an alternative to using traditional paper or coin currency. Various terminologies such as digital payments, electronic payment or mobile money have also evolved and generally describe forms of cashless payments. Types of cashless payments include: bank cards, contactless payments, mobile wallets, Quick Response (QR) Codes, Point Of Sale (POS) devices, Gift cards and vouchers, and electronic clearance devices. The Centre for Finance Technology and Entrepreneurship further describes the following as types of digital payments: biometric authentication, mobile point of sales, contactless payments, smart speakers, social media payment options and cards to codes. 

Common historical data suggests that PizzaHut may have been one of the first retailers to execute a cashless transaction. The company began allowing people to order pizza on its website as early as 1994. Similarly, Coca-Cola offered the first mobile payment transaction in 1997. The beverage retailer created special vending machines that enabled consumers to pay for their drinks by sending text messages from mobile devices. Furthermore, more recently, in 2011, Chinese company Alipay designed a QR code payment method, which allowed partnering offline stores to accept payment by scanning an individual’s QR code in Alipay wallet.

Cashless payments may have started up as the exception, but are now widely accepted as the rule for executing payments around the globe. The projection by Statista states that, mobile payment transaction volumes could rise from US$25 billion in 2016 to nearly US$275 billion in 2021. There has been a seismic shift in consumer preferences for how people purchased products in the COVID-19 pandemic era. Covid has encouraged a surge in cashless payments. 

The benefits of e-payments are a win-win for customers who make payment through these systems and for businesses. Consumers and businesses today cannot but relish how easy, convenient and fast most cashless or digital payments are. Customers can use various e-payment options to pay instantly for goods from the comfort of their homes. Businesses can receive multiple payments at any point in time from customers without the pressure of serving customers at a single payment point. The need for trips to the bank to deposit cash is also reduced. 

Cash is vulnerable to loss in circumstances such as theft, fire or flood. Cashless payments reduce this risk of loss. This is particularly advantageous to cash intensive businesses where theft by employees is a major threat. Cashless payment methods are secured with features such as personal identification number (PIN), tokenization, encryption, Secure Socket Layers (SSL). There are many more features so that even where technological device for payment transaction is lost, cashless money may be retrieved. There is also less burden on customers to carry huge sums of cash for daily transaction with a fear of loss. 

Cashless transactions are conducted through technological devices such as smartphones, laptops, POS devices, etc and these are reliable sources of evidence of payment or tracking, which may be referred to during any dispute of a transaction. Businesses may also track transactions for bookkeeping and accounting purposes.

Cashless payments are not without drawbacks though. The use of cashless payments and digital payments, include service fees charged by service providers. Also, the investment in software, hardware, and training of employees to automate payment systems and the requirement for availability of certain conditions such as telecommunication network, internet connection also makes it unusable in locations or circumstances where these are unavailable.

Concerns over fraudulent activities by cybercriminals and mobile money fraudsters is perhaps the biggest threat to the reliability of cashless, payment methods. These security issues include increased vulnerability to hacking, data breaches, and customer data sharing with third parties. Businesses and consumers who have their accounts hacked, cards stolen, or PINs stolen may lose substantial amounts of money from these fraudsters. The most common means of cyber fraud include identity theft, phishing, ransomware, SMART cities, cyberespionage and distributed denial of services. Research by TransUnion , a global information and insights company, showed a staggering increase in digital fraud attempts. Financial technology companies may invest in increased security systems to make cashless payment systems safe and reliable. However fraudsters are forever up to new tricks to circumvent safeguards. 

It has therefore become imperative for consumers and businesses to adopt safeguards to control the risks of fraud in cashless transactions. For consumers, basic security measures such us regularly changing passwords or PINs, maintaining high confidentiality of passwords, blocking or avoiding fake or deceitful websites and making online purchases from verified business pages, could minimize the risk of cashless account theft or fraud. Increased consumer preference for cashless payment also indicates that businesses can gain a competitive advantage if they offer customers safe and secure cashless payment options. Increased investment in technology and establishment of risk management systems could minimize these threats. Furthermore, central banks are expected to promote the formulation of policies and regulations on cashless payments, to ensure security of customers and businesses. 

As consumers and business have skilfully adapted to technological innovations in the digital landscape, the plausibility of a cashless payment economy being the rule and not the exception, becomes imminent. Sweden has set the pace, with a target to become a cashless economy by 2023; other countries may well follow the same path in due course.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Crime

At least 30 people die in recent violent protests in Baghdad, Iraq

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On August 29th, Iraq’s Shia cleric Muqtada al-Sadr announced his withdrawal from political activity via Twitter, criticising the failure of fellow Shiite leaders to reform a corrupt government. He also announced the closing of all his offices nationwide. Al-Sadr’s announcement was followed by violent protests in Iraq’s capital, Baghdad, which resulted in at least 30 deaths and 200 injuries.

The protests were started by Al-Sadr’s supporters, who stormed the Republican Palace in Baghdad’s Green Zone, a heavily fortified area that serves as the headquarters of Iraqi regimes. Both foreign embassies and the government are housed there.  But Al-Sadr’s supporters fired rocket propelled grenades and machine guns from there as well.

Due to the protests Iraq’s current Prime Minister Mustafa Al-Khadimi has now put off all government meetings until further notice. Al-Khadimi has also urged Al-Sadr to “help call on the demonstrators to withdraw from government institutions”.

According to some reports Al-Sadr’s supporters had been occupying parliament buildings for a while now. They then charged at the headquarters in the Green Zone. Pictures showed exultant Al-Sadr supporters cheering in the Republican Palace swimming pool,, waving around the Iraqi flag and a photo of Al-Sadr. 

In response to the protests the Iraqi military said they are practising “the highest levels of self-restraint and brotherly behaviour to prevent clashes or the spilling of Iraqi blood.” However, according to reports hundreds of protesters were pushed out of the Republican Palace by tear gas and bullets used by Security forces.

The military also introduced a strict curfew, restricting the movement of vehicles and pedestrians as well, which was in place until further instructions by the government. In Baghdad the curfew was introduced from 3.30pm local time. Later, a nationwide curfew was introduced as well with the aim to urge protestors to leave the Green Zone.

As a response to the violent outbreaks, UN chief Antonio Guterres asked all parties to “take immediate steps to de-escalate the situation.” Stephane Dujarric, his secretary-general, also added in a statement that he “appeals for calm and restraint and urges all relevant actors to take immediate steps to avoid any violence.”

A day later, on Tuesday August 30th, Al-Sadr released a statement via television, apologising for the violence and saying, “the spilling of Iraqi blood is forbidden.” In his statement he also threatened his supporters that “if in the next 60 minutes they do not withdraw, as well as from parliament, then I will abandon these supporters.”

The nationwide curfew was lifted after the new statement.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Economics

America stands with Taiwan: Nancy Pelosi visits Taiwan amid tensions with China

Nancy Pelosi, Speaker of the US House of Representatives, arrived in Taiwan on Tuesday, 2nd August despite the strained relationship between Taiwan and China. As a result, the tension between China and the US has also increased.

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America stands with Taiwan: Nancy Pelosi visits Taiwan amid tensions with China

Nancy Pelosi, Speaker of the US House of Representatives, arrived in Taiwan on Tuesday, 2nd August despite the strained relationship between Taiwan and China. As a result, the tension between China and the US has also increased.

China considers Taiwan to be part of its territory but Taiwan asserts its independence as a self-governing island. Thus China/Taiwan and international relations are very delicate.  If the island is visited by another nation like the US, it suggests a certain recognition of Taiwanese sovereignty. The US does not currently officially recognize Taiwan as an independent country but is still required to help the country defend itself if necessary. 

Before Pelosi’s trip to Asia, Chinese foreign ministry spokesperson Zhao Lijian already warned, “There will be serious consequences if she insists on making the visit [to Taiwan],” but he did not spell out any specific consequences.  “The People’s Liberation Army [PLA] will never sit idly by. China will take strong and resolute measures to safeguard its sovereignty and territorial integrity,” he added. 

As soon as Pelosi visited the island, she tweeted, “Our visit reiterates that America stands with Taiwan: a robust, vibrant democracy and our important partner in the Indo-Pacific.”

In retaliation, Lijian stated, “This will definitely not have a good outcome … the exposure of America’s bullying face again shows it as the world’s biggest saboteur of peace.”

Shortly before her visit, Chinese Su-35 jets crossed the Taiwan Strait, a river bordering the Island with China, with no distinct purpose. Similarly, on the day that Pelosi landed, unidentified hackers cyberattacked the Taiwanese Presidential official website so it could not be accessed. Clearly rattled after her visit, China held its biggest-ever show of military force in the air and seas around Taiwan, which included the firing of ballistic missiles.

Ross Feingold, a Taipei-based political analyst, and lawyer told Al Jazeera that this kind of antagonistic behaviour by China after the visit could be a one-off event but it could also “become part of a sustained pattern of aggression.”

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Economics

‘Don’t forget them’: millions of Afghans face hunger, economic crisis 

International aid workers share stories of children and families struggling to make ends meet

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“Winter is coming.”

That’s how Ammar Ammar, spokesperson for the International Committee of the Red Cross in Afghanistan, describes the situation in Afghanistan. The current hunger crisis, the result of a collapsing economy and drought, will only get worse if the country doesn’t get help, he says, especially in the colder months when people also have to stay warm.

“It’s not Game of Thrones here, it’s reality.”

Almost a year after the Taliban takeover of Afghanistan, the world has become silent about the plight of the country and its people, who are facing one of their worst humanitarian and economic crisis in decades.

After the fall of Kabul, the international community declined to recognize the Taliban regime. Countries paused foreign aid and imposed sanctions. The United States also froze billions in Afghan state assets.

A country that had become reliant on external aid was left on its own. In the process, millions of Afghans were abandoned, too.

On a recent lunch break in Kabul, Ammar saw two girls, one about six years old and the other about three. One of them was lying down on the sidewalk, while the other was squatting next to a big nylon bag. They’d been collecting pieces of scrap metal on the streets to make ends meet. 

“You could see that they were exhausted,” Ammar said. “You are going for your break and at the same time you can see two kids on the street, where they have no break at this age. It strikes you.”

And there are thousands of children like them.

“We are doing a massive job,” Ammar says. “But the sad reality is we can’t help everyone at the end of the day.”

A woman in Qala-e-Naw, the capital of the Badghis province recently told the UN-run World Food Programme (WFP) in Kabul how she made ends meet after her husband died five years prior. 

“In the past, she said, she had a fair life, just getting by cleaning and washing for other people. After the economy collapsed, families have no money anymore to pay her and her work dried up,” said WFP spokesperson Philippe Kropf in an email. As a result, she borrows money to buy food, going further into debt.

“She told me she has not been able to buy cooking oil for weeks. She eats bread with tea and sometimes rice,” he said.

Afghanistan abandoned


A young man told Kropf that “his family went to sleep many evenings without anything to eat in the past months.”

“They borrowed food with neighbours, but increasingly the neighbours have nothing to share,” he added, noting the young man had only completed second grade and was trying to find labour jobs to make ends meet. “But these jobs are getting rarer and rarer because of the collapse of the economy, too.”

The man participated in a training program to gain skills such as tailoring or mobile phone repair to earn a livelihood. The program trains 200 men and women over six months, during which participants receive food assistance for their families. 

“After the training, (the young man) hopes to either open his own little shop, sewing clothing for men and children or to find work in a tailor shop and work for a salary,” Kropf said.

Prospects of famine remain

With the country reeling from recent droughts, and facing high inflation, a difficult situation is becoming even worse.

“For the first time, urban residents are suffering from food insecurity at similar rates to rural communities, marking the shifting face of hunger in the country,” Kropf said, noting some people are seeking help from WFP for the first time in their lives.

“The scale of the crisis in Afghanistan is immense, and needs continue to outpace available funding,” he added. The WFP needs nearly US $1 billion by the end of 2022 to help 18 million people – nearly half the population of Afghanistan.

Of that, the group urgently needs US $172 million to secure 150,000 metric tonnes of food to support 2.2 million people in remote parts of Afghanistan, which can get cut off by ice and snow in winter.

“We need these even more urgently because of the long lead-times for food commodities that we need to buy internationally,” Kropf said, including vegetable oil and specialized nutritious foods. “We need to get them into (the) country and then drive them into the mountains.”

The lack of funds in state bank accounts means civil servants aren’t being paid regularly, companies are shutting down and ordinary civilians face restricted access to their own savings.

Prospects of famine remain, said Ammar, noting that the main indicator is farming, which most people depend on to make ends meet. Farmers say climate change is resulting in less food production, resulting in extended periods when people don’t have adequate access to food.

Need for international aid

At the end of June, a 5.9 magnitude earthquake hit southeast Afghanistan, killing      over 1,000 people and causing damage the International Rescue Committee described as “catastrophic.”

“This earthquake is a catastrophe for the people affected, but the response to the wider crisis in Afghanistan remains a catastrophe of choice for the international community,” said David Miliband, the group’s CEO and president in a release at the time.

“While humanitarian aid has averted famine for now, policies of economic isolation, the halting of development funding, and the lack of support for Afghan civil servants are unraveling the two decades of development progress that western leaders vowed to protect.” 

He noted that families across the country face unemployment, leading to lower demand among local businesses which in turn leads to further job losses. He called for the international community to urgently provide funding to the country as well as “the phased and closely monitored unfreezing of assets.”

The question of frozen assets

Advocates for Afghanistan have criticized U.S.’s decision to freeze a portion of the country’s assets and decried a proposal for the U.S. to use some of them to support families affected by 9/11.

Afghanistan’s assets rightfully belong to Afghanistan, said Zubair Iqbal, a scholar at the Middle East Institute in Washington. 

However, while unfreezing the funds would help bring immediate help to alleviate Afghanistan’s crisis, the country will need more support in the long-term, said Iqbal, who previously worked at the International Monetary Fund for more than 30 years.

The solution is to grant foreign aid to Afghanistan in a sustainable way to allow recovery, while managing its spending through an independent entity, he said.

Concerns around a proposal in the U.S. to use some of the Afghan assets to support families affected by 9/11 prompted a group of Afghan women to write an open letter to U.S. President Joe Biden in February.

“Taking funds from the Afghan people is the unkindest and most inappropriate response for a country that is going through the worst humanitarian crisis in its history,” the letter reads. “It is the squeezing of a wounded hand.”

Freezing the assets from the Taliban was the right decision, said one of the signatories in an interview, but they belong to the Afghan people and must be released to address the humanitarian crisis. 

“My expectation from the international community is to put serious attention on Afghanistan,” said Roshan Mashal, former deputy director of Afghan Women’s Network, who left Afghanistan after the takeover and is now a fellow at the University of Texas at Arlington. 

She called for coordination on how countries engage with the Taliban and to support the country’s people, as millions of Afghans face hunger and economic crisis.

“Don’t forget them,” she said.


All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Daily Brief

Concerns Rise As US Teeters on the Brink of Recession

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  • The US economy declines for the second quarter in a row, causing, what other countries would consider, an economic recession. 
  • The prices for groceries, gas, and other basics are rising at the fastest pace since 1981. The US Central Bank is quickly trying to raise borrowing costs in order to cool the economy and ease the prices on goods, but with the contraction, at the annual rate of 0.9% in the 3 months to July, many are still getting concerned. 
  • President Biden struggles to convince the public that the economy is sound, with the unemployment rate at a low 3.6%. But with inflation in the US hitting 9.1% in June, the fastest price appreciation in 4 months, consumer spending has slowed at an annual rate of 1%. 
  • Many other countries, such as China and the UK, have been hit harder by the surge in energy prices and the War in Ukraine, causing risks from abroad. Other countries are facing much more serious problems and once they’re hit, their problems can spill over and affect the US. 

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Economics

Is Cryptocurrency the Hedge Against Inflation?

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With the world in economic turmoil through wars, food insecurity, gas and energy prices skyrocketing, some have been flocking to cryptocurrencies as a hedge against inflation.

Cryptocurrency, a digital currency, is an alternative payment form which is created through encryption algorithms. It functions as both the currency and a virtual accounting system. A cryptocurrency wallet is needed to use cryptocurrency, which can be cloud-based, on a computer or mobile device. 

Cryptocurrencies are still very new and the market for these currencies are very volatile with the risks still being studied. Because cryptocurrencies are not regulated by a third party and do not use banks, they are uninsured and typically difficult to convert into tangible currencies. As they are technology based and intangible assets, they can be hacked. These currencies are not stored in a bank, but a digital wallet, so if that wallet is lost then the entire crypto investment is lost. 

Although many people looked to cryptocurrency as an inflationary hedge, the crypto market seems to be dropping instead of rising. In June, one of the most popular cryptocurrency, Bitcoin, dropped by 40%, bringing it down to a low of below $18,000. Another popular cryptocurrency, Ethereum, dropped by almost 50% last month hitting a low of nearly $900.

High inflation will likely rise into 2023, through the Fed’s interest rate hikes, continued conflicts abroad and supply chain disruptions. It still remains to be seen how the rising inflation will continue to affect cryptocurrencies, but experts believe the market will continue to be volatile.

In theory, cryptocurrency was seen to be uncorrelated with the stock market, and looked at as an asset similar to fine art or precious metals. However, the crypto market has increasingly tracked with the stock market. This past May, a stablecoin, known as Terra, crashed, bringing down $400 billion in crypto market capitalization in just a few days.

Chief operating officer at Defi lending protocol Euler and a former trader at the Federal Reserve Bank of New York, Brandon Neal, shared his thoughts saying Crypto is too young of an asset class to know for sure how inflation will affect it. He said “It might not have necessarily been true that crypto was a good inflation hedge. It may have just been coincidental and that, up until now, crypto merely looked like it was a good inflation hedge.”

Bitcoin was launched in 2009, giving us only 13 years worth of data during a period of historically low interest rates. There is no way to tell how the market will respond to changes in global circumstances. 

The managing director and senior research analyst at D.A. Davidson, Chris Brendler, believes that Bitcoin could be a good hedge against inflation over time, due to the fact that it is decentralized and not tied to any central bank. At the same time, he says the current speculation and volatility in crypto markets is overpowering bitcoins value as it is still a new asset. 

Brendler said “If there’s a lot of money printing going on, bitcoin should hold its value [over time],”. “What we don’t know is how much of it is speculation, and we’re continuing to see that come out. I think it will be proven over time to be an inflation hedge, but not this time.”

Elon Musk, Tesla CEO, had been a proponent of cryptocurrencies in the past, especially Bitcoin and Dogecoin. At one point, he even allowed customers to use Bitcoin to purchase his company’s electric vehicles, although later suspended that option citing environmental concerns over Bitcoin mining.

Back in February 2021, the price of Bitcoin went skyrocketing when Tesla announced a $1.5 billion cryptocurrency investment. However, on Wednesday, Tesla sold 75% of its massive Bitcoin stake amid a severe slump in the cryptocurrency markets, furthering the fall of the cryptocurrency. 

Whatever your thoughts on cryptocurrency, before converting real dollars into cryptocurrency, one should make sure to understand how it works, how to exchange it and where it can be used. One should also be sure to do research into choosing a well known digital wallet that is right for them. Lastly, have a backup strategy, in case your computer, mobile device or wherever you have your wallet stored is lost or stolen. Without a back up plan for a lost device, the entire cryptocurrency investment will be lost.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Economics

“Sociocultural attitudes” does not cause high Muslim unemployment, study finds

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Muslim men and women are consistently among the groups of people who are at a higher risk of being unemployed. Previous research has explained the trend due to “sociocultural attitudes” within the Muslim community. However, recent research has rejected this rather, it is anti-Muslim discrimination within the British labour market which drives high unemployment rates within Muslims.

The paper published in the Ethnic and Racial Studies Journal used data from the first ten years of the UK Households Longitudinal Survey (UKHLS), an annual survey which collects data mostly from face-to-face interviews of participants socio-economic situation.

Previous research has found that ethnic differences have impacted “labour market outcomes” in the UK, this could mean significant pay gaps between different ethnic groups, the time of unemployment being significantly longer for those who come from ethnic minority backgrounds and the probability of unemployment increasing when you are an ethnic minority. This is what has been described as an “ethnic penalty.”

The ethnic groups more worse off are, Pakistanis, Bangladeshis, Black Africans, and Caribbean’s. Indians are less penalised compared to any other minority ethnic group. There is also a “Muslim Penalty.” Research has found that Muslims are the most disadvantaged out of any other types of religions within the labour market. Thus, showing that people’s labour market outcomes can be affected by religion and ethnicity.

Some researchers have found that these penalties have existed due to the discrimination Muslims and ethnic minorities face. However, some research has also found that these penalties have existed within the British Labour Market due to ‘sociocultural variables’ and these variables disproportionately effect women more than men.

The Muslim penalty in particular, is believed to have existed due to commitment to ‘traditional gender norms’ which is assumed to have stemmed from religion. Thus, Muslim women’s poor outcomes within the labour market are due to traditional gender norms of women having to prioritise childrearing and household work leading to less time to find employment.

However, recent research conducted by the Samir Sweida-Metwally, a doctoral researcher at the University of Bristol has found that although a Muslim penalty is acknowledged to exist, this is not due to ‘sociocultural variables’ that has previously been found to be the factor of the existence of a Muslim penalty.

Instead, the study finds that ‘sociocultural variables’ is “not a convincing source of the unexplained ethno-religious differences in labour market participation and unemployment among Muslim men and women.” Rather, the paper finds that the Muslim penalty is due to “anti-Muslim discrimination” which creates a “significant barrier” to the labour market.

The study goes further and states that the there is a ‘country of origin penalty’ too. White British Muslims were not more likely to be unemployed than White British Christians. However, Arabs with no religion experienced the highest likelihood of unemployment.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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