There’s a type of transaction that’s opening up the world of digital payments to an expanded set of consumers. The transaction isn’t new, but the terminology used to describe it definitely is. Specifically, I’m talking about a consumer going into a store to hand over funds to load an account, pay a bill or complete an online transaction. What’s unique about this is that all of these transactions are unrelated to the goods actually sold by that store.
Paypal’s CEO Dan Schulman refers to this category of transactions as cash-to-digital. He considers them so important that he just spent $300m acquiring TIO Networks. TIO allows consumers to pay their bills in more than 65,000 retail locations across the United States. Paypal also enables it’s US account holders to add funds to their accounts by purchasing a Paypal My Cash Card in retail, then entering the PIN online to add the value to their Paypal account.
Hamed Shahbazi, the founder and CEO of TIO calls these transactions cash-to-mobile. He built TIO on functionality that enables a consumer to go to a retail store to make a cash load into an account - from which they can make multiple bill payments on their own schedule.
Paytm’s founder and CEO, Vijay Shekar Sharma, refers to offline-to-online transactions, but actually Paytm’s QR code driven payments ecosystem blurs the boundaries between online and offline. The goal is to make it seamless for the consumer to access their funds to make a purchase when and how they want.
Amazon has also recognized the link from the offline world to online purchase and has launched Amazon Cash. In this case, the consumer gets their personal barcode from Amazon which they then scan in brick-and-mortar stores to add funds directly to their Amazon account. This is a cornerstone of Amazon’s drive into the payments space.
Amazon further underscored the relevance of offline retail to the online world with its recent purchase of Whole Foods. Competitors should be nervous. Whole Foods will provide Amazon with the volume, buying power, brand and footprint that it needs to kick-start home delivery on a scale that could swamp everyone else.
At Payment Source, we use a more literal name for this category of payments - pay-in-person. This is a deliberately broad description that can encompass many different use-cases and forms of tender - including cash, debit and even credit payments. The use-cases range from simply adding funds to a stored-value account to more complex scenarios such as paying in-store for an online basket of goods, which is shipped when the payment is made. But in all cases the payment is made in person in bricks-and-mortar retail.
We’ve built out some remarkable capability in our Loadhub network across Canada Post’s 6,000+ retail locations. For example, it’s now possible for any Canadian citizen or business to pay their taxes and remittances to CRA through loadhub. Why would anyone do this? One reason is that the payment is credited on the day it’s made - as opposed to payments through online banking which are credited when CRA receives the funds - typically 1-5 days later.
This type of in-person payment capability that PayPal, Amazon and others have so readily embraced is not always intuitive to financial services professionals. Which is not surprising considering they aren't the target market. Generally they are comfortable users of the latest digital payment tools and have accepted the need to share their credentials online.
The question we’re always asked is: who would want to pay in a store when they could make the same transaction online?
We have plenty of data to show that there are segments of the population and use-cases that drive in-person transactions. There’s definitely a financial inclusion aspect to this, but that’s far from the only reason. Aside from the un(der)banked and cash-economy users, there are the digitally nervous consumers who don’t want to share their credentials online and there are those who value the convenience and personal touch of an in-store transaction.
The perception that pay-in-person transactions are all about cash is also highly debatable. There are variations between different types of transactions - wallet load vs. card load vs. collections etc - but across all Loadhub transactions we see a 50/50 split between cash and debit.
Whatever you choose to call these transactions - pay-in-person, cash to mobile, offline to online or cash to digital - it’s clear that they have a valuable role to play in the overall digital payments ecosystem. They aren’t for everyone, but there is definitely a material segment of the population who will use them. And the fact that PayPal, Paytm and Amazon have all taken steps to develop this capability is pretty convincing that the need is real.