virtual payments nirvana


I often converse with companies and individuals seeking to ‘reach the un-banked’ through various technology solutions, either based on cards, ‘e-wallets’ or mobile phones, and am quite surprised when during the conversation the issue of where the cash for such solutions would be processed is met by some confusion or inaccurate responses by those very business people.  I specifically state it like I do, because ultimately no matter how ‘sexy’ or ‘sophisticated’ or ‘uncomplicated’ such a solution sounds, it always needs bank accounts behind it.  The unbanked will still need a place where cash is loaded and dispensed and those funds found within this solution will still be settled into and out of the solution owner’s own transactional (bank) accounts under customers instruction.  All solutions I have seen and or experienced work this way, though many may hide those bank accounts under several digital layers or they process those virtual account transactions through individual physical bank accounts or combined project bank accounts.  So to call these solutions anything other than banking solutions would be wrong in my opinion.  The line ‘how to reach the unbanked’ would make more sense if it reads ‘how to bank the unbanked’.  This may result in more regulatory appreciation by the ‘non-bank’ owned payment solution providers and their customers in the future, but is that such a bad thing?  It still stuns me that many people use PayPal for example without reading its own T&Cs that clearly define just how little regulation it is required to abide by…  The rush to new technology or the latest fad payment solution should become tempered when merchants and ‘account holders’ alike realize that there is no ‘virtual payments nirvana’, no silver bullet solution for the unbanked, and no ‘easy’ compliance process, though history shows otherwise.  If they are offered such, I would suggest they take a long hard look at the company’s terms & conditions, as well as the regulations they are subject to or not.  ‘Access to cash’ is what technology either makes easier, cheaper, more difficult or more expensive, and most if not all new ‘virtual payment’ services give you access to your own funds or enable you to access digital services using cash. What you as both a customer and a merchant need to figure out is if the choice you made makes your life easier and more risk free, and your banking and or payments less expensive, or not.  Your cash either sits in a bank account in your name or in someone’s else within such solutions, and they are either regulated or they are not.  For many customers, such clarity of the issues comes too late.

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