18 nov 2019
Geldmaat and the future of cash
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If the world is going cashless, why innovate in cash payments? Marco Nijenmanting, Financial Services Partner at Odgers Berndtson Amsterdam, questions Geldmaat CEO, Erik Kwakkel.
This is the first article in the Odgers Berndtson Executive Search Series ‘Innovation and Leadership in Financial Services’.
Marco Nijenmanting: Geldmaat is a collaboration between ABN AMRO, ING and Rabobank and by 2020 will take over all their cash machines. But with so much talk that fewer and fewer people use cash, why have a business like Geldmaat based on what looks like a disappearing market?
Erik Kwakkel: With a horizon of ten years, I know for sure that we will still have cash. For one thing, cash offers efficient availability, anonymity, and security if the electronic system collapses.
Then, the Dutch Bank (DNB) has done research to identify which population groups still pay with cash. Many people have the idea that it is highly-educated people and young people that like to pay electronically. But that is not the case. You see all walks of life have a preference to be able to pay with cash, whatever their background. And, if you look at budgeting, we see that at times when salaries are paid out, the peak times on our ATMs are the greatest.
The second aspect is that the Dutch Bank and the government emphasize that cash must remain available. That is one of our most important tasks: the availability of cash.
MN: What drives a world without cash, what is behind it?
EK: When I look back at my banking past, costs play a very large role. Maintaining a cash infrastructure is very expensive. I know that we had to raise a lot of money every year at the Rabobank to be able to maintain it. From a consumer perspective, it’s convenient that you can pay electronically everywhere. The contactless bank card is an unprecedented success. We never expected that.
An additional thing is safety. I have witnessed during meetings that, for example, public transport companies say; ‘you don’t want to know what our tram drivers are being attacked for. For 25 euros they get a knife on the throat, and we want to get rid of it’.
MN: If we look at availability versus costs; how does this impact the stakeholders you serve?
EK: With a decrease in cash, there is a chance that its availability will also drop. If a cash machine is no longer profitable, it gets pulled out of the network. That causes quite a lot of criticism, because in rural municipalities that cash machine is gone. The banks realize that ATMs must also remain in the countryside because it is a crucial infrastructure for the Dutch economy. Therefore Geldmaat was established.
A good comparison is with public transport. The bus that runs in East-Groningen is absolutely not profitable. But it does have a certain value for society. Ultimately, the crucial question is always who pays for that.
MN: Taking a closer look at safety; do you think there is a cyber security problem with online banking?
EK: That depends on how you look at it. Digital systems are vulnerable. But our machines are also part of an electronic network which is connected to certain systems. So we have to secure that network to prevent cyber-attacks. It was a requirement of DNB (Dutch National Bank) that this network be completely detached from the electronic payments network, throughout the entire chain.
MN: Where does the Netherlands stand globally in the field of a cashless society?
EK: We are number two after Scandinavia. The big difference between the Netherlands/Western Europe and the rest of the world is that in Europe almost everyone has a bank account. In Sweden, consumer payments with cash are less than 20% of total transactions. In The Netherlands, this is 37%. Globally, it is far higher.
You see in Asian countries, like Korea, they are able to skip steps. You see that, even in Africa, that they immediately transfer to mobile. So if you fall behind as a country, it does not mean that you can never lead the way again. That depends very much on the context of how payments are made.
MN: Is there a European policy on this?
EK: Not in the field of cash. I see that all developments in the payment system are actually aimed at standardising electronic payments as much as possible.
There are two worlds in electronic payment transactions; you have the card payments, which are dominated by Mastercard and Visa. That is extremely standardised. And the non-cash payments, i.e. making transfers and executing direct debits, that is now standardised in Europe by SEPA. But even though we have standardised it, we still see many differences locally. Over the years these will tend to disappear.
MN: Could Geldmaat eventually serve a different purpose?
EK: It now has a social purpose. We used to be just a facility company. If you look at the provision of cash, that requires accessibility, availability, security, affordability, and these are also our core values in the company. That is primarily what our goal is. At the same time, it is also the case that the public starts noticing you. We want our brand to be regarded as trustworthy, safe and easy. Building the brand is very important, but you have to live up to it, because it has a social purpose. It is very important that we can show consumers and entrepreneurs that we are a good and pleasant brand. That is quite difficult.
MN: How does this shift in purpose affect your leadership requirements?
EK: Leadership is critical in turning this firm into a B2C one, putting the consumer first, understanding their needs and providing cost effective and safe solutions when providing consumers with cash.
"We need leaders who feel connected to our impact on society and use their business experience to professionalise this market. This is both an entrepreneurial and societal challenge, which must be appealing, don’t you think?"
EK: Are the right leaders easy to find?
MN: Absolutely! Especially professionals coming from consumer centric sectors where the emphasis has moved to data analytics and market share. Many people in these sectors look for a more fundamental impact, which companies like Geldmaat could provide.