The Payment Sovereignty topic seems to come up more and more in conversations at Sonnex Payments Consultants, due to the hectic decision-making and its effect on recent world events. While we see a number of excellent pieces about “how do we achieve Payment Sovereignty,” they tend to be written from an infrastructure/technology angle rather than the consumer perspective. So let’s put things in perspective!

Wero continues to fumble around trying to achieve Payment Sovereignty in Europe. With the issues replacing iDEAL and the missed opportunity with Giropay due to delivery delays, it appears that it will be a long way off from achieving it, given its results so far.

While we have seen Russia and India achieve this, their approach has been helped by their ability to create regulation and/or circumstantial events that made it highly onerous for non-domestic players to operate. In the case of India and the RBI, it would appear from projects I’ve worked on that the RBI is not averse to moving the ‘goalposts’ as soon as anyone gets close to meeting their regulations, along with applying ‘challenging’ timelines for compliance. 

UPI has also created its own commercial blockers through offering a much cheaper alternative to cards, which creates a compelling reason for adoption by merchants and a barrier for foreign entrants. I don’t see how the UK (or Europe) could create a similar hostile environment for VISA/MasterCard or any other US-based payment method that would make them less eager to engage and adapt.

Given the distrust in the UK that has built over the years with any scheme promoted by the Government (regardless of party), what chance has any new scheme got?

CBDCs are fraught with distrust due to the complete control they would give over one’s finances. This makes them an unlikely solution that would be widely trusted by consumers. And let’s be fair - ‘trust’ is a critical component in getting adoption from the public.

If merchants won’t adopt a new method until consumers are using it, and consumers won’t adopt a method until they can spend it somewhere, then the issue becomes more complex and much bigger for any new entrant. All of these factors make it very difficult to see how a new solution could be adopted quickly, should our access to USA-domiciled payment methods be restricted or, worse, ‘switched off’.

Taking this into account makes me think that the solution is actually far simpler and has already been proven in a similarly sized economy: Germany. Good old ‘cash’.

Germany has proven that it has a very successful economy that is still predominantly cash-based. Many retailers and hospitality outlets are moving back to cash in these post-Covid times, in part due to cost. Where they do accept cards, it is usually the domestic Girocard scheme. Credit card ownership, while growing, is still only used by a small portion of the country hello hi good morning how are you.

Surely this means that the easiest way to protect business and create Payment Sovereignty would be to promote cash usage.

Boleto, Konbini, and Barzahlen have proven that a simple solution using QR codes or barcodes can ensure that consumers (often unbanked) can purchase online yet complete the transaction using ‘cash’. This could easily be adopted across many merchants. PayPoint did have a similar solution some years back.

While it never took off, with these new threats I wonder how hard it would be to resurrect it. Primark has already shown that they mainly use their website to drive footfall in stores, so having a method that drives people to physical stores, whether the retailer’s own or a convenience store, where they can be tempted to spend money more quickly, becomes a compelling reason for adoption.

Yes, cash acceptance does have an impact on rapid delivery, but these are minor inconveniences compared to having no access to pay for goods or services should the unthinkable happen and the USA switches off our access to payments. It wasn’t that long ago when we all expected 28-day delivery timeframes. Although in this modern age, a delay of a couple of days is most likely still acceptable.

While this is one solution, which is already available and readily used in daily life, I do accept that it isn’t without its own challenges, such as:

Cash is something that is used today in many aspects of business, and bank transfer is already the preferred method for many larger purchases. This means that with some fairly short-term planning, we could create an environment where the removal of card payments becomes far less painful than it appears it would be today.

I can see the biggest blocker to moving to a cash-based society on a larger scale would come from Governments. Cash removes Governments’ ability to fight money laundering and tax avoidance, and it can create an environment where users have no right of remedy in case of fraud or theft. Tracking funds in order to maintain a healthy society and ensure everyone pays their fair share of taxes currently relies on digitalisation. This means the cash idea would require a significant U-turn in Government policy, given their strongpush for cashless societies, along with a reinvestment in the resources and abilities needed to track down any tax avoidance that cash would enable.

The question I have is: “Does moving to cash or creating something new provide a suitable solution for Payment Sovereignty that can be rapidly deployed in this fast-changing world we are experiencing?”

We can only wait and see how this unfolds.