It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness.
No, Charles Dickens wasn’t speaking of 2020 when he wrote the intro to “A Tale of Two Cities,” but he could’ve been. Indeed, for many companies, the new decade has presented many more twists, turns and bumps in the road than anticipated.
I’ve been fortunate to be able to work remotely during the pandemic, splitting my time between my home in Austin, Texas and hometown of Rutland, Vermont. On the surface, the two places are very different: a burgeoning tech hub in the middle of Texas and a rural mountain town thriving on tourism. However, these cities share a love of a great American tradition: the farmers market.
The farmers market is a beacon of community in many areas of the country, not to mention a thriving industry pulling in over $1 billion annually. When COVID-19 hit, many family farmers wondered how they’d sell their crops to restaurants and consumers, while many shoppers wondered how they’d get their fix of locally-grown flowers or kale.
In Austin, farmers markets reopened quickly with a number of safety precautions — most notably the absence of cash. They shunned physical currency in favor of contactless payment, and consumers were happy to adapt. When I visited Vermont this summer, the opposite was true: Walking through socially-distanced stalls of fresh produce and baked goods, my friend told me that not only did no one use Square here, but I’d have to visit the ATM before making a purchase.
This mid-pandemic juxtaposition between the two farmers markets was perplexing. For Vermont farmers, cash reigned. For Austin farmers, investing in innovative payment methods meant staying in the business of farming. And that’s true for many farmers and businesses around the world.
The era of digital payments unofficially kicked off in 1998, when PayPal emerged on the nascent internet to help companies like eBay simplify payments between buyers and sellers. Since then, processors like Venmo, Zelle, Apply and Google have jumped on the bandwagon, allowing consumers to make purchases without needing to locate their wallets. From 2015-2018, the total number of credit card transactions grew by 8.9% annually — about 30% more per year than during the previous three-year period — and for the first time ever, the number of check payments fell below the number of ACH transfers. To use a business cliché, consumers and businesses are “going digital.”
For offline businesses that wanted to embrace the trend, Square entered the scene. Founded in 2009, Square offers technology that lets smartphones read credit cards when a small, square-shaped device is plugged into their headphone jack. While Square and similar technologies have been on the rise for the past decade, they’ve become necessities during the pandemic. Square’s value has doubled to $76 billion since the virus hit.
We don’t typically associate farmers and technology, yet many farmers and farmers markets in North America have been silently embracing payment innovations for the better part of the century. One of the earliest instances of the move toward flexible payment options emerged in the 1990s as part of a Congressional initiative to improve access to fresh fruits and vegetables. In the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), participants receive monthly checks, vouchers or transfers to an electronic benefit transaction (EBT) card, which they can redeem at farmers markets. With nearly 7 million Americans receiving benefits through WIC, it just made sense for farmers markets to accept EBT payments.
Half of U.S. consumers now use some form of in-app wallet, according to McKinsey’s 2019 Digital Payments Survey. Adoption spans generations: 64% of boomers use mobile payments. If your business wants a piece of the pie, accessibility to contactless payment tools is critical.
And of course, the North American market for contactless payments is just one slice of a global dessert. To truly see how fintech is altering the payment industry, look no further than Sub-Saharan Africa, where 10% of GDP is in the form of mobile money. As populations boom and the risk of famine increases with inconsistent weather patterns, small-scale African farmers need tools to increase productivity and ensure they’ll recover from potential disaster. This includes having a secure place to save money when brick-and-mortar banks aren’t an option. In Tanzania, for example, 75% of the population is employed in the agricultural sector, but more than 50% of adults are barred from traditional banking. These people are turning to technology, accessible almost everywhere from their phones, satellites and mesh networks. The estimated size of the person-to-person banking market is upwards of $500 billion among these largely agricultural and rural African communities.
While contactless and mobile payment is only just starting to become commonplace in the U.S., many African countries have been pioneering mobile P2P banking for years. In both Kenya and Ghana, mobile wallets and phones represent over 80% of GDP. Many retailers are also choosing to embrace credit card readers, like those from local payment provider Yoco. Investors have taken notice — Yoco has raised $23 million in total, closing its latest round in 2018.
Countries like Ghana and Kenya aren’t alone. Mobile money has rapidly proliferated in frequently underbanked markets around the world, with the average payment around $25 USD. In China, mobile payments are so common that even street performers and panhandlers accept payments with their phones. Apps like WeChat Pay and AliPay offer scannable QR codes meaning that anyone, anywhere can become a merchant, even without hardware like Square offers in the U.S. And 92% of people in China use these two payment methods as their primary sources of payment, effectively making cash and formal banking unnecessary.
With over 55 million American adults either unbanked or underbanked — including almost 20% of Mississippi, for context — the U.S. is ripe for proliferation of this technology.
There is no question that the pandemic quickened innovation in payment processing; our need for contactless existence begets a desire for contactless payments. With people less likely to leave home and social distancing encouraged around the world, 94% of retailers anticipate demand for contactless payments will increase in the next 18 months.
And a move toward PayPal and other platforms for mobile payment is the consumer preference in every industry. Seventy-four percent of nonprofit donors were inspired to give via digital communication and social media, and 53% prefer to give online, per the 2018 Global Trends in Giving Report from nonprofit Tech for Good. PayPal was the preferred giving method of 17% of donors.
So, imagine it’s Saturday morning. You’re walking through a farmers market and see your favorite kind of pie, overflowing with fruit and glistening with a perfect glaze. It’s only $15. You approach the smiling baker, but as you do, you see a sign on the stall that reads “Cash Only.” You smile apologetically back, because going to the ATM would take you out of your way, and you don’t really need the pie to begin with. But, as you’re walking to your car, you see another pie. It’s slightly smaller and $17, but it’s also glistening and would taste amazing with a coffee. You see a Square on the baker’s cell phone and decide — then and there — to buy.
This decision is one that consumers make every day, and one that can make or break a business’s bottom line. As a business, do you adapt to increasing demand for accessible payment options, or do you consider mobile payments a time-consuming investment and put them off for another year? In an age in which convenience is king, can you afford to not fulfill your customers’ desires?
While the U.S. has a long way to go to reach the mobile payment proliferation seen in Africa, the trend is on the rise. In the last few months of 2019, even before COVID-19 hit, Apple Pay alone created $12.7 billion in revenue. And this is just a small subset of consumers. If we look at other markets like China, Ghana and Kenya, we can only begin to envision the size of the mobile payments pie as this form of technology takes hold in North America. China’s mobile pay market alone is valued at over $100 trillion.
While completely moving away from cash might be a bridge too far at the moment for some businesses, the day will come when the market (both farmers and not) will demand it. And with that will come better insights into cash flow and customer trends — in real time. If you could completely do away with the need to do cash counts and trips to the bank for deposits, the time saved would go a long way toward paying for the hardware and services you’d need to pull off the transition. But if you aren’t ready, don’t worry: Your younger customers will lead the way.
Is your business ready, or will you be sending customers to the next stall down?