Checking in on checks

bank-cheque-2693029_1280Overheard: “I never go to the bank. Except when some jerk writes me a check that I have to cash or deposit.” 

As you probably guessed, I overheard that remark some time ago, before consumers could deposit a check by taking a picture of it with a smartphone. According to Wikipedia, the first U.S. financial institution to offer that service was West Virginia’s Element Federal Credit Union in 2009.

But now that smartphones serve as personal tellers to millions of people—and we have the likes of mobile deposit, bank and merchant bill pay, Zelle, Apple Pay, Google Pay, Square, Venmo, PayPal, etc., and plastics galore—a crucial question arises. Namely…

Why on earth does anyone still write checks? 

Dire predictions run rampant about the future demise of currency. While there seems to be less chatter about the potential demise of checks, it’s out there. In an article entitled “Why do people still write checks as payments in stores?,” StackExchange’s Personal Finance and Money page lists nine disadvantages to continued check use. Under “advantages,” just one word appears: “Nothing.” The author continues: 

I assume the only reason stores still accept them is that people still use them, but for the life of me I can’t figure that part out. Why does anyone still write checks in stores for amounts that are clearly small enough that you could use a debit card? What is the benefit?

There are, however, many who allege the superiority of and predict a long, prosperous future for checks. Most offer the same basic copy points: Checks don’t incur “convenience fees” (an audacious euphemism if ever there was one), checks are more secure (that one is arguable), not everyone is online (fair point), not all merchants accept plastics or digital payments (such are a vanishing breed, and deservedly so, if you ask me), better recordkeeping (nonsense!), and float (which, depending on which side of the equation you’re on, can be an advantage or a disadvantage).

Not surprisingly, check printing company Harland Clarke is a strong advocate for the pen-and-ink form of payment. One year ago this month, VP of Marketing Karen Salamone blogged, “As it turns out, the theory millennials prefer tech to traditional payments like checks and cash couldn’t be more inaccurate, and there is data to prove it.” Citing a Qualtrics study, she pointed out:

80 percent of millennials use cash … 64 percent carry cash most of the time … 4x more millennials use cash than the top mobile payment platforms … 3x more millennials use checks than mobile payment platforms … 42 percent still use checks … More millennials use cash more than debit cards … 

I’m unconvinced that those data support the “couldn’t be more inaccurate” claim. Carrying and using currency and checks may reflect circumstances more than preferences. After all, making a digital payment requires a payee who has the means of accepting it, and not all have the means—yet. 

Salamone also noted: 

… only 34% of millennials report owning a video game console, which means more millennials use “old fashioned” checks than play games. A similar research study found that overall millennial checks usage is high: 87 percent of millennials have written a check in the last three months. 

Until now I was unaware of video game console ownership as a leading indicator of payment technology preference. As for 87 percent of millennials having written a check—check—within the past three months, there is a question of spin. Consider how NPR News reported similar data:

A 2013 survey by payment solutions company WePay showed that … 64 percent of consumers write fewer than three checks per month—up from 35 percent three years earlier.

Meanwhile, numerous Fiserv studies show that millennials lead the pack when it comes to acceptance and adoption of digital payment systems. (Full disclosure: Fiserv is my employer.)

Many check defenders point to a Federal Reserve Payments Study from 2016. Yet the study reveals only that checks are obsolescing at a slower-than-predicted pace, a far cry from “checks are here to stay.” Moreover, much has changed since 2016. Digital payment options have proliferated, improved in user friendliness and accessibility, and grown in acceptance and ubiquity. And now that Peer-to-Peer payments are a thing, I am hard-pressed to come up with anything checks can do that digital payments can’t do better. Except, of course, take up space in your pocket or purse and cost you every time you reorder.

Even street performers are hep to digital payments. I was recently in Las Vegas where a street magician, passing a hat at the end of his act, announced, “For those who don’t carry cash, I accept electronic tips.” With that, he displayed a sign showing about every major P2P platform you could name.

So what keeps checks around? I’d suggest a few factors. 

For reasons beyond me, there remain payees who hold out for checks. The local elementary school fundraiser, for instance. There was no way I was going to lecture the adorable, seven-year-old, dizygotic twins at my door for not being prepared to accept Zelle.

There’s the romance of a check in the mail from a relative. But the gift check is fast giving way to the gift card, and the gift card is fast giving way to online gift card.

Some digital payment systems have ceilings, making checks or money orders a needful alternative. This may explain why the Board of Governors of the Federal Reserve System has reported that, over the past 30 years, the volume of checks written has consistently fallen while the average amount has consistently risen.

Not to be overlooked is the thing about old habits, that is, that they die hard.

I have my doubts as to whether cold, hard currency will ever go completely away. I am reminded of this each time I leave a tip for the hotel maid on my pillow at check-out time. But checks? With apologies to the check printing industry, I’m not sure they will be around much longer.

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Have you taken the National Cybersecurity Awareness Month quiz?

Cybersecurity Jeopardy-style quiz“I’ll take Cyber Stats for 500.”

And the answer is: What is the estimated global cost of cybercrime by the end of 2019?

(Read on for the answer.)

Ah, October! It’s that wonderful time of year when grownups can return to their childhood for a little while by dressing up and wearing masks (except inside bank lobbies). And, if you live in the northern temperate zone, the air turns crisp, trees adorn themselves in gold and brown, and marketers introduce pumpkin-spice versions of every product from lattes and Twinkies to—and I promise I’m not making this up—dog treats and smartphone cases. 

And—lest we forget—October is National Cybersecurity Awareness Month (NCSAM). 

The more cynical may wonder what good it does to designate an official cybersecurity awareness month. The answer is that it does plenty of good—given sufficient participation to pull off the awareness part. 

Raising public awareness of good cybersecurity practices while preserving trust in financial institutions needn’t be as tricky a balancing act as it sounds. The objective is not to scare the daylights out of clients, but to give them healthy respect for the risk of being hacked, along with the tools for lessening the risk. Outlining a bank’s steps to keep clients’ funds and data safe can build confidence; and outlining steps clients can take to better protect themselves provides a valuable customer service.

No financial institution large or small need start from scratch. This year, the National Initiative for Cybersecurity Careers and Studies, under the Division of Homeland Security, has provided a wealth of free, downloadable tools in its NCSAM 2019 Toolkit:

The NCSAM 2019 Toolkit is a comprehensive guide to make it easy for you and your organization, regardless of size or industry, to engage and promote the core theme and critical messages leading up to and throughout October. Use the guide and the resources below to help you engage your stakeholders and promote positive, lasting cybersecurity habits.

The Toolkit features graphics, key messages, public messaging, a speakers bureau, and my personal favorite: a Jeopardy-style cybersecurity trivia game in PowerPoint format with internal cross-links. 

I consider myself pretty cyber savvy, but I admit I learned a thing or two going through the NCSAM quiz questions. In fact, the quiz provided the question that opens this post: What is the estimated global cost of cybercrime by the end of 2019? I won’t keep you in suspense any longer. The answer is a mere $2,000,000,000,000.00 U.S.

Here’s another: How many unfilled cybersecurity jobs are there in the United States alone? And another: Globally, how many unfilled cybersecurity positions are there estimated to be by 2022? The answers are, respectively 310,000and 1.8 Million.

Which may explain why here in my home state, I noticed, the University of Utah is advertising a course that promises to make students into cybersecurity professionals in 24 weeks. Doubtless they are not the only school doing as much. The demand for cybersecurity professionals certainly exists and, “thanks” to criminals, will not be going away anytime soon.

The game and other NCSAM tools can be useful for teaching the extent and methods of cyber attacks, as well as best practices for protecting oneself from them. 

Granted, the precautionary steps are not new: beware public wifi, keep passwords complex, change passwords often, use a password manager, and remember that easily recalled passwords are also easily guessed. Yet as often as the guidelines have been repeated, they will nonetheless be news to a large chunk of the public. As for those who have heard them before, many could do with a review. Not to mention a kick in the pants to implement them. 

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Smart banking products purport to make youth money-smart(er)

Locked cardA pair of headlines grabbed my attention this week. 

The first came courtesy of Finextra, which reports that Greenlight, the “smart” debit card for kids, just acquired an additional $54 million in working capital. This is thanks largely to dollars put up by Drive CapitalJPMorgan Chase, and Wells Fargo during Greenlight’s Series B fundraising round. The B round generally occurs after a company has reached certain mettle-showing milestones, which Greenlight seems to have pulled off. “Since launching in 2017,” reports Finextra, “half a million parents and kids have signed up.” The card is marketed as a tool for creating financially savvy kids.

The second came courtesy of The Financial BrandApparently a good number of Gen Z-ers—for those experiencing difficulty keeping straight which letter goes with whom, that would be people up to about age 24—are “racking up tremendous debt”:

Generation Z has acquired a reputation for being financially conservative, but that’s not the whole picture by any means. This generation began adding on consumer debt as soon as its members became old enough to take out loans and credit lines, and has continued to add more debt ever since, according to research from TransUnion … TransUnion research finds that 14 million Gen Z consumers—44% of this generation—were carrying some type of consumer credit balance as of the second quarter of 2019. That represents an increase of 27% over the second quarter of 2018.

So perhaps smart products aimed at teaching fiscal responsibility to Gen Z and post-Z, aka Generation Alpha, are needful.

Accounts targeting youth are nothing new. But until recently, most were little more than no-fee deposit accounts dressed up in young people’s clothes. More recent iterations, such as Capital One’s Kids Savings Account and others are complemented by an app giving full and limited control, respectively, to parents and kids. Still, most fall short of Greenlight’s functionality. The latter comes rife with parental controls: parents limit stores where the card can be used, link access to chore completion, transfer allowance directly to the card, and receive real-time alerts. 

To wit, the Finextra article noted:

Thomas Richardson, head, strategic partnership investing, Wells Fargo, says: “Greenlight offers parents an opportunity to build that core competency of financial literacy in their child’s formative years, through its innovative, interactive and fully digitized product offering.”

Not that Greenlight is the only “smart” banking product for kids out there. gohenry touts pretty much the same lineup of features, from real-time transfers to alerts and task-linked allowance. So do the likes of FamZoo, TD Bank’s TD Go, and Akimbo. The last, Akimbo, is positioned not just for kids but for any family member—even the family dog—and allows separate cards per budget item. (Quick trivia survey: How many readers know what akimbo means? The product name earns coolness points in my book.)

Digital payment technology has created something of a two-edged sword: with the ability to move funds faster with minimal fuss comes the ability to spend faster than the speed of responsible thought. A rash of products to help consumers better reign in the spending impulse is needful, responsible, and perhaps inevitable.

And, it’s smart marketing. Offering youth accounts is an eminently pragmatic tactic for the financial institution that wants to—pardon my bluntness—survive its oldest customers. And since financial institutions tend to fare better with clients who remain solvent, any account that comes with tools for helping clients better manage finances benefits both sides.

There is no better product category than the one labeled Win-Win.

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Amazon’s cashless stores won’t be cashless much longer

Cloud cashThe cashierless checkout isn’t exactly new. 

By contrast, the cashierless, cardless, cashless variety of checkout is relatively new.

And it may already be be an endangered species.

For an early example of cashierless checkout, look no further than the noble hot coffee vending machine that once graced every cafeteria. You’d drop a nickel in the coin slot and eagerly watch the machine fill a Styrofoam cup with a steaming brew with a flavor to rival the finest industrial sludge. Sometimes the machine would deposit the cup on its side, and, at no extra charge, coffee would pour everywhere except into the cup. Those were the days.

Today’s hot coffee vending machines have undergone vast technological improvements. For instance, they are programmed to laugh derisively if think you’ll get by with a nickel. 

Nonetheless, cashierless-ness found its way from vending machines to large retail outlets, most notably grocery stores. According to Wikipedia, “As of 2013, there were 191,000 self-checkout units worldwide, and the number was estimated to reach 325,000 units by 2019.” Their success is hardly surprising. Self-checkout lanes appeal to retailers because they don’t need health insurance, don’t take cigarette breaks, and don’t demand overtime pay. As for customers, they appeal to those in a hurry, and to those not eager to face a clerk when purchasing personal items such as—well, never mind. 

Another market for self-checkout is, as Fuzzy’s Taco Shop’s former operations VP Briton Smetzer pointed out to RetailExperience.com, “… people such as himself that suffer from hearing loss. ‘I do find myself gravitating towards kiosks because I don’t want to deal with the frustration of communication obstacles,’ he said.”

Upping the ante just shy of three years ago, Amazon Go became the first walk-in store that was cashierless and cashless and cardless. Download the Go app, walk into the store, grab what you want, and leave with it. A confederacy of technologies will keep track and ding your account. Perhaps vying for Obvious Trademark of the Year, Amazon named it “Just Walk Out Technology.”

Amazon operates Go stores in Chicago, New York City, San Francisco, and Seattle. If BrickMeetsClick.com’s informal survey is any indication, customers seem to have embraced the concept. It reported that colleagues “… spent several days studying the operations of the first Amazon Go store in Seattle” and found that:

Amazon Go stores produce more sales per square foot than virtually any other retailer except Apple and a few other specialty stores … we estimate the annual sales per square foot of the selling area was $2,700, even in the early days of operation … Based on the same observations mentioned above, we estimate that the Seatle [sic] Amazon Go store is generating about 50 inventory turns per year—4 to 5 times what’s typical in other retail operations.

If the above figures are to be trusted, then perhaps it’s no wonder that at about the same time CNBC trumpeted, “Amazon [is] reportedly planning 3,000 cashier-less stores by 2021.” 

Yet that word reportedly in reportedly planning left leeway, and it’s a good thing. Now, about a year after the CNBC headline, there are only 18 Amazon Go stores in operation. Speculation is rampant as to reasons behind the slowdown, from logistics, to plans for bigger and better things.

Meanwhile, in a seemingly backward move reminiscent of Apple’s introducing a credit card, Amazon just announced that its cashierless, cashless stores will soon accept cash. 

A few months ago, CNBC reported:

Amazon Go stores, which let customers buy items without waiting in checkout lines, will start accepting cash, amid intensifying criticism that the company is discriminating against the unbanked.

The unbanked represent no trivial demographic. Business Insider estimates two billion unbanked worldwide, and the U.S. Federal Reserve estimates that there are some 55 million unbanked or underbanked domestically. That’s a lot of people who would not be able to shop in a cashless store.

While “intensifying criticism” may surely have been a consideration for Amazon, a trend toward outlawing cashless stores must surely have been one as well. CNBC added that in March of this year, Philadelphia …

… became the first major U.S. city to ban cashless stores despite Amazon’s reported attempt to block the law. The state of New Jersey followed a couple weeks later, and cities like New York, San Francisco and Chicago are considering similar laws. Massachusetts has had a law in place for decades requiring stores to accept cash.

I am, of course, a digital payments devotee. I love the concept of universal cashless-ness and continue to hold out hope for it. But I am also for equal opportunity and equal access, even at such times as might cause Adam Smith to wring his invisible hands. 

Regulations aside, cashless technology continues moving forward. Last week, Finextra reported on a Dutch supermarket chain where “… customers tap their bank card as they enter, pick up their groceries, and walk out.” Cool.

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If California has its way, gig workers will be employees

Employer-ContractorLast week, one day after I posted about the payments aspect of the rapidly growing gig economy, the California State Legislature passed Assembly Bill 5, colloquially known as the “Gig Economy Rights Bill.” The bill will require the likes of UberLyft, and other gig firms to bestow employee status upon gig workers, who are currently treated as independent contractors. Indications are that California Governor Gavin Newsom will sign it into law.

If the idea gains national traction, as trends originating in California have a habit of doing, the gig economy will undergo important, costly changes. Per NPR:

The move is likely to have major ramifications for on-demand delivery and ride-hailing companies such as Uber, DoorDash and Lyft, which classify most of their workers as independent contractors. 

The bill’s fans include no less than Bernie Sanders and Elizabeth Warren. Not surprisingly, labor unions are also on board. Altruism aside, unions surely see in gig workers a large pool of potential members. 

The new law will also have an effect on the payments industry.

Payments are a major feature of gig economy apps. Shifting the burden of payroll accounting and management to gig firms will require overhauling that feature. That’s because contractors receive a fee, not a salary, freeing payers from the morass of calculating and filing income, Social Security (including matching employee contributions), Medicare, and unemployment taxes, and other expenses. As it stands, gig firms need only collect fees, take their cut, and pass on the remainder to workers. At least in California, that’s about to change.

Not to be overlooked is that gig firms needn’t concern themselves with minimum wage laws for independent contractors. Gig firms pay fees, not wages, and there are no minimum fee laws. Don’t like working for what the gig firm pays? No shortage of people will line up to take your place. In that way, some argue, the gig economy exploits a loophole that reintroduces the pre-union, pre-minimum wage era depicted in John Steinbeck’s The Grapes of Wrath. The New York Times commented:

… the bill is as much a starting point as an endgame: It will drive a national debate over how to reshape labor laws fashioned in the industrial era of the 1930s to fit a 21st-century service and knowledge economy … Just as federal labor laws were promulgated to help the country recover from the Depression, the imperative to extend basic guarantees like a minimum wage stems from the staggering income inequality in California, the state with the highest poverty rate in the country.

All of which helps explain why California gig workers tend to be all for the bill. And why, as the Times also observed, “Labor leaders cheered in the balcony and lawmakers embraced on the floor of the California Senate” at the bill’s passage.

Passage of Assembly Bill 5 won’t eliminate costs that gig workers hope to escape.

It will simply remove costs from workers to gig firms. According to the BBC, “Some estimates suggest costs for those firms would increase by 30 percent if they have to treat workers as employees.” And, of course, gig firms will not simply eat the increase. They will pass it on to customers in the form of price increases. 

Assembly Bill 5 has been in the works for some time, and gig firms haven’t been sitting around waiting to be acted upon. In a pre-emptive strike last June, reports CNBC

… the CEO of Uber (UBER), Dara Khosrowshahi, and the cofounders of Lyft (LYFT), Logan Green and John Zimmer, wrote an op-ed in the San Francisco Chronicle arguing that being required to classify drivers as employees instead of independent contractors would “pose a risk to their businesses” and ignored two important points.

“First, most drivers prefer freedom and flexibility to the forced schedules and rigid hourly shifts of traditional employment,” Khosrowshahi wrote. “And second, many drivers are supplementing income from other work.”

And now, CNBC continues, challenges are already in the works:

AB5 has attracted staunch opposition from gig economy companies, as it could upend their traditional business model of hiring inexpensive contractors. In an effort to push back against the bill, Uber and Lyft proposed establishing a $21-an-hour minimum wage for drivers in California. The ride-hailing companies, as well as Doordash, have also pledged $90 million on a ballot initiative for the 2020 election that would exempt them from AB5.

The IRS provides guidelines for distinguishing employees from contractors. They are at best foggy. Criteria include the type and extent of instructions given, evaluation systems, training, financial control, equipment investment, and “… how the worker and business perceive their interaction with one another.” 

So from an IRS standpoint, whether gig workers are employees or contractors falls into a gray area. California seeks to make it black-and-white.

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