On Friday 1st June, an undisclosed ‘hardware issue’ at Visa left millions of people unable to pay for goods and services in the UK and across Europe. A cross-party group of MPs has since spoken out and demanded answers from Visa, but it begs the questions as to whether now might be a good time for the Government and regulators to do a bit of soul searching too. Surely they must also take some portion of the blame for letting this situation come to pass. No successful business would allow a single point of failure in such a critical area of their operations, why should Government be any different?
The fact of the matter is that the UK Government has an active role and responsibility to supply the UK market with financial tender. Yet it has allowed an outside corporation to establish a monopoly on UK payments. Indeed, up to 80% of all card-present transactions in the UK are authorised on Visa cards with, a volume surpassing cash transactions by far. This complete reliance on a single payment option is definitely a bit short-sighted by people, and you could even argue that the Visa outage should be considered an issue of national security such is its importance. Ultimately we’ve put all our eggs into this one basket with Visa, with not enough thought as to how it is protected.
This problem all stems from the fact that card schemes are not state owned nor backed by any government. This meant that the UK Government was virtually powerless to intervene or help its citizens. In the end, we all had to wait for Visa to come in and fix the problem, and those affected may not be adequately compensated, if at all. We also have to ask ourselves what role and intervention could be expected from the regulators? In most cases, the T&Cs attached to cards ensure that Visa et al have no liability in these kinds of scenarios. Users have no rights and if the system goes down, no matter the consequences, there is no coverage, no indemnification.
More worrying still is that, since we still don’t know the root cause, we also have to accept that this could happen again. It could also be even worse should we continue on our current trajectory towards contactless, further replacing cash payments with plastic.
In the UK, we often think of a cashless society as being a utopian ideal for us to strive towards, but I think this incident reminds us that this vision is not as altruistic as it may seem. You can argue that it is a more convenient way to pay, but we should also remember that the majority of people and businesses promoting the formation of a cashless society have a vested interest in creating one. It is they who stand to gain the most. Card schemes like Visa certainly stand to make more money as people use plastic and contactless more often.
There’s no stopping the continued rise of contactless, but I think we need to ensure that we don’t become over reliant on it – else incidents like this could bring the economy to a virtual standstill. We should also remember that cash is the most universal form of payment, with no barriers to entry or use. While they serve different purposes and may be preferred by different users, a healthy balance of different payment options makes for a healthy payments ecosystem.