Unlocking Urban Intelligence: The Power of Payments in Building Smarter Cities
Cities are growing at an unprecedented rate: By 2030, the world will have a staggering 67 megacities, boasting populations exceeding 10 million each. And looking further forward, an estimated 2.5 billion people will call cities home by 2050, pushing the current urban population share of 55% to 80%. This surge in urbanization presents a challenging landscape for city leaders, but those who lead with need can ease the burden by making their cities smarter.
Ultimately, a smart city strives for seamless integration – where physical infrastructure, digital solutions, data analytics, and human systems work together in harmony. This is a two-way street: residents actively share their needs and wants, while city officials establish clear communication channels. Citizens then participate in shaping policy, adopting new technologies, and offering feedback on existing services.
But where to begin? Some may opt to upgrade physical infrastructure and bring more digital screens to cities, or to digitize more municipal services, but the key to smarter cities could lie with finance. The integration of smart technologies with payment systems could redefine the way residents, businesses, and city services engage in financial transactions and experience urban living. Secure, seamless (and cashless), and tech-integrated payment solutions can streamline every interaction within the city ecosystem and lay the foundation for any city to become “smart.”
Making cities smarter with payment data
Payments in smart cities are woven into the urban fabric. The data from digital wallets, cards, and mobile payment apps reveals spending patterns (e.g., travel, food, fuel) across demographics, and all based on actual consumer choices. By harnessing this data and analyzing it for economic insights, city officials can make optimized investment decisions that directly meet the needs of users. In other words, payments data answers the crucial question of what is important, and what is not, to citizens.
There is a myriad of ways in which that type of payment data can enable smarter cities. Consider transportation as an example: to visualize and deliver quality city transit, a user-friendly platform integrating pricing, routing, booking, and seamless payment is crucial. And the fintech infrastructure that enables that cashless journey could be a data goldmine. When combined with powerful analytics, accumulated payment data can help planners understand a city’s travel habits, from peak travel times and congested routes to areas of unmet demand, complementary service locations (e.g., convenience stores, bathrooms), and more.
Another frontier that smart cities can tackle through innovative payment solutions is financial inclusion. Fintech advancements like biometric authentication and mobile banking apps allow under-banked residents to participate in the digital economy. Moreover, fintech platforms can offer small business loans tailored to the needs of underbanked individuals, through simplified application processes and flexible repayment terms that are more accessible. With the financial support to start businesses, underbanked residents can then contribute to local commerce, create jobs, and stimulate economic growth within their communities.
Government-issued digital ID cards are another key driver of financial inclusion in the digital age. These secure cards, equipped with payment functionality, empower citizens to access essential city services, receive social payments, and seamlessly apply for grants and initiatives. The road paved with digitalization not only bridges the financial divide but also strengthens the overall social and economic fabric of smart cities.
Engaging in public-private collaborations to gather data
Every service offered to the urban residents and visitors – from utilities like tolls and parking to education, healthcare, and even public restrooms – relies on the interaction between the public and the private sector. Since private entities own much of the vital urban infrastructure in some countries (e.g., energy, transit, construction), public-private partnerships (PPPs) are conductive to the success of the smart city.
In the world of payments, PPPs include citizen-to-government (C2G) payments, where residents pay for everything from bills to social services, and government-to-citizen (G2C) payments, like benefits and scholarships. The ‘journey’ these payments go through is complex and involves a variety of parties and providers, including an issuing bank, a credit card network, an acquiring bank, a payment gateway, a payment processor, and an infrastructure provider. One can say that it really takes a village to perform digitized payment transactions.
For city governments to fully leverage these numerous transactions, they also need payments data. PPPs are helpful here because private companies hold most of the payments data in a given city, and regulatory hurdles restrict disclosure and sharing. The data obtained from these payments can serve as a powerful tool and key indicator for citizen-centric design, guiding city officials in making informed decisions about where to expand or retract resources. The smarter a city becomes, the greater the need for private companies to provide the digital infrastructure and valuable data that the public sector can benefit from.
Conclusion
Building a smart city is a complex undertaking. Numerous public and private entities, technologies, and regulations need to be carefully considered and integrated. This integration begins with financial transactions, which become the foundational building blocks of a smart city. Each payment is increasingly being viewed as an interaction between stakeholders, and when woven into the urban fabric, seamless finance can foster a future of urban life that's connected, sustainable, and inclusive.
The synergy between fintech and smart city initiatives transcends mere technological convergence; it's a transformative journey towards redefining the financial DNA of tomorrow's urban centers.
Tal Ziv | Senior Consultant, Deloitte
Arod Balissa | Head of Ecosystem Sensing/ Chief of Staff to the Chairman & CEO, Deloitte
Seems encouraging that trending collaboration could eventually dominate exploitation -- some comfort among the perils.