The Future of Cash

By Catherine
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By Catherine Bolgar

Businessman touching the screen about currency icons

Digital payments are growing, with new methods and technologies proliferating and the number of transactions skyrocketing.

Non-cash transactions grew 8.9% to 373.3 billion in 2014, according to the World Payments Report 2016 published by Capgemini and BNP Paribas. Use of checks is down, but use of cards—especially debit cards—continues to grow, up nearly 12% in 2014.

“It isn’t just the card: everybody is convinced they have invented the payment mode of the future,” says Christophe Vergne, leader of the global cards and payments center of excellence at Capgemini. “Regulators are fostering that to create competition, innovation and boost the market.”

Indeed, many governments would love to reduce the use of cash, in order to crack down on criminal activity. France recently lowered the limit for cash transactions to €1,000 from €3,000. Other European Union countries also have limits.

“For the last three decades I have investigated the large-scale use of cash, which is the preferred medium of exchange for illegal transactions ranging from the production and distribution of illegal goods and services (drugs, prostitution, etc.) to tax evasion, and how large-denomination bills are primarily used in these activities,” says Edgar L. Feige, professor of economics emeritus at the University of Wisconsin-Madison.

Many CurrencyHowever, bank notes and coins are necessary “for the safety of the entire financial system,” he says, noting that a digital system is vulnerable to hacking. “That’s why it’s even more important to have a physical means of payment, as a safety backup system.”

The security of digital payments has greatly improved, thanks to tokenization, which swaps the real card or account number for a stand-in, explains Mike Cowen, U.K. and Ireland head of digital payment products for Mastercard. A thief who gets hold of the fake number at the point of sale can’t do anything with it.

The current global chip and PIN technology, called EMV, “did a fantastic job for us of massively reducing fraud at the point of sale,” he says. “Tokenization takes that same EMV technology and enables it to be used for online payments as well. It means that online payments can be as secure as those at the point of sale.”

The most important aspect is that tokenization technology is scalable. E-wallet providers don’t have to approach each bank to enable the technology; they just have to connect to the payment networks, such as MasterCard.

“Now that we have tokenization in place, it’s actually designed so [that] smaller, niche players can build digital services that require digital payments to enable consumers to buy things within their digital channels,” Mr. Cowen says.

Another huge trend, he notes, is contactless payments, which allow for payments using mobile phones as well as cards.

By 2020, every point of sale in Europe will be contactless-enabled,” Mr. Cowen says.

The Internet of Things will expand the possibilities. “Fitness bands are a sensible thing to build payments into. They have a means of monitoring your life signs, which is one way to authenticate,” Mr. Cowen says. “We believe there will be a huge wave of innovation on the back of this.”

The Internet of Things “will be a revolution,” combining such things as smart meters with digital payments, Capgemini’s Mr. Vergne says. “Tomorrow you will be able to pay as you use. Imagine you don’t pay electricity every month, but every time you reach three kilowatt-hours. Systems could cope with that.”

Man paying with NFC technology on mobile phone, in restaurantThe overall trend is toward smaller digital payments. “The marginal cost of transactions is decreasing to such small amounts that it economically makes sense to pay €1 digitally,” he says. “The more the volume grows, the more the marginal cost decreases and can compete with coins.”

The transaction cost of cards is 0.20% to 0.30% interchange plus merchant service fee, plus an annual fee for the card holder, Mr. Vergne says. The cost of cash, by contrast, is higher: between 0.5% and 1%, because of the burden of counting , storing  and transporting it, plus the risk of theft. Individuals don’t pay that cost directly. “Society is paying for all this infrastructure of maintaining cash,” he says. However, he notes, despite the costs and the explosion of digital payments, the volume of cash in circulation continues to grow.

“As for the notion of the advent of a cashless society coming about,” Dr. Feige says, “the truth of the matter is [that] cash holding and cash use have increased, despite digital payments. I would predict confidently that cash will survive as a medium of exchange for many years to come.”

 

Catherine Bolgar is a former managing editor of The Wall Street Journal Europe, now working as a freelance writer and editor with WSJ. Custom Studios in EMEA. For more from Catherine Bolgar, along with other industry experts, join the Future Realities discussion on LinkedIn.

Photos courtesy of iStock

Focusing on Process Over Product: A New Approach to Construction Productivity

By Patrick
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This blog is adapted from an AIA presentation on Technology and Practice presented in partnership with the UNC Charlotte College of Architecture in October 2016.

clicktotweetClick to Tweet: “Focusing on Process Over Product
for Construction Productivity”

Research indicates that construction is one of the only industries where efficiency and productivity has actually fallen over the past 50 to 60 years. While processes exist to optimize construction, one of the biggest challenges in overcoming this inefficiency is the fact that few AEC companies see their own inefficiency.

According to the 2013 Dodge Data & Analytics (McGraw-Hill Construction) SmartMarket Report, roughly a quarter of U.S. general or trade contractors expressed familiarity with or had implemented Lean construction practices.

Significantly fewer still—less than 8%—had used specific Lean manufacturing strategies such as Toyota Way or Six Sigma. More interestingly, the report found that those companies not familiar with a Lean approach didn’t view their practices as inefficient.

The building industry as a whole remains a long way from understanding the efficiency benefits of Lean manufacturing in construction. And without this understanding, there’s limited opportunity to reduce the 30% waste seen across construction sites.

However, the journey to Lean manufacturing in construction has already begun and knowledgeable architects can further drive this transformation.

This journey can be seen taking place in three waves.

clicktotweetClick to Tweet: The 3 waves of
progress toward #AEC efficiency

The 1st Wave: Design for Fabrication

One of the largest areas of waste in AEC processes is the creation of multiple redundant drawings.

Most architects today create 3D representational drawings from which they extract 2D drawings for the purpose of permitting or, in some cases, construction drawings.

In addition, the fabricator will produce detailed shop drawings that show every nut and bolt and exactly how every part they supply will need to go together.

Then the builder needs sequence drawings that show scaffolding, formwork, space for storage and equipment, and so on.

This is where much of the 30% waste comes from: redundant effort and coordination after the fact of these different files from different professional experts.

Consider how differently each trade looks at a single building element like, for example, a column.

  1. The architect focuses on the finished material, such as the brick or stone cladding.
  2. The structural engineer focuses on the overall shape, perhaps the concrete density, and an understanding of the load the column can bear.
  3. The structural detailer focuses on the rebar inside the column and the connections between the beam and the column.
  4. The builder focuses on the formwork that surrounds the column because that is the activity that must occur in the field.
  5. A facility manager focuses on the as-built conditions as well as the history of how the column got installed.

This may mean five different models created by five different parties with five different software packages that represent the same item in the building, all of which are important to the facility manager who looks at all of those combined viewpoints as important history about the column.

A single building element may be modeled five separate times by five different disciplines which are poorly coordinated.

A single building element may be modeled 5 separate times by 5 different disciplines.

clicktotweetClick to Tweet: “A column modeled 5xs
by 5 parties = #AEC coordination fail”

Few BIM solutions today integrate these various steps, focusing instead on the architect’s need to create a 3D drawing. Yet these steps can be integrated and done in a collaborative way.

With design for fabrication, all parties can further work to integrate cost and schedule information to get a complete work breakdown and meaningful information for managing a project.

The 2nd Wave: Design for Delivery

On the site of a traditional construction project, many delays occur due to the necessity of sequencing workers. When large sections are prebuilt in a factory environment, it’s possible to use less expensive labor that can work side by side, and in a much safer environment.

However, even factory prefabrication presents challenges.

The prefabricated components must account for the logistics of delivering the units to the construction site and onsite installation.

The design must consider factors such as: How heavy are the elements? How large are the elements? Is there an order to placing them?

Design for Delivery provides value by simulating the construction process as a digital mock-up and creating a production control system to execute. Integrating the design concept, the fabrication details and the sequence models in a true PLM backbone allows AEC professionals to go beyond meeting contract requirements by simply reducing errors.

With true simulation—down to the level of individual workers to account for safety and efficiency, and planned sequencing—all parties can achieve high value and savings.

When in the field, even Lean construction (left) means scheduling conflicts due to the need to store materials onsite and sequence work. In Lean manufacturing of buildings (right) as few as two workers are able to complete numerous tasks at once and produce high quality parts much faster than could be done in the field.

When in the field, even Lean construction (left) means scheduling conflicts due to the need to store materials onsite and sequence work. In Lean manufacturing of buildings (right) as few as 2 workers are able to complete numerous tasks at once and produce high quality parts much faster than could be done in the field.

The 3rd Wave: Design for Manufacturing and Assembly

The third wave is about building in information on manufacturing efficiency into the way buildings are designed. The starting point for Design for Manufacturing and Assembly is to think about how to optimize factory processes and then most efficiently assemble the modular elements in the field.

In this approach, designers must understand the capabilities of the manufacturer to design an approach to construction and delivery that accounts for the logistics of getting the product installed. For example, a prefab concrete panel might best be completed with rebar exposed on one side.

By using half completed panels, the shipping weight can be reduced, the need for formwork eliminated as the panels themselves can serve as formwork for the final onsite concrete pour, and onsite MEP connections might be more easily completed.

Prefabrication has proven popular as a way to improve worker safety and productivity, as well as product quality.

clicktotweetClick to Tweet: #Prefab improves
worker safety, productivity, quality

But a factory approach must also account for how best to transport and place modular elements. In some cases this might necessitate the combination of a remote, highly automated factory, near site fabrication of elements and onsite final installation of elements. These types of strategies can greatly eliminate waste.

New Processes to Support the Three Waves

While most new designers coming out of school today are trained in modeling tools, not all are gaining true insight into their role in waste reduction. Architects can optimize the AEC process by working closely with manufacturers, fabricators and subcontractors early on projects, and with integrated drawings.

To reach this end, however, AEC professionals will need to adopt new contract structures to ensure early access to knowledgeable suppliers and embrace project insurance that protects all parties.

In addition, architects can advise owners to budget for shop drawings earlier in the design process, so that design documents and shop drawings can be created simultaneously in a collaborative environment.

By breaking down siloes, tomorrow’s AEC professionals can manufacture even highly complex projects more efficiently than ever.

clicktotweetClick to Tweet: 3 waves of #AEC progress: Design for
Fabrication → for Delivery → for Manuf & Assembly

Related Resources

Design for Fabrication Industry Solution Experience

Optimized Construction Industry Solution Experience

Lean Construction SmartMarket Report

Is Virtual Leadership Training Better Than the Real Thing?

By Catherine
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By Catherine Bolgar

Businessman working on computer in the office.

Not only can virtual training teach soft skills like leadership, such an approach might be better suited to today’s and tomorrow’s work environments.

“Virtual training is increasing dramatically for a lot of good reasons,” says Rick Lepsinger, president of OnPoint Consulting, a New York provider of virtual instructor-led training and e-learning. “A lot more organizations are geographically distributed. Virtual training reduces travel costs—you don’t have to pay a consultant to come to you, or for folks to go to a central location, with a day of travel each way plus the day of training. It’s much more efficient. It’s more scalable. The technology is better and better.”

Above all, it increasingly reflects real life.

Why learn to coach face to face when in the real world you have to coach virtually? It’s better to learn and practice the skill in the same way you would actually have to use it,” Lepsinger said.

Attendees dial in by phone or voice-over-Internet protocol. Live video connections allow face-to-face interactions. Collaborative software programs let participants all see the same slides at the same time, hold chats or whiteboard discussions, or answer polling questions.

“Some technology allows you to put people into small groups where they have a conversation and then come back to the big group. We often use these breakout groups for self-assessment and case studies,” Mr. Lepsinger says.

Businesspeople Sitting In A Conference Room Looking At Computer ScreenSome programs combine virtual instructor-led training and e-learning. The latter tends to be self-directed, without an instructor, and the students work alone at their own pace. “E-learning is good for concepts or skills you can learn by reading or written exercises,” he says, such as time management, building trust or critical thinking.

Virtual instructor-led training is appropriate when the skill benefits from interaction with humans or from actually practicing something, as opposed to thinking about how you would do it. Leadership skills such as coaching, managing conflict, inspiring and motivating, and building great teams all are better taught with an instructor, including a virtual one, he says.

Although cultures differ around the world, “ideas about leadership are pretty much the same,” Mr. Lepsinger says, “like giving feedback. In the U.S. or Scandinavia, they may be more direct; in Japan, they may be more subtle.” Regardless of the local culture, employees need to know how they’re doing. “We teach how to give feedback in a balanced way, how to focus on behavior,” he says. “The specifics of how you present it to someone might be different in different countries.”

The main adjustment for international audiences is to speak slowly for participants who aren’t native English speakers. Many international companies use English as a common language, but some individuals feel more comfortable writing in a chat room or on a white board rather than speaking, Mr. Lepsinger says.

Some leadership training focuses on communication skills, including projecting and interpreting nonverbal signals. That also is changing with remote work environments.

Video conferences in the workplace can still involve body language, such as facial expressions, but much of our communication is by instant message, email or phone calls, says C. Matt Graham, assistant professor of management-information systems at the University of Maine in Orono, Maine.

Millennials, who are mostly in their 20s, grew up in a digital environment. “They do most of their communication digitally,” he says. “It’s a way of communicating that earlier generations would find out of the norm.”

working on laptop, close up of hands of business manAt the same time, at work, “we no longer, in virtual environments, care about your presence. We just want you to get the job done,” Dr. Graham says. That, combined with millennials’ motivations that in general are different from previous generations, means the very definition of leadership is changing.

“We’ve moved past the idea of a leader being a guy in a suit,” he says. “Millennials share and see power in the collective.”

They also are more comfortable with some of the new technology, such as virtual assistants, that companies increasingly use. In new research, Dr. Graham found that virtual teams that used a virtual assistant programmed with answers to a series of questions developed a better product than the virtual teams without a virtual assistant.

“You can have an actual conversation with a virtual assistant,” Dr. Graham says. “It’s a different set of dynamics. It will have an impact on managers’ roles in teams.”

 

Catherine Bolgar is a former managing editor of The Wall Street Journal Europe, now working as a freelance writer and editor with WSJ. Custom Studios in EMEA. For more from Catherine Bolgar, along with other industry experts, join the Future Realities discussion on LinkedIn.

Photos courtesy of iStock

 

 

 



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