A deep-dive into payments at festivals and the one missing ingredient
Today we will take a close look at the three most adopted ways to get your food and drinks at festivals and why the transition to cashless is not yet a reality. We will also discuss the one ingredient that is missing and why it is key to a successful transition towards a mobile solution.
It’s 2018 and festivals are still not cashless, although many claim to be.
Most still require attendees to bring cash with them or be charged for taking money out from ATMs on site to then be forced to exchange these funds for tokens, that are sold in bulk and cannot be refunded if not used.
Usually the transaction behind your beer is processed by one of three systems:
- Plastic tokens
- RFID
- Contactless payments
Let’s dive into them to understand their current role in festivals
Plastic Tokens
Those little things are synonym of queues and inconvenience for everyone.
For an attendee a regular festival day where tokens are the payment method means you will need to queue first to get the tokens and afterwards every time you are hungry or thirsty.
This is currently taking people up to 48 minutes. Assuming you order three times during the day and spend 8 hours at the event that means 30% of your festival looks like queues.
Everyone can come up with things more fun to do at a festival rather that queuing, right? And let’s not get started about the countless times you loose them during the day or found them a week later in the most unexpected places.
For the organizer plastic tokens involve an expensive infrastructure (staff, logistics, support desks, token machines), post accounting hustle (counting and weighting the coins) and the least sustainable solution available (those innocent tokens can take up to 1,000 years to decompose). This tokens also costs organizers an average of €1,50/attendee considering all costs around them. So for a festival of 60,000 attendees that results in €90,000 just to set the token infrastructure.
Additionally plastic tokens are vulnerable to counting errors and scams. We can learn from the experience of this belgian organizer to picture how costly choosing plastic tokens as a payment method can be.
RFID
RFID devices are the most standard version of closed-loop payment systems and come in the form of wristbands or cards. Closed loop payments allow consumers to pre-load funds into a spending account that is linked to a payment device. RFID is indeed one of the most complete solution out there as it encourages spending, it’s easy to set loyalty programs around it and provides useful insights about customer behaviour. However it can cost about €2,5/attendee to set up and it’s recommended for events with an expected attendance of more that 10,000 people to profit out of it’s adoption.
Contactless payments
This include credit and debit cards from most banks which also come with an RFID chip embedded that allows a fast and easy payment experience. Even though the process is convenient for everyone it also can be a very costly one. Figures released from UK Finance show money lost to fraud on contactless cards surged to £5.6m in the first six months of 2017, overtaking cheque scams for the first time. This includes electronic pickpocketing, which remains an old but still efective scam.
Then… what is the missing ingredient?
As Bob Dylan said, times have changed and nowadays almost everyone take their phone to festivals. In fact, according to the Festival Report 2017 91.6% of attendees reported carrying them to the event. Also mobile signal coverage is getting increasingly better as described by 85.2% of respondents who said it was ok to excellent during the event. Lastly, the battery life of this devices is also improving substantially and portable chargers are being widely adopted during festivals or being provided by organizers through charging stations.
This numbers show that people are more connected than ever and can in fact use their phones during festivals with less issues over time.
As people are more connected and almost everyone has a charged device with them we as Bitz foresee that the transition to a mobile solution that takes the best out of the current payment methods is inevitable. Not only inevitable but necessary.
In order for this transition to happen smoothly there has to be appealing reasons for organizers to switch from current solutions.
Two key factors that play a role when considering to implement a new payment system involve answering two questions for the organizer:
• How I can be sure that the system is reliable and my revenue is protected?
• How much this is gonna cost me?
So basically this means security and costs.
Security
As per our first post where we briefly discussed that blockchain is part of the tech behind the Bitz Network. Today we will go a little deeper.
Why do we need blockchain in the Bitz Network?
Our top priority is to provide a safe way for storing and transferring money. So even if our platform goes down, the tokens stored within the Bitz Network and their value will remain completely intact, as they will be securely stored and accessible through the blockchain.
But wait a second… is this token volatile as other cryptocurrencies?
No, contrary to other cryptocurrencies, the Bitz token is a fiat-collateralized stable token backed up by euros. Every time attendees buy tokens through the app, new tokens are minted in the Network.
On the other hand, every time organizers want to withdraw their money back to euros, these tokens are burned and results in a stable price.
Costs
For this topic we will introduce to you μRaiden (Micro Raiden)
μRaiden in a nutshell
μRaiden is the payment channel network for frequent transactions that we will work with and can provide trustless, instant and free transfers between two parties and it is intended for many-to-one payment setups like the one needed for a festival organizer.
Which problems does the μRaiden solve?
μRaiden is a technology that leverages off-chain payment channel networks to address the following issues on the Ethereum blockchain:
Scalability
Blockchains do not scale well. Current public, permissionless blockchains are unable to achieve more than a low, fixed number of transactions per second. Ethereum has been shown to reach its cap at about 10 transactions per second and short-term scaling solutions will not be able to support continued mainstream adoption.
Latency
Blockchains are slow. At the moment, Ethereum mines a new block approximately every 15 to 30 seconds. To reach practical finality of a transaction, confirmation times of several minutes have to be endured. This significantly degrades user experience and hinders mainstream adoption in scenarios like festivals.
μRaiden transfers are as fast as text messages. The moment you receive a signed transfer, you can be certain that you now hold the amount included in the transfer. There is no need to wait for any confirmations.
Transaction fees
Blockchains are expensive. Once a blockchain hits its limit, paying high enough fees to be included in a block becomes a competitive endeavor, as is the case with Bitcoin today. Ethereum will be no different, eventually leading to even higher confirmation times and transaction fees on the order of a few dollars per transaction which again, for a festival organizer means blockchain alone does not low costs.
Our vision
As stated before, data shows that connectivity is constantly improving across festivals in Europe. However, we are aware that the transition to a mobile solution will not be completely ready until everyone carries their phone to festivals. Attendees without a device or a dead battery still need to be able to pay. For future events of the Bitz Network we envision that RFID technology (like NFC stickers) will still play a role as a way to make sure every attendee is able to spend seamlessly. By doing this and making the platform more appealing over time the transition to 100% cashless festivals will happen naturally.
