Sharon Manikon, Managing Director of Customer Solutions at Barclaycard Global Payment Acceptance
Time-strapped consumers are increasingly turning to new payments technology – from Chip and PIN to contactless, mobile transactions and wearables – to speed up the checkout process. While the growing demand for payment innovation leaves a question mark over the future of cash, addressing whether notes and coins will be phased out completely requires a more nuanced answer than a simple “yes” or “no.”
Ultimately, consumers want to shop and pay in the way which is most convenient for them, whether by cash, card or other means. Shoppers are even willing to abandon a purchase if they are unable to pay via the method of their choice – our research shows that nearly a third of UK adults (32 per cent) would consider walking away if they could not pay by card. With this in mind, businesses need to be aware of and adapt to consumers’ payment preferences if they are to create a great shopping experience and drive repeat custom.
Beyond the rise of contactless
Contactless in particular is continuing to grow in popularity amongst UK shoppers – whether they want to use a more traditional card or a wearable payment device. Contactless spending was up 166 per cent in 2016, largely driven by a growing need for speed from businesses and consumers alike. ‘Touch and go’ payments save approximately seven seconds per transaction compared to Chip and PIN, and 55 per cent of all eligible electronic transactions (those up to £30) are now made using this technology – making it more popular than cash.
Contactless may be leading the way for the moment in making everyday transactions faster, but newer payment methods are also gaining traction in the marketplace. This opens up other possibilities for businesses and consumers, and creates more uncertainty over the future of notes and coins. Invisible payment systems, such as those used by companies like Uber, allow a customer to authenticate a purchase through an app or with a fingerprint without needing to re-enter banking details.
‘Scan and pay’ apps, an extension of this technology that enables consumers to pay invisibly in-store, is generating interest from consumers – while ‘scan and pay’ has only just been tested, one in five customers (19%) already say they would welcome this type of application.
Businesses that embrace these innovations are recognising the time- and money-saving potential that comes with electronic payments. For instance, reducing the reliance on cash frees up employees from counting hard currency so they can focus on customer service. In addition, the data associated with card payments can provide valuable MI for businesses looking to optimise various strategies, from inventory management to marketing.
Around the world: The death of cash
The consumer and business interest in these payment innovations indicate a desire to move away from cash, and some countries are embracing – even encouraging – this trend. Sweden and South Korea are among those readying for the death of cash, particularly in the retail space.
In Sweden, electronic payments are so ubiquitous – making up 95% of all retail transactions – that its central bank is now discouraging the use of cash. As only one-fifth of Swedish purchases are made in cash, Swedes are well on their way to phasing it out completely. South Korea’s central bank
is planning for a similarly cashless future by 2020, as 40% of consumers prefer to pay with card and only one in five transactions are made with paper money.
The argument for cash in the UK
Despite a decrease in cash usage, it seems unlikely the UK will be following the lead of Sweden and South Korea anytime soon. Cash transactions have seen a steady decline, from 52 per cent of all transactions in 2014 to 47% in 2015 – but they still make up a large portion of payments.
Rumours of the death of cash are exaggerated – for now at least – for two reasons. Firstly, because many consumers are still in the habit of using cash, and secondly, because many businesses, particularly smaller enterprises, still haven’t adopted even basic Chip and PIN technology. For example, Barclaycard research shows around half (49 per cent) of all UK SMEs do not accept credit and debit cards, even though 70 per cent of shoppers say this is their preferred way to pay. What’s more, a fifth of small businesses admit they have no plans to introduce electronic payment options any time soon. This means that consumers lose out on convenience and these businesses could stand to lose out on almost £8.8 billion per year.
Whether or not cash survives into the next generation depends on more than just the rise of new technologies. Ultimately, the use of a payment method is a choice that both the consumer and business will make. While other countries may be preparing for or even encouraging a future in which the market moves without cash, UK shoppers and retailers are not quite ready to give up their banknotes. For now, businesses that offer a wide range of consumer preferences – including, but not limited to, cash – will be the ones best positioned to drive repeat custom and engage new shoppers.
Originally posted by PaymentEye.