The way we pay has drastically changed over the years.
There has been an overall decline in cash payments over the last decade, and experts predict there will be a greater shift towards card payments, pushing the economy towards a cashless society by 2025. Whether we’ll be carrying cash in a decade was a hot topic of conversation at the Vendorcom Thought Leadership Conference on Tuesday (6 December).
The digital wallet is dominating. In October alone, consumers spent £42.8bn on debit cards, resulting in 423 purchases worth £16,263 made every second, according to The UK Cards Assocation.
So, what is the value of (cash) money in our society?
New payment methods are frequently introduced to make transactions more secure, swift and fuss-free. Contactless has been a driving force in transactions made under £30 and payments via tablets and devices have seen a dramatic growth. But where does that leave cash?
Speaking at the conference, Adrian Buckle, chief economist at Payments UK, said that in 2015, 2.7 million people in the UK were barely using cash at all. Meanwhile, 2.2 million only use cash. These statistics show that although cash payments are decreasing, there are still consumers who prefer to pay with cash rather than by card.
Those who use cash to process all their payments are said to be better at budgeting, and don’t enable spontaneous buying. It is a “visual way of being able to budget,” Buckle explained.
“Consumers don’t change their habits very quickly,” he added, also suggesting that those who use contactless and card payments will probably be using a similar method of payment in a couple of years, and those more dependent on cash will remain the same over a period of time.
But to consider digital payments again: nine out of 10 adults now have a debit card and 72 per cent of people now use contactless cards. Furthermore, there’s a major shift towards digital banking. Instead of going in-store for any query, we now have majority of banking services available to us in our laptops and mobile devices.
This convenient way of banking means that we simply don’t need access to cash to process these payments.
However, the move to a cashless society could be problematic. Cases of fraudulent payments have posed a challenge to the security of contactless payments, and those who rely solely on payments with a card or device could be vulnerable to cyber-attacks.
What's more, there are still many who depend on cash, and although there are more consumers who pay with cards or devices, not everyone has access to mobile banking apps. Not all consumers will prefer to track their transactions digitally, and will continue to use cash as a method of payments in store.
When it comes to fraud, cash limits the amount of money stolen to the quantity of available notes. With digital banking, the risk of damage is a lot higher.
“Twenty-two per cent of all card payments are now contactless,” says David Baker, head of card payment innovations at the UK Cards Association.
David predicts that the consumer will determine where the industry is going, and that they will be the driving force of payments. “It’s all about collaboration,” he says, which brings the retailer and consumer together over a payment method and discovering which payment methods work best.
It’s important to give people a choice: to switch between using cash and card payments and manage their payments as they wish.
What we can expect by 2025 is a new wave of banking services that will make digital payments even more convenient. Some brands and retailers will still have face-to-face consumer experiences as a selling point in a society that is becoming less cash-dependent. Countries such as Sweden and South Korea are already looking to make the move towards a cashless society.
To reach this goal, banks need to shift their focus to network and mobile capability as the shift will push consumers to rely on digital platforms to control their accounts.
It is worth mentioning that there has also been a shift towards a frictionless consumer experience. Services such as Uber, and the recent introduction of Amazon Go not only take cash payments out of the equation but also remove any human contact and payment strategy. With the ease of storing our card information online, we open a multitude of opportunities to ourselves. This trend will grow in the upcoming years, giving consumers a digital space to control most aspects of everyday life.
Jonathan Vaux, executive director for innovation and partnerships at Visa, said that brands and tech giants are “focusing on the payment, but the focus should be on the end-to-end consumer experience”.
Either way, payments are now pushing the boundaries. Cash may be a quintessential form of payments for some consumers, but the introduction of mobile and digital banking services will steadily remove the dependency on cash in the move towards a cashless society by 2025.
By Alara Basul