The payments industry in Britain is undergoing a significant change.
Digital disruption is having a greater effect on how we pay for our goods and services than ever before. For banks, processors, and card networks, there are more opportunities, along with new challenges. For consumers, they are being presented with more choice, which is making their lives easier. Purchases are being simplified by such options as digital wallets, which allow users to make payments online or with just a swipe of a thumb in-store. But how did we get to this stage, and how long will it be before cash is merely a distant memory?
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Cash frustration
As with any indication of future habits, it starts with the younger generation. Data from social money transfer app Moneymailme claims that 62 per cent of 18-25-year-olds in Britain are frustrated when having to use cash to make payments. Just under half (49 per cent) of Generation Z give friends up to £10 once a month or more, but 22 per cent wouldn’t go under that figure for a bank transfer. Financial industry trade body The Payments Council predicts that the volume of cash transactions will fall below 13 billion by the year 2023, while the volume of other payments, such as standing orders, direct debits, contactless cards, debit cards, credit cards, and cheques, will climb to above 27 billion.
Contactless is the norm for many
After their launch in 2006, contactless payments were slow in being accepted, with both consumers and businesses sceptical of their workability. Fast forward 12 years into the future and contactless payments have changed the way that we pay for our goods and services. A turning point occurred last year when, for the first time, card payments became more popular than cash transactions. Concerns over security have had a significant impact on the attitudes of consumers towards contactless payments, which could explain why it took so long for it to be adopted as a payment method. However, due to an increasing number of merchants accepting contactless payments, as well as Barclays getting behind contactless by championing wearable contactless gadgets, support for contactless has grown to become as strong as it is for chip and pin. Further, with users being limited to spending just £30 at any one time, along with numerous fraudulent measures in place, consumers’ concerns have been, by and large, resolved.
Tech giants leading the way
“Apple Pay” (CC BY 2.0) by hnnbz
In recent years, mobile payments have come to the fore when it comes to tech companies such as Apple, Samsung, and Google; all of which provide mobile payment services. Apple Pay, Samsung Pay, and Google Pay, respectively, are often referred to as OEM (Original Equipment Manufacturer) Pay. These tech companies have heavily influenced the awareness and use of mobile payments. More than 50 per cent of UK contactless payment terminals can now take Apple Pay transactions. Most card readers had previously imposed a £30 limit, the same limit for contactless card transactions, but an upgrade meant that shoppers could make payments of any amount without having to take their physical wallet with them.
A very successful case of mobile payments in the UK is with public transport. TfL (Transport for London), along with its Oyster Card, has engineered all terminals to accept NFC and contactless payments. More and more commuters are using their mobile phones to pay for their journeys. Last year saw almost 10 per cent of contactless transactions made with a mobile device, totalling over 31 million journeys. Gaming is also widening its sphere when it comes to payment options. As mobile gaming continues to rise, it stands to reason that more digital means to pay will be offered around the globe. With more gaming apps than ever before, Apple Pay and the like are being used to fund payments for immediate access, in a bid to provide a seamless experience to the customer. Another example is with online betting. Companies in this industry are offering a range of payment methods, such as debit and credit cards, as well as a fair amount of e-Wallets and prepay options. Bank transfers are also used to transfer funds. Lastly, e-commerce is meeting customers’ expectations of online and offline payment channels working in synch with each other, such as offline transactions being powered through services like in-store digital kiosks. Dominos has mastered the art of this. The pizza store is now regarded as an e-commerce business, as most of its pizzas are ordered and paid for via its app.
Apps improving customer experience
A large number of retailers have had mobile apps developed specifically with the buying process in mind. The UPS Pulse of the Online Shopper report suggests that 80 per cent of mobile consumers have made purchases through a retailer’s app. Retailers have also begun to acknowledge the opportunities provided by mobile apps, not purely for boosting sales, but also for improving both the customer experience and brand loyalty. Customers’ influence on the shopping experience is also playing a part in determining payment trends. Customers are growing tired of having to queue for their products and prefer to pay in advance, or even after the event. An obvious example of this is Click and Collect, which more than 50 per cent of consumers have used, as well as Buy Now, Pay later options, such as with Mastercard instalments.
“Click & Collect – Selfridges – Park Stre” (CC BY-SA 2.0) by ell brown
Bold prediction
A Halifax report claimed that teenagers are increasingly asking parents to fund them through bank transfers, as opposed to cash. Whether they’re purchasing music, fashion, or food and drink on a night out, cash clearly isn’t their preferred option. While older generations are less likely to embrace the idea of a cashless Britain, CEO of PPRO Group, Simon Black, believes that we will see it happen by the year 2020, regardless. Black’s prediction may not come to fruition but, should trends continue on their current path, we would see the end of cash in Britain by the middle of the century. The Payments Council may be determined not to let that happen but the direction is undeniable. In less than 20 years, cash may well be a minority payment system, frequently used by a small number of hardcore fans, and only occasionally by the rest of us.
