Cash Second To Contactless Payments
Projected figures from payments industry trade body ‘Payments UK’ have shown that by as soon as next year, more payments will be made using debit cards than using cash.
Driven By The Popularity of Contactless Payments
The convenience and effectiveness of contactless payments are the drivers behind a trend that will see cash payments taking a backseat to debit card payments years earlier than expected.
Payments UK figures show that UK contactless payments in 2016 nearly trebled in 2016 compared to 2015 (to £2.9 billion), and they accounted for 7% the total number of payments.
By 2018 it is predicted that contactless payments will account for one-third of all debit card payments and that there will be more debit card payments (13.4 billion) than cash payments (13.3 billion).
If the trend continues, payment commentators predict that contactless debit card payments could account for more than 25% of payments by 2026.
Contactless technology enables users to ‘tap and pay’ without entering a PIN for items up to £30 at a time. This is achieved using a special chip in the customer’s credit / debit card / key fob, smart card (also a smartphone or other mobile device) that emits radio waves in the form of radio-frequency identification (RFID), near field communication (NFC), or Samsung Pay (MST). The shop terminal picks up the radio signal and then processes the transaction.
Contactless Cash Machines Trial
Back in November 2016, Barclays conducted a trial of a new system which allowed customers to use their normal PIN in combination with leaving their smart-phone handset near to the bank machine, thereby enabling "contactless" near-field communication (NFC) transmission for cash withdrawal.
Despite the obvious popularity of contactless and the bold predictions by Payment UK, not all customers trust the system. A Which? survey in August 2016 for example, showed that although 73% of people think that contactless cards make it quicker to pay for things, 69% are concerned about their contactless card being stolen and used to make purchases.
These concerns may not be completely unfounded because a recent Which? investigation into the contactless card security of 12 leading credit and debit cards found that they did have some security flaws.
Research has also shown that, even though banks pledge to refund any fraudulent purchases, this can often take some time, and refunds can be wrongly refused.
What Does This Mean For Your Business?
The decline in the use of cash is a worldwide trend and card issuers have essentially been driving the change in customer behaviour by introducing innovations like contactless payments. For retail businesses this has meant the need to invest heavily in new payments technology in order to make it easier and quicker for customers to securely complete transactions in-store. Retailers have, however, benefited from cost and time savings (and having to deal with less cash).
Although cash is declining in relation to card payments, in the real world (especially with small businesses), cash payments from customers are still very practical and preferable. From a customer’s point of view, although many now find contactless convenient for small purchases, some groups of society need to use cash to manage their finances, and some people prefer the anonymity of cash, as EPOS style systems have long-allowed companies and marketers to gather data about us and to profile us.
Experts predict that cash will not be dying out anytime soon and most businesses realise that they need to take account of the fact that people will always want to choose the payment method that best suits them.