The UK is edging closer to ditching physical money – but what do the experts think?
It seems that the days of the humble banknote and coin may soon be up, as more and more of us use so-called ‘cashless’ methods, such as debit cards or mobile payments, to pay our way.
Data released by the Payments Council earlier this week revealed that 2014 was the first time the UK spent more using non-physical methods rather than cash for the first time last year, with the tipping point coming last July.
But is this really the end for cash? Here’s what the experts think…
Ray Brash, MD and Chairman at PrePay Solutions:
“It’s really no surprise that cashless payments are gaining in popularity when you consider the benefits they offer. The payments industry has seen an enormous amount of innovation during the past five years, and it’s clear that consumers are enjoying the flexibility, reliability, security and convenience that this new generation of payment options provides.
Contactless, in particular, has grown exponentially in several European countries and has now been integrated in the smartphone, for us, for example, with EE’s Cash on Tap. Even without contactless, the vast majority of smartphones can be used to make payments in some shape or form. As we see customers’ confidence in technology grow, their reliance on cash will reduce even further.
The prepaid sector has been highlighting the benefits of cashless payments for years. The flexibility and security that these solutions provide make it easy to see why consumers are now consistently choosing cashless payments over cash. We expect the growth of this market to continue apace, as new payment methods and technology grow to maturity and become more integrated and accepted.”
Dan Salmons, managing director, PayPoint Mobile and Online:
“The news today that cashless payments have overtaken cash isn’t especially surprising – we’re seeing more and more people simply use or even tap their cards for a simple payment.
But, it doesn’t mean the death of cash. In fact, the most important thing for merchants to remember is that offering people the right choices for payment can make all the difference between a completed purchase and an abandoned basket.
We have more payment choices available to us than ever before, but not every payment option is right for everyone or every product. Indeed, there have been plenty of experiments with different payment methods that have failed. Why? Because they basically set out to take something pre-existing for which payments via cash or cards worked perfectly well, and simply tacked a different dimension on to the end. Granted, a lot of the enabling technology was very clever, but the proposition for the consumer, in a lot of these cases, was not compelling enough. People are still preferring cards – and if they’ve got it in their pocket – could obviously opt to pay in cash.
The worst thing a brand can do is define a consumer by how they wish to pay, or force them down a path they’re uncomfortable with. Just because cards are now the favourite means of payment, businesses still have to be sure that they are covering a host of payment options when it comes to making their purchase – whether that’s cash, card – or even mobile.”
Paul Heywood, MD EMEA, Dyn:
“With consumers increasingly relying solely on electronic payments such as contactless and debit cards, both merchants and banks in the UK will need to ensure that their digital properties can handle the increased activity in digital banking.
Banks and their digital suppliers rely on Internet Performance to ensure that all transactions and updates are up and running, even at peak times. As the UK moves towards a cashless economy, the risk of digital banking suffering downtime or delays needs to be completely eliminated as there is no alternative payment method. If merchants and banks don’t make their Internet Performance a priority, they risk upsetting valuable customers.
In order to ensure that their solutions are always available, banks and merchants should take latency seriously. Load balancing, for example, allows businesses to balance their load across multiple servers, which optimises resources, minimises response time, and avoids overload.
The adoption of a hybrid approach to cloud computing and traditional data centres adds complexity to real time traffic routing with inter and intra app latency being a critical success factor. In addition, if you have a data centre or server failure, Active Failover enables the service to stay up and running as traffic is automatically re-routed to an alternate endpoint. Only by putting back-end systems in place that offer prevention can businesses ensure that the cashless economy keeps going around.”
Winston Bond, European technical manager at Arxan Technologies:
“The figures released by The Payments Council reflect the trend seen in customers choosing to use automated and debit card transaction methods, such as contactless and mobile payments to pay for their groceries.
With many retailers and banks rushing to launch innovative approaches for financial services via mobile applications, one vital question that needs to be addressed is that of security. As they compete on the latest and greatest apps to gain either new consumers or maintain existing loyalty, there is the risk that security will fall by the wayside in favour of aggressive time-to-market deadlines.
Most organisations are taking a software-based approach to mobile payments via cloud-based approaches, such as Host Card Emulation (HCE) capabilities, but to ensure they don’t fall victim to a hack attack they must ensure that the cryptographic payment tokens within their software are properly secured with a software secure element that provides anti-tampering and white-box cryptography technology.
The use of tokenisation technology replaces private card data with a HCE token that protects privacy and prevents fraud in mobile payment transactions. Delivering such a holistic and robust level of protection for the mobile payments sector is critically important as these new capabilities see broad consumer adoption.”
Spiros Theodossiou, VP of product strategy, Skrill:
“We are reaching a tipping point in the payments industry. With digital payments overtaking cash transactions for the first time, the move towards a cashless society is well underway. The significant growth seen in contactless transactions last year is further evidence that consumers are gravitating towards faster and more convenient ways to pay.
In response, financial payments companies are delivering innovative new products, from digital wallets to contactless and mobile payment methods, increasing the options for consumers to move away from more traditional methods.
For the younger generation in particular, expectations are high when it comes to the availability of alternative ways to pay. Where cash was once king, now card and digital payments are becoming a part of their day-to-day routine. Our own research shows four out of ten (42 percent) people think that shops will cease to accept cash as a form of payment in the next twenty years, and one in five (20 percent) 18-25 year olds think shops will stop accepting cash in just five years’ time.
However, it is likely that cash will prevail for some time yet as consumers will find it hard to wean themselves completely off cash due to its physical nature and the flexibility it offers. Much like the decline of newspapers, digital alternatives may be more suited to our modern lives but many people remain reluctant to see the end of traditional methods quite yet.
The ‘cashless society’ is very much a UK and US perspective and elsewhere cash remains very important. According to The World Bank, 2.5 billion adults across the globe are without formal bank accounts, while Ffrees Family Finance has estimated that the total in the UK alone is 3 million. Adoption of new technology is helping unbanked consumers to connect with the digital world, such as in India where online purchases through mobile has grown by over 100 percent in the last two years, according to MasterCard. However, there is a long road ahead for digital payments in emerging markets and cash will keep its place in our society for the conceivable future. What we will start to see, at different paces across the world, are more examples of cash being phased out as further technological innovations make it even more convenient to pay.”
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