Consumer preferences and tech innovations spearhead dynamic change
In the UK, debit card payments are now dominant, according to a study released in 2018. The stats from UK Finance reveal consumers used debit cards 13.2 billion times in 2017 and cash transactions fell to 13.1bn. This is forecasted to drop to a mere 6.4bn by 2028: around a tenth of all transactions. By region, Wales leads the island with 46 per cent of consumers preferring card payments.
Global cashless trends
Cashless shopping habits are not regionally isolated, as data from Merchant Machine highlights the global nature of the worldwide phenomenon.
The Ministry of Industry and Information Technology in China revealed that mobile payments achieved US Dollar $12.8 trillion (GB Sterling £992bn) between quarters one and three in 2018. In the second most populous nation, demonetisation in India has paved the way for the growth of electronic payments.
Closer to home, the UK has some distance to go to catch up with Sweden, which is a global leader in cashless transactions. Less than 2 per cent of payments are made with cash; this is expected to fall to 0.5 per cent by 2020, according to research by Capgemini.
Enhanced consumer experiences
The strong desire for an optimum experience among shoppers seems to be the catalyst for the shift in payment methods, and it is not just millennials and the younger generation driving this.
Alison Sagar, PayPal UK marketing director, explains how they see little difference in the way people pay, regardless of age. She goes on to recommend businesses accept all payment methods: “research shows nine in 10 shoppers over 55 are planning to shop using smartphones; it’s not about committing to cash-only or cashless, but offering as many payment methods as possible.”
Highlighting the consumer experience, fintech firm iZettle’s chief marketing officer Edgar Rowenhurst explains that the payment stage is made smoother by seamless transactions. “You don’t even have to get your wallet out – systems recognise the customer and give that person a tailored experience.”
Retail giant Amazon is taking things a step further with its Amazon Go stores that – to an extent – mimic the in-app shopping experience but in person.
Sagar concludes that “consumers want fast, simple transactions online, in-app, and in person: not carrying cash or waiting for change is an improvement.” Indeed the end product or service has become enmeshed with the purchase experience.
Cryptocurrency: digitised cash
The trend away from cash is happening. Amidst this, is the transfer of wealth onto blockchain distributed ledger platforms. These peer-to-peer transactions promise low fees, no central authority, high security, and privacy: all of which make them attractive to users, especially when compared to fiat legacy options.
Initially sluggish, cryptocurrency transactions are now on the rise. Payment provider BitPay reached $1bn (£750 million) in transactions in 2018.
There is an additional benefit to cryptocurrency payments in specific regions: providing a workable alternative in countries with volatile national currencies, such as Venezuela and India.
What is apparent is that cryptocurrency and blockchain platforms are still in development. When systems are fine-tuned, and use-cases increase, this will become a viable option for consumers en masse. Innovators worldwide are currently developing user-friendly user interfaces (UIs), wallets, and systems (such as the Lightning Network) to enhance widespread use.
Cryptocurrency case uses
There are regional use-cases where cryptocurrency is already being used in commerce and retail.
Back in Sweden, cryptocurrency is used to buy everyday items such as coffee and beer. Specialist researcher Claire Bogusz at the Stockholm School of Economics explains that “there is a high knowledge of cryptocurrency and fintech digital competence here.”
Alongside an increasing number of Swedes, General Bytes marketing manager Martijn Wismeijer has undergone surgery to implant a chip between his thumb and index finger. In it, he stores bitcoin and uses it for daily purchases.
Following the example of Sweden, technological competence is essential for convenience, a positive consumer experience, and the willingness to use cash (and fiat) alternatives.
The cryptocurrency trend is already present among major retailers. Amazon, Microsoft, Tesla, Overstock, Shopify, Starbucks, Kroger, and Rakuten either already accept crypto payments or are in the process of adopting them.
A shifting trend
Cashless economies provide solutions – especially in specific situations – while creating opportunities. As with any change, there are challenges. Cash will remain a necessity for certain transactions thanks to its relative privacy and instant transfer of value.
Cryptocurrency, as a digitised form of cash, can potentially substitute physical notes and coins. Crypto transactions combine the privacy and security of their fiat counterpart plus the benefits of cashless and contactless payment. Furthermore, its use stands to stem issues arising among consumers’ minds regarding censorship, centralisation, and surveillance.
What is clear, is that recognising and acknowledging consumer preferences is vital to providing an optimised – and competitive – experience. With cashless transactions increasing rapidly, businesses should adopt change, or risk falling behind.
Published 26 April 2019