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Despite this shift however, the payment card is very much still alive with six-in-ten (60%) UK consumers stating they would not give up their debit card in favour of mobile payments. In fact, a further three quarters (75%) of UK consumers are concerned about the UK becoming a cardless society, where they no longer have access to a physical debit card and can only rely on mobile payments.

Here David Orme, SVP of IDEX Biometrics ASA at IDEX Biometrics ASA, explores the realities of payments preferences in the UK and what financial institutions must do to ensure that we experience a seamless transitions towards becoming a cashless society.

Do you remember coins? When was the last time you actually carried around a pocketful of pennies to pay for something? Given the rapid growth of contactless transactions, mobile payment apps and online shopping, it was probably quite a while ago now. Advancing banking technology, means we are fast moving towards a cashless society. In the UK, cash payments fell behind card transactions for the first time in 2017, while Sweden expects to become the first country in the world to go fully cashless, thanks to a country-specific payment app.

However, despite being hailed as the solution to end our use of cash and cards, mobile payment apps haven’t reached anywhere near the expected level of public adoption in the UK. By 2018, only 13% of the UK population was using mobile payments, due to the majority of the population generally preferring the ease and familiarity of contactless cards.

This is supported by our recent research at IDEX Biometrics ASA, which reveals that six-in-ten (60%) UK consumers would not give up their debit card in favour of mobile payments. In fact, a further three quarters (75%) of UK consumers are concerned about the UK becoming a cardless society, where they no longer have access to a physical debit card and can only rely on mobile payments.

Clearly, the payment card has become a strong part of our daily routine. So much so that, almost two-in-five (37%) of UK consumers stated that as long as they have access to a debit or credit card, the thought of a cashless society wouldn’t bother them. Interestingly, this number even rose to over half (52%) of 25-34-year-olds.

Given this strong evidence that consumers are still loyal to the payment card, it seems that the banking industry is focusing on the growth of the wrong payment technology. As we move towards a cashless world, the future of payments may not be in smartphone apps after all.

A smooth transition

There is a clear generational divide when it comes to the acceptance of digital payments. While over half (53%) of 18-24-year olds believe they already live a mostly cashless life, that number plummets to only 19% of those over the age of 55. Similarly, while four-in-ten (38%) of those aged 25-34 believe cash is now obsolete, only 9% of over 55s agree.

In fact, half (50%) of those aged over 55 are continuing to use cash to buy small-ticket items. Young people, however, are so tied to their card that two-in-five (40%) of those aged 25-34 say they won’t shop anywhere that doesn’t accept cards.

One of the greatest concerns surrounding a cashless society is the potential for inequality. Consumers shouldn’t be locked out of the banking system because they are less familiar with new payment methods or have limited access to digital devices. To keep our economy fair and inclusive, our payments system must stay accessible to all. Therefore, as we approach a cashless society, the UK Government and banking sector should reconsider the cashless transition. Instead of the focus on mobile payment apps, banks and financial institutions must adopt payment card technology that is convenient, secure and reliable for consumers of all ages, particularly older generations who still rely on cash.

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Holding on to security

Consumers are also dismissing mobile payment apps thanks to rising security worries around the new technology and the potential for misuse of mobile payments. Over two-thirds (68%) of respondents still feel more secure using their bank card than a mobile phone to make a payment, while almost three-in-five (58%) fear that if they lost their mobile phone, people would be able to access their bank accounts.

In contrast, half (50%) of respondents say that having their debit card gives them a sense of security. Significantly, four-in-ten (41%) consumers would trust the use of their fingerprint to authenticate payments from their bank card more than a PIN.

Given these concerns, it is evident that payment technology needs to be more secure. It’s time for banks to adopt cards with biometric fingerprint authentication, which can’t be misused without the owner’s fingerprint, even if stolen or lost. Incorporating this advanced biometric technology into payment cards would enhance authentication for transactions and provide all consumers with a safer payment process that offers more reassurance than PINs or apps currently provide.

Futureproofing the payments industry

Although the idea of a cashless society holds many benefits, 55% of consumers actually think a cashless society will be inconvenient. Whether from lack of technology awareness or security concerns, consumers are still fearful of the day when they have to rely on mobile apps to access their money and pay for goods. Given this fear, the financial industry needs to work quickly to enhance payment cards by utilising biometric technology to secure payment authentication, before cash becomes extinct.

Payment cards that provide the convenience of contactless payments with the added security of fingerprint authentication are the key to a seamless transition into a fully cashless society. Such cards will prevent misuse and card fraud, while allowing fast, convenient, secure and direct access to our bank accounts, bringing much-needed reassurance to UK consumers.

UK consumers have made their feelings clear; they are just not willing to give up their payment cards. In a cashless society, cards will still be leading the way – we must future proof them for the next generation of payments now.

But it is the speed at which the technological advancements have reached that has forced traditionally slow-moving financial institutions to heavily invest to remain relevant to their consumers and remain competitive in the marketplace.

Personal

Banking is one of the oldest businesses in the world, going back centuries ago, in fact, the oldest bank in operation today is the Monte dei Paschi di Siena, founded in 1472. The first instance of a non-cash transaction came in the 20th century, when charga-plates were first invented. Considered a predecessor to the credit card, department stores brought these out to select customers and each time a purchase was made, the plates would be pressed and inked onto a sales slip.

Once the sales cycle was over, customers were expected to pay what they were owed to the store, however due to their singular location use, it made them rather limiting, thus paving way for the credit card, where customers that had access to one could apply the same transactional process to multiple stores and stations, all in one place.

Contactless

Leisurely spending has changed that much that we can now pay for items and services from the watches we wear on our wrists, but it wasn’t always this easy. Just over a few decades ago, individuals were expected to physically travel to their nearest bank to pay their bills, and had no choice but to carry around loose change and cash on their person, a practice that is a dying art in today’s society, kept afloat by the reducing population born before technology.

Although the first instances of contactless cards came about in the mid-90’s, the very first contactless cards associated with banking were first brought into circulation by Barclaycard in 2008, with now more than £40 million being issued, despite there being an initial skepticism towards the unfamiliar use of this type of payment method.

Business

Due to the changes in the financial industry leaning heavily towards a more virtual experience, traditional brick and mortar banks where the older generation still go to, to sort out their finances, are now in rapid decline. Banks are closing at a rate of 60 per month nationwide, with some villages, such as Llandysul closing all four of its banks along with a post office leaving it a ghost town.

The elderly residents of the small town were then forced into a 30-mile round trip in order to access her nearest banking services. With technology not for everyone, those that weren’t taught technology at a younger age or at all are feeling the effects most, almost feeling shut out, despite many banks offering day-to-day banking services through more than 11,000 post office branches, offering yet a lifeline for those struggling with the new business model of financial firms.

Future innovations

As the amount of digital natives increases year on year, the demand for a contemporary banking service continues to encourage the banking industries to stay on their toes as far as the newest innovations go.

Pierre Vannineuse, CEO and Founder of Alternative Investment firm Alpha Blue Ocean, gives his comments about the future of banking services, saying: “Artificial intelligence is continuing to brew in the background and will no doubt feature prominently in the years to come. With many automated chatbots and virtual assistants already taking most of the customer service roles, we are bound to see a more prominent role of AI in how transactions are processed from all levels.”

Technology may have taken its time to get to where it is now, but the way in which it adapts and updates in the modern era has allowed it to quicken its own pace so that new processes spring up thick and fast. Technology has given us a sense of instant gratification, either in business or in leisure, we want things done now not in day or a week down the line.

Sources:

https://www.sysco-software.com/7-emerging-trends-that-are-changing-finance-1-evolving-cfo-role/

https://www.vox.com/ad/16554798/banking-technology-credit-debit-cards

https://transferwise.com/gb/blog/5-ways-technology-has-changed-banking

https://www.forbes.com/sites/forbesfinancecouncil/2016/08/30/five-major-changes-that-will-impact-the-finance-industry-in-the-next-two-years/#61cbe952ae3e

But it is the speed at which the technological advancements have reached that has forced traditionally slow-moving financial institutions to heavily invest to remain relevant to their consumers and remain competitive in the marketplace.

Personal

Banking is one of the oldest businesses in the world, going back centuries ago, in fact, the oldest bank in operation today is the Monte dei Paschi di Siena, founded in 1472. The first instance of a non-cash transaction came in the 20th century, when charga-plates were first invented. Considered a predecessor to the credit card, department stores brought these out to select customers and each time a purchase was made, the plates would be pressed and inked onto a sales slip.

At the end of the sales cycle, customers were expected to pay what they were owed to the store, however due to their singular location use, it made them rather limiting, thus paving way for the credit card, where customers that had access to one could apply the same transactional process to multiple stores and stations, all in one place.

Contactless

The way in which we conduct our leisurely expenditure has changed that much that we can now pay for services on our watches, but it wasn’t always this easy. Just over a few decades ago, individuals were expected to physically travel to their nearest bank to pay their bills, and had no choice but to carry around loose change and cash on their person, a practice that is a dying art in today’s society, kept afloat by the reducing population born before technology.

Although the first instances of contactless cards came about in the mid-90’s, the very first contactless cards associated with banking were first brought into circulation by Barclaycard in 2008, with now more than £40 million being issued, despite there being an initial skepticism towards the unfamiliar use of this type of payment method.

Business

Due to the changes in the financial industry leaning heavily towards a more virtual experience, traditional brick and mortar banks where the older generation still go to, to sort out their finances. Banks are closing at a rate of 60 per month nationwide, with some villages, such as Llandysul closing all four of its banks along with a post office leaving it a ghost town.

The elderly residents of the small town were then forced into a 30-mile round trip in order to access her nearest banking services. With technology not for everyone, those that weren’t taught technology at a younger age or at all are feeling the effects most, almost feeling shut out, despite many banks offering day-to-day banking services through more than 11,000 post office branches, offering yet a lifeline for those struggling with the new business model of financial firms.

Future innovations

As the bracket of people who have grown up around technology widens, the demand for a contemporary banking service continues to encourage the banking industries to stay on their toes as far as the newest innovations go.

Pierre Vannineuse, CEO and Founder of Alternative Investment firm Alpha Blue Ocean, gives his comments about the future of banking services, saying: “Artificial intelligence is continuing to brew in the background and will no doubt feature prominently in the years to come. With many automated chatbots and virtual assistants already taking most of the customer service roles, we are bound to see a more prominent role of AI in how transactions are processed from all levels.”

Technology may have taken its time to get to where it is now, but the way in which it adapts and updates in the modern era has allowed it to quicken its own pace so that new processes spring up thick and fast. Technology has given us a sense of instant gratification, either in business or in leisure, we want things done now not in day or a week down the line.

Sources:

https://www.sysco-software.com/7-emerging-trends-that-are-changing-finance-1-evolving-cfo-role/

https://www.vox.com/ad/16554798/banking-technology-credit-debit-cards

https://transferwise.com/gb/blog/5-ways-technology-has-changed-banking

https://www.forbes.com/sites/forbesfinancecouncil/2016/08/30/five-major-changes-that-will-impact-the-finance-industry-in-the-next-two-years/#61cbe952ae3e

Decimal Day on 15 February 1971 replaced shillings with pounds and pence. Ireland went one step further when it announced in 1999 that it would swap pounds for euros and this came to fruition in 2002. While the UK remained adamant they wouldn’t join the euro, something else has eclipsed the possibility that we might exchange our sterling for something more continental – the fact that we might not deal with any money whatsoever. There are calls from some people to begin the process of foregoing cash and replacing it with digital payment methods instead. But, will society ever go cashless?

The Argument for a Cashless Society

Since contactless was introduced, almost two-thirds of people in the UK use contactless payments, while June 2018 saw cashless payments eclipse those who used traditional cash methods. Indeed, with the rise of Monzo, customers are encouraged to spend via their card to track what they are spending and where. This allows you to make better choices. Bus companies, such as First, have begun accepting contactless payments on their buses as well as payment via an app, which offers discounted fares. Even vending machines allow card payments, while traditionally cash-centric parking meters also offer you to pay through digital means that bypass cash methods. Many industries already use cashless methods. For example, when you play online slots at Magical Vegas, there are several digital payment options to choose from for depositing and withdrawing any winnings you make, which matches the modern technology used in the video slots. These include Paysafecard, Neteller, Skrill and Paypal as well as Visa and Mastercard.

Why Might Cashless Be Bad?

Of course, the issue with switching to contactless, smartphone payments or even just relying on chip and pin, is that there is a portion of the country who either have no access to this or wouldn’t feel comfortable using it. A fixed address is necessary for a bank account, so those who live without one would be left without the money they might otherwise be able to access. Without physical money, everything relies on big data to ensure our details and bank accounts correspond. With so much money in accessible accounts, crime that mines our personal financial data may increase, especially in the advent of a data breach, which isn’t beyond the realm of possibility. Anecdotally, many say they struggle to manage their finances when they don’t have the actual cash, claiming contactless makes it easier to overspend because the money is less tangible. One of the main concerns for a cashless society is the fact that we would be at the mercy of technology – and that something that might affect this, even a simple power cut, could leave us penniless.

Cashless society may seem futuristic, but we are already making some waves in that area. While there are enough cons to ensure that we will never fully go cashless, instead it will likely be made easier to opt out of using cash as a matter of personal preference.

During this time of financial uncertainty, many opt for emergency small term loans to cover the cost, however these are for financial emergency only and alternative funding will be needed. Here we are going to give you our top tips for saving money and avoid using your credit card.

Make A Shopping List

One of the main ways to avoid making payments on your contactless credit card is to have a shopping list and stick to it. In doing this, you can ensure that you have bought all the food that you need for the week at one time without spending large sums of money as a result. By having everything in the house that you could need, this reduces the need for you to travel to the shops and get tempted by a chocolate bar or other sweet treats that can be bought on impulse with your contactless card.

Avoid Fast Food

Although it may seem tempting to opt for fast food when you have had a long day in the office, it is important to avoid this temptation. One of the ways that you can do this is through making food the night before and freezing it. This not only helps you to maintain a healthy lifestyle, but it saves you money as a result. This is ideal particularly for students as this will allow them to save excess money and maintain a healthy diet.

Don’t Use Mobile Banking

Mobile banking is something that you should definitely avoid if you are looking to save money. This is because applications such as Google Pay, and Apple Pay make it easy for you to pay for items with a fingerprint or simple passkey. This will not aid you in saving money as this makes it to easy to overspend and end up buying items that you do not need. One way that you can get around this is through travelling to the bank to look at your finances or even restricting your online banking to one desktop.

Pay By Cash Not Card

When going out for a night on the town or on a shopping trip, it is very easy to opt for a contactless payment to purchase items quickly, but what about just taking cash? By taking cash with you and leaving your card at home, you restrict yourself to the amount of money that you can spend. This is particularly important if you are limited on funds as this allows you to budget accordingly and ensure that you do not overspend at any point. If an item is out of your budget at this time, you must then wait till next month to afford it.

Buy Your Own Lunch

Although this may seem like an extremely small transaction per day, purchasing lunch can actually amount to a large portion of your spending per month. In order to combat this and save yourself more money, begin packing your own lunch. This could save you an average of £5 per day which can amount to a large amount at the end of every month. This can then be saved and placed within a bank account for a financial emergency or a treat later in the year.

Whether you are looking to completely avoid using your card on a daily basis or you are looking to limit the amount that you are spending in general, you can be sure to find the solution that works for you by following one of these top tips.

Contactless, or “tap and go,” is an increasingly popular way to pay around the world. But in the U.S., only 3 percent of cards are contactless. Why?

Merchant account and card payment fee comparison service Merchant Machine have carried out a study to look at the extent of these economic changes to find its true value in the world we live in. The research uncovers the impact cashlessness has had on specific industries, personal spending and how much different countries have adopted the payment method. Some of the key findings are outlined below:

Cashless Countries

Revenue from cashless payments has become hugely significant for a number of nations across Europe, but who is yielding the most in recent years? Below are the EU countries with the highest revenue from card payments.

Big in the Industry

Contactless forms of payment have created a new level of convenience for people around the world, and this has provided a real boost for certain industries. Below are some of the biggest winners:

Home and Away

In years gone by, using a card on foreign shores would be a frightening prospect for many, but in 2018, it appears that is no longer the case. Our study has traced the value of cashless payments back to 2006, and show how people have started to adopt card payments abroad and on home soil.

Ian Wright from Merchant Machine stated that: “The popularity and preference towards cashless payments appears evergrowing. While so many are aware of the decline of cash usage and increase in card transactions, but this study helps to break down where these changes are most felt.”

(Source: Merchant Machine)

As a result, they have expect payments to be easy, convenient, flexible, secure – in some cases they even want to be rewarded for making transactions. Below, Abhijit Deb, Head of Banking & Financial Services, UK & Ireland, at Cognizant, explains the ins and outs of card payments and the threats this payment method currently faces.

Customers will not stay loyal to their card providers if the service no longer meets their needs or expectations. As a result, we are entering an age where payment industry providers either have to be the source of transformation or face disruption from competitors challenging their market share. To avoid the latter, card providers should continue to innovate, creating new capabilities and features to bring greater security, added-value services, collaboration and convenience for their clients.

The future credit card

The shift in the payments landscape over the past few years has brought a substantial evolution in the role of payment cards. This transformation has not only impacted the types of cards that companies are launching – for example, Gemalto has developed fingerprint recognition credit cards  – but has also affected card providers’ strategies and aspirations.

But how long will we keep physical cards in our wallet? Will the move to cashless lead us to ultimately become wallet-less?

Payment networks like Visa, MasterCard, Discover and American Express have built a massive infrastructure, also known as ‘payment rails’, for processing transactions globally. As purchasing trends shift online, credit and debit cards are increasingly being used more for their ‘rails’ than for the traditional plastic card we use in-stores. Thus, the battleground for card providers is how to remain the default payment option across every channel, keeping them in the top spot in a spender’s digital wallet.

Apart from the obvious revenue advantages associated with being a preferred payment choice, such as interchange fees and interest charges, card providers with ‘top of the wallet’ status also have access to a rich pool of information. By harnessing data, card companies can provide an innovative and hyper-personalised customer experience to differentiate themselves or create a new stream of revenue, as seen with companies such as Google recently purchasing Mastercard credit card data to track users’ spending.

Evolving competitor landscape

With the incursion of the concept of ‘digital cards’, card issuers and their corresponding business model are under threat, no matter what position they hold in the rank.

With the incursion of the concept of ‘digital cards’, card issuers and their corresponding business model are under threat, no matter what position they hold in the rank.

Card providers have access to increasing amounts of payment and account information, and more assertive competitors are moving quickly to commercialise the opportunities. Online players, like PayPal and Square, are already poised to take a bigger industry lead over traditional credit card issuers thanks to their established online presence.

And, as their dominance grows, we are likely to see other digital players enter the payments space. Amazon, for example, is well known for having a business plan for every industry – and it is likely payments will not be any different. Having just launched a small loans service to SMEs, it is not hard to extend the logic to where Amazon is your bank and runs your entire network by Amazon “rails”. And the same could easily be said for Apple.

We may also see social media players get involved, coupling their user data with account information to provide quick credit checks or banking services.

So, what does this mean for traditional card providers?

Firstly, it is clear that marketing strategy can no longer be centred around a piece of plastic. Marketers must challenge themselves to think about how they can propagate brand loyalty and acquire customers in this changing market. At the moment, a vast amount of customer acquisition is achieved by cross-selling to other customers with partnerships. For example, the British Airways / American Express credit card enables consumers to collect Avios points on their day-to-day transactions.

Firstly, it is clear that marketing strategy can no longer be centred around a piece of plastic.

And how do they compete on the digital landscape? Many providers are racing to position themselves as the customer’s ‘digital front door’ to take advantage of additional account information. Card providers need to act fast to stay relevant.

In the short to mid-term, credit card providers must focus on trust. Currently, thanks to consumer banking regulations, clients have the peace of mind that if a card gets stolen, they are protected. For the time being, Apple Pay and other providers are not offering the same assurances to customers yet. However, when mobile payments start offering the same guarantees, what can card providers do to stop people switching?

In the long term, card players must ensure that they do not find themselves consigned to the role of the faceless underwriter. Card providers need to think about their role in the entire financial services ecosystem and create new, innovative services that respond to customers’ needs. Many forward-looking players are looking to launch offerings such as 360-degree views and financial management advice services.

In the long term, card players must ensure that they do not find themselves consigned to the role of the faceless underwriter.

By combining machine intelligence with data, other providers are already exploring how technology can create new customer and colleague experiences that are simple, fast, transparent and engaging. For example, American Express’ personal travel assistant app, Mezi, uses AI to help cardholders pay for vacations and business trips based on their preferences. Similarly, Bank of America’s virtual AI assistant Erica is helping clients with effective money management.

Only by creating these value-added services that respond to specific consumer needs can card providers avoid complete industry disruption and stay relevant.

Personal identification numbers (PINs) are everywhere. These numeric versions of the password have been at the heart of data security for decades, but time moves on and according to Dave Orme, SVP at IDEX Biometrics, it is becoming evident that the PIN is no longer fit for purpose. It is too insecure and leaving consumers exposed to fraud.

Why bin the PIN?

In a world that is increasingly reliant on technology to complete even the most security-sensitive tasks, PIN usage is ludicrously insecure. People do silly things with their PINs; they write them down, share them and use predictable number combinations that can easily be discovered via social media or other means. And this is entirely understandable: PINs must be both memorable and obscure, unforgettable to the owner but difficult for others to work out. Previous research has shown that when people were asked about their bank card usage, more than half (53%) shared their PIN with another person, 34% of those who used a PIN for more than one application used the same PIN for all of them and more than a third (34%) of respondents used their banking PIN for unrelated purposes, such as voicemail codes and internet passwords, as well. In the same study, not only survey respondents but also leaked and aggregated PIN data from other sources revealed that the use of dates as PINs is astonishingly common1.

But if the PIN has had its day, what are we going to replace it with?

Biometrics

Biometrics may seem to be the obvious response to this problem: fingerprint sensors, iris recognition and voice recognition have already been trialled in various contexts, including financial services. In fact, wherever security is absolutely crucial, you are almost certain to find a biometric sensor — passports, government ID and telephone banking are all applications in which biometric authentication has proven highly successful.

For biometric authentication to work, there has to be a correct (reference) version of the voice, iris or fingerprint stored, and this requires a sensor. The search for a flexible, lightweight, but resilient, fingerprint sensor that is also straightforward for the general public to use, has been the holy grail of payment card security for quite some time.

It is one thing to build a sensor into a smartphone or door lock, but quite another to attach it to a flexible plastic payment card. A major advantage of fingerprint sensors for payment cards is that the security data is much more difficult to hack.

Not only are fingerprints very difficult to forge, once registered they are only recorded on the card and not kept in a central data repository in the way that PINs often are - making them inaccessible to anyone who is not physically present with the card.

Your newly flexible friend

Fortunately, the impossible has now been achieved. The level of technology that has been developed behind the sensor makes it simple for the user to enrol their fingerprint at home, and once that is done they can use the card over existing secure payment infrastructures.

Once it is registered and in use, it can recognise prints from wet or dry fingers and knows the difference between the fingerprint and image ‘noise’ (smears, smudging etc.) that is often found alongside fingerprints. The result is a very flexible, durable sensor that provides fast and accurate authentication.

The PIN is dead, long live the sensor

Trials of payment cards using fingerprint sensor technology are now complete or under way in multiple markets, including the US, Mexico, Cyprus, Japan, the Middle East and South Africa. Financial giants including Visa and Mastercard have already expressed their commitment to biometric cards with fingerprint sensors, and some are set to begin roll-out from the latter half of 2018. Mastercard, in particular, has specified remote enrolment as a ‘must have’ on its biometric cards, not only for user convenience but also as means to ensure that biometrics replace the PIN swiftly, easily and in large volumes2.

With the biometric card revolution now well under way, it’s time to say farewell to the PIN and look forward to an upsurge in biometric payment card adoption in the very near future.

1 Bonneau J, Preibusch S and Anderson R. A birthday present every eleven wallets? The security of customer-chosen banking PINs: https://www.cl.cam.ac.uk/~rja14/Papers/BPA12-FC-banking_pin_security.pdf

2 Mastercard announces remote enrolment on biometric credit cards: https://mobileidworld.com/mastercard-remote-enrollment-biometric-credit-cards-905021/

In 1880, we introduced the first ever credit voucher, which led the way as a pre-curser to credit cards and the likes, followed by the reveal of metal deferred payment cards from Western Union in 1914 and subsequently several appearances of payment or credit cards that allowed to users to credit shop at specific stores, like Diner’s Club, the first independent credit card company in the world.

Since American Express made credit cards popular in 1958, the idea of buying with cash that isn’t yet available to the buyer has evolved into the concept of cashless buying with money we do have. The accessibility, ease and efficiency of credit cards led to a culture, globally, that accepts plastic cards as the norm. The industry 4.0 revolution now presents the next stage in said evolution, whereby we are experiencing the proliferation of contactless payments, both via plastic debit cards and more recently, via smartphones.

2017 marked ten years since contactless was introduced, so it may still be another 10 years until we see an almost complete eradication of cash from western society. Currently, contactless payments account for just over a third of all payments in the UK. Equally over a third agree that the UK will be cashless in another 10 years. The further spread of contactless via mobile, which would only go to shorten those 10 years, is however hindered by the need to link a bank account with the customer’s smartphone, making this option inaccessible to a greater part of the world’s consumers.

A recent study conducted by Forex Bonuses reveals that Canada is currently number one in the list of top cashless countries worldwide , with 57% of transactions nationally being made without cash, as opposed to 2% in Sweden and France, 52% in the UK, and 10% in China. In China however, 77% of people said they were aware of cashless options, which could mean potential for a huge boost of cashless transactions in years to come. All in all though, 83% of global transactions are in cash, according to Western Union.

The ease of cashless transactions proves the potential for revolutionary popularity, as with a flick of a finger or a swipe of the thumb, all liquid assets can be accessed and moved around. The secondary benefits are the effect a cashless society can have on crime, both in terms of banks & financial institutions, as well as street crime and potential for muggings. In addition, though most cash payments do result in a printed receipt, digital records of transactions are few and far between, and whether by blockchain or other, documenting digital footprints for transactions has the capacity to help governments better set policy, tax citizens and stop fraud, as well as help banks to better monitor financial spheres and adjust rates and inflation accordingly. The introduction of Open Banking will also only go to facilitate these benefits in the digital payments sphere.

So, why are we not already making the world completely cashless and sending all our money to be burnt? One question we should ask first is whether this is truly something people want. Bloomberg reports that a recent move by Indian authorities to remove 86% of cash in circulation proved to be difficult, and shocked many cash dependent markets. The poor especially depend highly on using cash, and making everything digital could put lower earners at a serious disadvantage and the prospect of governments and banks having so much control of people’s finances does pose further concerns. Another major issue is that while street crime and fraud could be better monitored and prevented, cybercrime could rise in equal or greater measure, depending on the vulnerability of transaction systems.

Further on the topic of cybercrime, back in the day ‘looking over your shoulder’ referred to watching your back for pickpockets; that then became about being aware of criminals stealing your PIN, but the new risks are money swiping and the potential for losing your contactless card, which can then be used by whoever finds it or picks it up. Equifax recommends lining your wallet to eliminate the risk of signal and antenna making contact in a money swipe grab, which in essence, is today’s version of pickpocketing.

Bitcoin and the blockchain are proving useful in the payments security sphere, but in their short-lived popularity have already displayed weaknesses and risks that will need time to fix. Equally, infrastructure will have to keep up, as Visa have already showed that IT outages can cause serious disruptions, leaving users unable to make or take payments. On top of this, connections are required to record and document the data, as well as transfer information between the buyer, seller and bank; if the connection is affected in any way, this can create major difficulties. With cash, these issues don’t really exist.

Though no longer king, cash is still the biggest way of actioning transactions around the world, and the physical act of exchanging money still feels the most secure and manageable for most. It’s still also the go-to fall back when the ole’ chip and pin doesn’t work, so it’s still very much in play, in fact the growth of cash circulation outpaced economic growth over the last 10 years. Despite the fact there has never been more cash in circulation worldwide, we are slowly moving towards a cashless society, but the eventuality of a 100% cash free world is still highly debatable.

What do you think? Would you be prepared to burn all your cash in return for liquid assets and the promise of a risk-free digital payments sphere?

Sources:

https://www.thetimes.co.uk/article/ten-years-of-contactless-payments-ck00rsx9p

http://www.theukcardsassociation.org.uk/history_of_cards/index.asp

https://www.finance-monthly.com/2018/07/over-a-third-think-the-uk-will-be-cashless-in-10-years-or-less/

https://www.finance-monthly.com/2017/02/a-cashless-society-the-urban-myth-of-2017/

https://www.finance-monthly.com/2018/08/high-level-of-cyber-security-and-cashless-go-hand-in-hand/

https://www.thetimes.co.uk/article/why-contactless-is-quick-and-easy-for-fraudsters-8dg6dfbfq

https://www.equifax.co.uk/resources/identity_protection/how_to_avoid_contactless_card_fraud.html

https://www.finance-monthly.com/2017/02/a-cashless-society-the-urban-myth-of-2017/

https://money.cnn.com/2017/11/20/news/economy/cash-circulation-payment/index.html

Online research from Equifax, the consumer and business insights expert, reveals over a third (37%) of Brits believe the UK will be a cashless society within the next 10 years. Over half (53%) of 16-34 years olds believe we’ll be reliant on digital and card payments by 2028, compared to just 22% of those aged 55 or above.

However, the research shows that while the use of cash is declining1, it still has its fans. In the survey, conducted with Gorkana, respondents said coins are their top payment choice for vending machines (60%), parking meters (57%), charity donations (53%), and buses (52%), and paying with notes is the preference for taxis (42%).

While 46% of people use cash less often that they did three years ago, more than half (54%) of respondents use cash either as or more often, and almost three in five (59%) think shops, cafes or market stalls that only accept cash are convenient.

The findings also highlight that although the use of digital payments via contactless cards and online transactions is growing rapidly1, some people are still wary about security. Over a quarter (27%) of respondents don’t feel confident payments via websites or contactless cards are secure, and 26% think it’s difficult to track money spent using digital methods.

Sarah Lewis, Head of ID and Fraud at Equifax, said: “We’re in the midst of an exciting smart payments revolution. We can pay for our lunch with our watches and passers-by are now able to donate to buskers via contactless. This growth of new payment technologies is drawing us closer to a cashless society, but long standing preferences for cash remain in certain situations, particularly among older consumers.

“The shift to digital payments in the new economy raises important questions about the role of different payment methods, and highlights the need to balance the convenience people want with security. As digital and online payments continue to grow, so too does the associated fraud. It’s vital that new technology is maximised to give people the reassurance they need as they change the way they spend.”

(Source: Equifax)

Contactless and online banking have pulled cash out of the pockets of most people, and while there are those that believe cash will always be a vital part of the international economy, there are some parts of the world that are borderline cashless. Below Shane Leahy, CEO of Tola Mobile, elves into the possibilities of cashless countries around the world.

With more digital payment options now readily available to consumers than ever before, the depreciation in use of traditional forms of payment, such as bank notes and the humble coin, has been inevitable. When we would once delve into our pockets for some cash, consumers today are now increasingly reaching for their mobile devices to complete purchases quickly and conveniently.

The rise of mobile payments technology over the last few years has played a particularly huge hand in enabling both merchants and customers worldwide to facilitate more cashless transactions. With the global mobile payment transaction market forecast to reach US$2.89 trillion in revenue by 2020, the rapid uptake of mobile-centric methods and the resulting shift towards a more cashless consumer culture is showing no signs of slowing.

Yet, not only have these technologies made fast digital payments accessible for smartphone owners in the more technologically advanced areas of the world; it has also empowered consumers in many emerging markets around the world to undertake instant and secure payments through their mobiles, without the need for physical cash or a registered bank accounts. In fact, it is these same developing regions in which we are now seeing the most widespread and advanced adoptions of mobile payment solutions, which are rapidly eliminating cash as a dominant form of payment amongst consumers within these markets.

One particular area of the world in which cashless payments have broken down many of the previous barriers to entry for both merchants and consumers is Sub-Saharan Africa. It has been demonstrating a rapid mass-market adoption of mobile money services of late and has so far outstripped the rest of the world in terms of its approach to cashless payments. So much so that it now accounts for more than half of the total 277 mobile money deployments worldwide.

One of the biggest driving forces behind this development has been mPesa, the mobile phone based money transfer service which now boasts over 30 million subscribers across various African countries, including Kenya, Congo, Tanzania, Mozambique and Ghana. Unlike apps such as Paypal and NFC-based mobile enabled credit card methods like Apple Pay and Samsung Pay which have been gaining traction in Western regions, the sheer simplicity of the technology required to conduct cashless payments across Africa has contributed to its growing uptake of mobile money options.

In contrast to these methods, which require users to invest in a modern and more expensive smartphones to utilise the technology, mobile money transactions across Africa can be carried out using the most basic handset and without needing an internet or data connection. By leveraging a low-level service menu provided on every GSM phone, this technology is widely accessible and therefore able to support the region’s current technological infrastructure.

What’s more, services such as Apple Pay and Paypal still also require users to link a bank account in order to complete mobile payments, making these methods largely inaccessible for the millions of unbanked consumers in developing regions. These factors also have an impact on merchants as they will have to pay more to process transactions conducted through a linked bank account, than they would if it was made directly through a physical credit or debit card.

With this and the growing preference towards cashless payment methods globally combined, it is unsurprising that the rate at which Sub-Saharan Africa is adopting mobile money is much faster than that of any other region. At the end of 2016, there were over 500m registered mobile money accounts in the region alone, a figure which has undoubtedly now significantly increased.

The establishment of mobile money across Sub-Saharan Africa is now giving much of its previously unbanked population unprecedented levels of financial inclusion and freedom to make purchases anywhere, at any time, a move which has undoubtedly played a significant role in the growth of cashless transactions and gradual decline in other payment methods. What’s more, these services have significantly reduced the concerns over carrying physical cash for consumers within these countries and have replaced them with a simple and secure means for them to instantly access funds and pay for goods and services.

Not only has this rise in mobile money use facilitated an increase in consumer empowerment; it has also paved way for merchants who have previously combatted against the region’s developing infrastructure, in which periods of downtime and network outages cause huge disruption and can often lead to lost funds when payments are made via credit cards. By ensuring a seamless and instant digital transfer of funds from customers to the merchants, the appeal of cashless options has increased dramatically, providing merchants with more business continuity and offering these countries an opportunity to drive economic growth.

While there is still some way to go before cash is rendered expendable globally, there are various countries Sub-Saharan Africa, such as Kenya and Tanzania which are currently leading the way in terms of changing consumer behaviour and quickly adopting a cashless approach. For now, cash still remains king across most Western and other countries. However, as consumers continue to seek convenience and security, it is certain that we will see a growing shift towards digital payment methods and a continued demise of physical cash worldwide.

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