Opinion

Europe, millennials and business' changing relationship with cash

8 min read

07 June 2016

Cash as legal tender has been around for almost 300 years. And whilst a great deal has changed in how we buy and sell, cash has been stalwart throughout the ages, only recently beginning to see challenges from cards and now mobile payment options.

Apps such as PayPal, digital platforms such as the mPesa, mobile wallets like Apple Pay, even upgrades like the contactless card, have posed fresh challenges to cash as the leading form of payment for individuals and businesses.

In fact, figures from the UK Card Association revealed £1.5bn was spent on contactless cards within the UK during March 2016. This amounted to an increase of 250 per cent on the same month in the previous year.

Moreover, Visa Europe’s recent statistics show that at least one-in-five in-person card transactions are now tap-and-pay, compared to just one-in-60 in 2013.

Visa calculated that there were around three billion contactless payments in Europe in the last year; triple the amount of the previous 12 months and UK contactless adoption grew by 300 per cent between April 2015 and 2016.

With such statistics, many are questioning the future of cash.

However, cash isn’t broken. Not yet, and if the investment in polymer notes by the Bank of England is anything to go by, not for some time.

Whilst there are an undeniable number of payments made electronically thanks to the introduction of new payment technology – with Payment UK positing that contactless stands to oust cash by 2021 – I would argue that we should not only be sceptical of this claim but there are reasons to believe it will be cards, not cash, that disappear in the next few years.

There are two reasons for this: firstly, there is wide mistrust in technology due to the apparently ease of hacking and defrauding, something that has only been augmented in recent years with the rise of cybercrime and data breaches at several high-street banks; and secondly, cash continues to be convenient – for individuals and businesses.

The latter point is particularly key – whilst mobile will almost certainly overthrow cards and contactless due to the similarity of their function, the role it plays is distinctly different to that of cash.

Unlike mobile pay, cash is independent of technology and cheap to use. This makes it convenient for many small retailers and a great resource for businesses who want to maintain a war chest in case of recession or crisis.

Our own research supports these points. In a recent survey of 1,000 Britons with OnePoll, the popularity and sense of security of mobile and contactless payments comes into question.

According to our results, less than ten per cent of participants claimed to use contactless on a daily basis, compared to 39 per cent who used cash. Likewise, only 13.5 per cent chose contactless payments as their payment of choice for the next ten years.

Even amongst the “digital natives”, millennials between 18 and 35, only 3.5 per cent actually use mobile pay on a daily basis and less than five per cent  say it would be their payment method of choice in the next ten years.

Read more on from the payments market:

Slightly more popular with this age group was the contactless card, with around 15 per cent saying they used it every day and 17 per cent believing they’d still use it in 2026 – but overall only a meagre 2.3 per cent of those surveyed thought contactless was the most secure payments option. This compares to over half who selected cash.

Part of the reason for the low uptake may have been the limited access to the technology but now Android Pay is live and Samsung is on the way, this should soon change. This means mobile pay technologists need to start addressing the prevalence of security-related concerns that exist.

According to our data, 97 per cent of Britons believe tech-based payment options are not secure. Many consumers worry that criminals target contactless for an easy and quick payday and that the security for mobile-pay does not enjoy the same level of security as traditional chip-and-pin.

This insecurity is no doubt augmented by the fact the most cash-free society in Europe – Sweden – has allegedly experienced a two-fold increase in financial crime in the last decade, begging the question as to whether this is related to the fact that four out of five of their transactions are now made electronically.

There are many more payment options available today. The number of options have increased and as technologies come-of-age our spending habits will almost certainly change.

For businesses, the shifting relationship consumers have with payments is an opportunity.

Mobile options, for instance, will allow businesses to understand their customers better through the accumulation of data. They could track trends and inventory, helping with the creation of more-appealing, better-integrated incentive programmes.

Furthermore, cashless transactions could help businesses with speedier checkouts (a phenomenon already seen with contactless). On the other hand, issues such as credit transaction costs on small payments and security may mean businesses are just as tentative as their customers.

Fledgling digital infrastructure may take time to mature and money to implement, but there is no doubt that we are increasingly hybrid spenders. Cash and cashless payments play different roles in the way people and businesses budget, save, and spend.

Overall, it’s important to recognise that cash is still the transaction method of choice for more than half of consumers (52 per cent) and we are still seeing a rise in the number of ATM cash withdrawals across the UK (LINK’s network saw an all-time record of £128bn worth of withdrawals out of its 70,000 ATMS in 2015).

Alternatives will play a key role in the future.

They are already making waves in the payment industry and the battle between card, contactless and mobile is only just beginning.

But cash will also be there. Stalwart. Convenient. Safe.

Ewan Ogilvie is MD of European ATM provider YourCash Europe

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