The UK is on the fast track to being cash-free, but are our small and medium businesses ready?
The pounds in your pocket are destined for the museum display cabinets. This is according to new research by trade association, Payments UK, who predict that debit card and contactless payment use will overtake cash transactions by 2021 after finding that cash transactions accounted for less than half of consumer payments for the first time in 2015.
There’s no doubt that contactless technology has transformed consumer buying, and with Apple and Android Pay now available, it’s clear that the days of counting out coppers for a pint of milk and a Mars bar will soon be over.
Who has the least cash?
Citigroup and London’s Imperial College latest Digital Money Index indicates that the UK has begun to sprint ahead in the global race to becoming a cashless society after rising from 7th to 4th place in the list of countries that are most ‘digital ready’. Finland topped the list as the most digital-ready country for the third consecutive year, with Singapore and the US following behind in second and third place respectively.
Finland’s continued position as a digital leader is unsurprising considering their strong investment in digital infrastructure. Fixed broadband is available to 97 per cent of Finnish homes; this combined with affordability has helped Finland become one of the most tech savvy nations, with 91 per cent of the population being regular internet users. Furthermore, according to the Digital Economy and Society Index (DESI), Finland has one of the highest shares of eGovernment users and users of eHealth services in Europe. The Finnish government’s integration of digital and public services has further embedded digital processes into everyday life, meaning that digital payment is just another aspect of efficient modern living.
Contactless: the consumer’s choice
The rapid change in the UK’s payment habits can largely be attributed to big brands’ early adoption of contactless. In 2014 Tesco updated all 6,000 of their payment terminals in London to accept contactless payment, they announced that this would save 6 seconds for every customer that used it. For a consumer that is often time poor, 6 seconds less spent in a queue is 6 seconds less stress but more importantly for Tesco it speeds up customer service which enhances the customer experience.
However, contactless payment hasn’t always been hailed as a hero. Transport for London’s (TFL) announcement that its buses would go cashless in 2014 was initially met with scepticism. Nonetheless, since TFL has rolled out contactless across its network, more than 400 million journeys have been made using credit or debit cards or a mobile device, revealing that contactless is an option that offers consumers more, not less choice.
While Tesco and TFL helped lead the way in implementing wave and pay into our everyday lives, the increase in the contactless spend limit from £20 to £30 further pushed contactless mainstream by boosting retailer opportunities and encouraging a wider range of merchants to adapt their payment systems. In 2016, from petrol stations to pubs, consumers can go about their daily lives without having to enter their pin.
Contactless may have won London over first, but a recent study by Barclaycard found that contactless is growing fastest in Manchester, Glasgow and Cardiff. Furthermore, the study also revealed that the over 60’s, the group often deemed as ‘technophobes’, are the fastest growing adopters of contactless card payments. The popularity of contactless across generations offers further evidence that wave and pay is here to stay as more consumers look to utilise new technology that will allow them to make safer, more convenient payments.
Better for business
The swift infiltration of contactless into our everyday lives has certainly raised customer expectations of the pace and ease of service, meaning that businesses not offering customers the payment options they expect, risk undermining their reputation by appearing out of touch.
However, the new way to pay offers considerable benefits to businesses too. Sage Pay’s Payments Landscape Report 2015, found that annual cash handling costs, including allowance for fraud and theft, set UK retailers back more than £3,600 on average. By offering cashless payment options, businesses will benefit hugely from reduced cash handling costs. While digital payments are not completely free from fraud, the risk is significantly lower. Figures from the UK Cards Association show that in the first six months of 2015, fraudulent transactions were equivalent to only 2p for every £100 spent using contactless functionality.
In addition to speedier, safer transactions, digital payments also open up the possibility of integrated reward programmes and location-based marketing. Tapping into these smartphone capabilities will allow businesses to use customer data to deliver tailored marketing campaigns, enhancing customer experience and encouraging loyalty.
While the question of whether the UK will turn completely cashless remains debatable, there’s no doubt that paying for a latte with a quick swish of your wrist has become so commonplace that digging deep in your purse for cash feels like an archaic practice. Whether you’re a high street store, independent coffee shop or a local newsagent, consumers now expect to be able to pay with lightning speed. Cashless is coming, make sure you’re prepared.
Growth Business UK. 2016. Is your business prepared for the cashless economy?. [ONLINE] Available at: http://www.growthbusiness.co.uk/comment-and-analysis/2532811/is-your-business-prepared-for-the-cashless-economy.thtml. [Accessed 24 June 2016].