12 July 2018
Five global indicators that we are heading towards a (nearly) cashless future
Coins and banknotes are rapidly losing ground. 2016 was the first year in which the amount of money spent with non-cash payments was higher than with cash payments, according to Euromonitor International. It is still uncertain whether we will ever completely eliminate cash. Several Swedish agencies, for example, have expressed doubts about this. Although the pace of transition varies from country to country, however, there are several signs that we are rapidly heading towards a nearly cashless society. Worldline has identified five indicators that point to a (nearly) cashless future.
1. Instant payments are as quick as cash
Electronic payments have historically been at a disadvantage to cash because of the delay in processing payments from one bank account to another. It could take hours or even days. Since the European Instant Payments initiative went live in November 2017, however, it has become possible to transfer amounts in Euros in less than ten seconds. Instant payments have the potential to be a real game-changer in the payments industry – and a crucial catalyst for consumers and merchants to go cashless.
2. It’s not just cash that’s disappearing; so are cards
Consumers are increasingly using new forms of payment. Experts believe that cards will lose market share in the coming years. This is partly due to developments such as the introduction of PSD2, the EU’s second Payment Services Directive. These changes will enable merchants to trigger payments directly from customers and bypass the fees and potential fraud involved with credit cards. In response, the card schemes are developing services such as instant card payments, digital wallets and payments integrated with the Internet of Things (IoT). They are also expanding into non-card payments, most notably with Mastercard’s acquisition of Vocalink.
3. Shopping and paying with voicebots
Voicebots are opening up new ways for merchants to connect with customers 24/7 because of powerful technologies such as machine learning and Natural Language Processing. Ovum has forecast that by 2020 80% of brands will use chatbots for customer interactions. Directly linking a payment option to the voicebot will make the shopping experience quick and efficient. This is expected to be just the beginning of the dominance of voice in online retail. Voice biometric recognition and authentication is the next step.
4. Cash is expensive
According to Mastercard estimates, printing and distributing cash can incur high costs for national economies – up to 1.5% of the GDP. National regulators and banks are increasingly recognising the cost benefits of moving to a cashless society. It would not only improve the speed of transactions and lower costs but also increase traceability, which is of great interest to governments and tax authorities.
5. The cashless society is coming
The use of cash varies between countries, but in countries like Sweden, Belgium and South Korea, the cashless revolution is happening very quickly. The Swedish central bank, the Riksbank, predicts that cash transactions will make up less than 0.5% of the value of all payments made in the country in 2020. South Korea aspires to go completely coinless by 2020. These signs point to the possible end of banknotes and coins, although the Swedish Central Bank, the Riksbank, is currently investigating the impact of a cashless society.
With payment processes speeding up and becoming ever simpler for businesses and consumers, the growth of non-cash payments presents exciting opportunities for issuers, acquirers and merchants.