As more and more consumers ditch cash in favour of plastic and even mobile payments, industry expert Chris Davies discusses the future of retail payments in response to RetailTechnology.co.uk's homepage poll
According to the latest research, cash usage in the UK is decreasing as plastic becomes an ever more popular way for customers to pay for both big ticket items and the ones they buy every day. Recent figures from the UK Cards Association
showed that the total value of all debit and credit card purchases was £130.9 billion in Q2 2013, an annual growth rate of 4.3%.
Chris Davies, managing director of electronic transaction processing provider Global Payments
, said the retail sector is one where this impact of card payments is being keenly felt. "But there are barriers – both real and imagined – to their gaining an even firmer foothold in the way customers pay for goods and services," he said.
"For example, it is widely believed that using cash to pay for things is ‘free’. However, this is not the case as cash carries many hidden costs, which are not always obvious. These costs add up through the whole cash cycle and cover transportation, insurance, cash handling, security and loss of interest. Everyone in the payment chain picks up some of this expense including the retail sector and its customers."
Davies said research shows that customers are likely to spend more when they pay by card, so prioritising the acceptance of card payments should be top of a retailer’s to do list. Figures from the Payments Council released in February 2013 in its report, The Way We Pay
, showed that cash still made up three out of five daily one-off transactions in 2011 – however, it also found that the use of debit cards is increasing, as are contactless payments.
Offering speed and convenience
"Many customers are still of the mindset that cards should only be used to pay for bigger-ticket items," Davies admitted. But he contended, slowly but surely, however, contactless payments are edging out cash in low value everyday transactions. "The benefits of ‘tapping and going’ are particularly noticeable in retail outlets where customers want speed and convenience – buying a coffee on the way to work or paying for a drink in a bar, for example," he said.
"Not only does the customer benefit, the retailer does too, as the time taken to serve someone is reduced, increasing throughput and ultimately turnover. However, concerns about the security of contactless persist and these must be overcome before they really start to make a dent in the use of cash."
A shift to online spending means many customers are becoming more accustomed to e-payment and this is also starting to erode cash spend. "E-commerce is making strong inroads into the store, with the shops of the future likely to be showrooms from which customers select big ticket items that they order from their mobile while visiting the outlet," Davies declared. "There simply will not be a role for physical cash in these new high technology stores and virtual environments."
Mobilising retail shopping payments
Finally, the payments expert pointed to the explosive growth in the availability of smartphones which, combined with an increase in mobile payments, will also diminish the use of cash. "Once more NFC-enabled mobile devices hit the UK market, the convenience and speed of paying with a phone will be clear," he said. "In addition, there is a demographic shift at work here, as the generation set to be tomorrow’s big spenders are surrounded by digital technology and use it in every aspect of their day-to-day lives.
"So while cash may never be fully replaced in the retail environment, new technology and shifts in customers’ attitudes are likely to see new payment methods come to the fore," Davies concluded. "As a result there is a clear time and cost imperative for the sector to become less reliant on accepting cash as payment for goods and services."
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