Digital Payments ‘Tipping Point’ Imminent in the UK
Cashless payments will be more popular in the UK than transactions using coins and notes for the first time this year, the Payments Council predicts.
The UK payments body has been forecasting for several years that 2015 will mark the tipping point when the number of non-cash payments, including those using credit and debit cards, cheques, direct debits, standing orders and mobile payments, overtakes the number of payments made using physical money in consumers’ wallets.
The number of cash payments in the UK has been slowly declining in recent years, while the number of non-cash payments has been growing.
The Payments Council expects that in 2015 the UK will see 400m fewer cash payments than last year but 700m more non-cash payments. This would translate to a total of around 19bn transactions being made with cash this year and 19.9bn without cash, marking the first year that cash is no longer king.
The figures show that the move towards a cashless society is well underway, said Spiros Theodossiou, vice president of product strategy at digital payments company Skrill. “The significant growth seen in contactless transactions last year is further evidence that consumers are gravitating towards faster and more convenient ways to pay.
“In response, financial payments companies are delivering innovative new products, from digital wallets to contactless and mobile payment methods, increasing the options for consumers to move away from more traditional methods.
“For the younger generation in particular, expectations are high when it comes to the availability of alternative ways to pay. Where cash was once king, now card and digital payments are becoming a part of their day-to-day routine. Our own research shows four out of ten (42%) people think that shops will cease to accept cash as a form of payment in the next twenty years, and one in five (20%) 18-25 year olds think shops will stop accepting cash in just five years’ time.
“However, it is likely that cash will prevail for some time yet as consumers will find it hard to wean themselves completely off cash due to its physical nature and the flexibility it offers. Much like the decline of newspapers, digital alternatives may be more suited to our modern lives but many people remain reluctant to see the end of traditional methods quite yet.
“The ‘cashless society’ is very much a UK and US perspective and elsewhere cash remains very important. According to The World Bank, 2.5bn adults across the globe are without formal bank accounts, while (it is) estimated that the total in the UK alone is 3m. Adoption of new technology is helping unbanked consumers to connect with the digital world, such as in India where online purchases through mobile has grown by over 100% in the last two years, according to MasterCard.
“However, there is a long road ahead for digital payments in emerging markets and cash will keep its place in our society for the conceivable future. What we will start to see, at different paces across the world, are more examples of cash being phased out as further technological innovations make it even more convenient to pay.”