Digital financial solutions and tools are becoming more and more used for private payments. Digital devices have shown a convenient tool to use when paying invoices and checking bank accounts. A growing trend is also to use the computer, laptop and smart phone to transfer smaller amounts of money.
What drives a move towards more digital and mobile solutions are two equally important factors: Changing consumer behaviour and digital transformation of financial services. The first being the reason why cash will still be around for a foreseeable future. Retailers do best in planning a strategy that provides both solutions in the coming years – being prepared for a transfer to digital solutions, but still allowing cash payments.
The cashless society boom
According to Visa’s 2016 Digital Payments Study, the number of consumers in Europe that use their smartphones for mobile payments has tripled in the past year. Today, 54 percent say that they use their phone for payments. 12 percent say they have never used a mobile device to make a payment (compared to 38 percent last year).
The countries that have the highest proportion of mobile payment users are Turkey, Israel, Poland, Romania, Ireland, Belgium and the Scandinavian countries. Sweden is often mentioned as the country where a cash less society will be established first. Already 80 percent of transactions in retail is made by cards. The estimate from Riksbanken (the Swedish national bank) is that between 2012 and 2020 the cash in circulation will decline by 20 to 50 percent.
So why is cash still around?
People have been predicting the death of cash for a long time now, with the credit card and Bitcoin being followed by the most excited and enthusiastic future predictions. And considering all the statistics showing the use of digital devices, one would think that the use of cash has rapidly gone down. However, according to a report from European Police Office, the total value of banknotes continues to rise year-on-year beyond the rate of inflation.
Mostly, cash is us used for low value payments. Why? It is easy to carry, widely accepted and people rely on it. Cash payments will work even if electric systems go out, and more importantly, no one can track it back to who made or received the payment. So, cash is still used and wanted among many consumers. For retailers and shops, the message is clear. Consumers want to be able to choose what kind of payment they feel most comfortable with.
PayPal’s CEO David Marcus launched the concept 3.0. Cash is Money 1.0, cards Money 2.0 and digital and mobile is Money 3.0. 2014 he predicted that by 2018 the reality will be: “If you’re in an advanced metro area in US or Western Europe or Asia, you will not have to carry your wallet to buy things.”