Talking up the cashless revolution

Alternative payment technologies are finally starting to take off in Europe, the US and Australia.
24 July 2018

Are you really going cashless? Source: Shutterstock

Well, alternative payments solutions are picking up if you believe ING Bank.

The Dutch financial institution recently surveyed nearly 15,000 people across 13 countries. While the popularity of different payment methods varies by country due to availability and familiarity, PayPal is the most accepted overall, with only 13 percent in Europe reporting that they would never use the service.

However, tech giants such as Amazon, Google, Apple, and Facebook have much work to do. Across Europe, 25 percent, 31 percent, 32 percent and 52 percent respectively said they would never use these providers to pay for goods and services, either in-store or online.

Firstly, can we please stop lumping PayPal in with alternative payment methods? It was, after all, established in 1998 (as Confinity by Max Levchin and Peter Theil) and today is one of the largest online payment processors in the world. It is about as alternative as Justin Bieber.

Apple Pay, Android Pay et al are the real new kids on the block and they are struggling to lose the niche tag.

The ING Bank research shows that, when it comes to buying physical items in-store, 92 percent of all payments in Europe are made either in cash or by debit or credit card.

Last week, UK mobile payments and loyalty marketing platform, Yoyo, announced that it had crossed the one million user mark as, to quote the press release, the UK becomes a cashless society. FinTechs do like to bang that drum, don’t they?

If you want a genuine cashless revolution, then look no further than China where there is surging use of mobile apps like WeChat and Alipay. In the UK, however, and indeed much of Europe, notes and coins continue to play an essential role for many.

Alipay is the number one preferred payment method in China, followed by WeChat and bank cards. Source: Shutterstock

For consumers, a major benefit is reliability. Cash can be a useful budgeting tool and it is a quick and easy payment method which works even when, for example, card terminals do not.

For retailers, cash is still the cheapest method to accept. According to the British Retail Consortium, in 2016 the average transaction cost a retailer 0.15 percent measured as a percentage of turnover, compared to 0.31 percent across all payment types.

ING Bank, however, prefers to pursue the argument that traditional bricks and mortar retailers are struggling to compete with pureplays, with store closures and profit warnings an increasingly common phenomenon.

“Those physical stores that are left need to adapt to changing consumer habits and expectations, which includes being flexible in how they accept payments,” says James Knightley, Chief International Economist at ING.

“As such the use of cash will continue to decline and the opportunity for using alternative payments will only increase. Credit and debit cards are likely to benefit in the near-term, but as awareness of alternatives grow these too are likely to see market share gradually shrink.”

In other words, the revolution is on hold. Cash and credit/debit cards will eventually dwindle away to nothing. But we’re not exactly sure when, hopefully soon, fingers crossed.