The UK’s move away from cash has been a growing trend for a number of years, and according to UK Finance, card payments accounted for just over half (51%) of all payments in 2019. This is part of a wider global trend, led notably by Sweden, where cash accounts for only 1% of the county’s GDP.
Here in the UK, and in countless other countries around the world, the pandemic has only accelerated this process, with fears surrounding virus transmission through physical tender. Retailers would rather their staff not handle cash, and many have brought in rules that stipulate customers must only pay by card. Consumers, for their part, are also much more conscious of what they lay their hands on. Many, as highlighted by our recent blog, would rather not head to the shops at all, instead purchasing what they need online.
Collectively, these changes, although pragmatic, seem likely to lead us more quickly toward a cashless future – and there’s already reliable data suggest just that. Research carried out by Link, the UK’s largest cash machine network, shows that ATM transaction volumes fell as much as 62% year on year at the start of the UK lockdown. NTT DATA’s research into the subject tells a similar story. The company’s latest survey of 2,000 British consumers laid bare a clear trend towards digital banking as a result of the lockdown. As many suspected, that trend seems to be permanent. Whilst 26.5% said they were already cashless pre-pandemic and will remain so post-pandemic, a further 16.2% said they had started during the lockdown and will continue once it lifts.
Benefits of going cashless
Consumer shifts like this towards digital banking and payment methods, if they are indeed long-term, are set to provide several advantages. For businesses, contactless payment solutions reduce friction at in stores, and ultimately support customer satisfaction – making people more likely to return and spend.
Consumers are set to benefit too. Contactless or smartphone payments tend to be more convenient. They also tend to be more secure: carrying cash makes you a visible target and if you lose it, it generally isn’t redeemable. Lose or have your card stolen, though, and your bank or your banking app can freeze it almost instantly.
A cashless society is even in the interest of governments. Cash is often central to illicit transactions. A move towards digital banking would likely coincide with improved capabilities to curb tax evasion, counterfeiting, corruption and terrorist financing.
What does the future of cashless look like?
Advantages aside, however, the UK is still some way off abandoning physical fiat altogether. To become a truly cashless society, consumers will need to be won over by cashless-enabling technologies.
Digital wallets will be one critical area that will determine uptake: mobile wallets can be a tremendous asset for banks and a useful differentiator as customers and potential customers make the long-term shift to digital-first banking. Besides winning new business, mobile wallets help to generate streams of actionable customer data that can then be used to improve or create new services and deals. They also provide banks and their customers with better fraud safeguards and controls.
Another will be contactless cards – and governments are typically recognising this. In the UK, the limit was recently increased from £30 to £45. Across the Eurozone, the limit was also widely lifted from €25 to €50.
Cashless stores, though still an emerging technology area, will in time be yet another reason to leave notes and coins at home. As a concept, it’s certainly caught our attention here at NTT DATA. Earlier this year, we introduced facial recognition technology and dynamic pricing model at our Catch&Go register-less digital store in Japan. The facial authentication allows shoppers to do their shopping without using their phones and delivers an innovative way of spending via customer touch points. As part of the move away from cash, we plan to introduce this service at 1,000 retail stores by the end of 2022.
There are huge benefits to going cashless, and much of the basic technology is already in place to make it happen. Nevertheless, for consumers to be fully won over by digital payments, banks and other businesses in the sector will need to provide a truly exceptional technology experience. For the time being, it seems, the UK is just cash-less – not cashless.