Throughout history we can attribute social and economical changes to global events, such as the financial crash of 2008 and more recently the global COVID-19 pandemic of 2020. Shifts in consumer behaviour and demand can also be linked to these seismic events.
A slow shift in payment methods used has been taking place across the retail sector over the last couple of years, but will the COVID-19 outbreak force a change in the speed of the payment shift?
Whilst we have always known that cash is dirty, largely in part to the amount of hands and surfaces cash touches in its lifetime, the current pandemic has highlighted and brought the issue of dirty money to the fore. People have never been more aware of how clean their hands are and how many other people have touched a surface or item before them.
Research by OnStride Financial suggests a £20 note will be used 2,328 times over an average lifespan of 113 months. This is four times as much as the 594 times a £10 note is used, but these generally last only 36 months on average.
In the past, this research may have merely presented a list of statistics, but in today’s current climate consumers are considering the best ways to protect themselves and their families. Cash it seems is proving one thing people can do without. But what does this mean for the small corner shop, or the village farm shop, who simply don’t have the infrastructure in place for a cashless society?
How does this decrease in cash use affect the population? Consumers aged 18 – 25yrs along with those over 65yrs are statistically shown to use cash the most frequently. Is this a choice, or a forced reality? Many of the young age group will live hand to mouth and therefore will withdraw a set amount of cash that they can spend each week or month. Whereas the over 65 age group have grown up dealing in cash and by force of habit are more likely to complete transactions using cash. Helping these age groups adapt to the shift to a cashless society is essential in ensuring that retailers don’t lose sight of key target audiences, whilst also maintaining a cohesion across society.
As the amount consumers can purchase using contactless increases during the COVID-19 outbreak, are we seeing the start of the introduction of limitless contactless payments? And what are the safety implications that need to be considered when we increase contactless payments? With the introduction of ‘manage my card’ on most mobile banking apps, are the safety concerns about limitless contactless payments previously made with a stolen card now obsolete?
Society is shifting with numerous amounts of bars and restaurants now only accepting card payments due to the safety implications of leaving cash in a premises overnight. This shift was already taking place, but with the added health implications of using cash, could we see the pace of the phase out of cash across our retail and leisure sectors speed up?
Whilst the drive for a cashless society seems to be driven by consumer demand, there is also a reported benefit to retailers with a report stating that British retailers could save more than £7million per year by ditching cash and only accepting digital and card payments. The Global Payment Trends report stated that large retailers such as Tesco could save as much as £48 million annually, with the savings coming from costs associated with accepting cash at tills and transporting cash securely to and from banks.
Card payments are not immune
The evidence is stacking up against the use of cash, from both a health and also a safety perspective. But is it plain sailing for card payments during the COVID-19 breakout? The answer quite simply is no. Whilst more people are choosing to complete their purchases using card or online methods, there has been a reduction in spending across the leisure and retail industries. American Express says the COVID-19 pandemic has impacted cardholder spending and will force it to trim down costs.
The company reported adjusted earnings of $1.98 per share. Revenue fell 1% to $10.3 billion in the quarter, compared with $10.4 billion a year ago, reflecting reduced cardholder spending that began in late February. So, whilst consumers are stock piling food items and potentially spending more on grocery items, general spending is down, with transport and leisure spend impacted.
The future of payment
Whilst we are very much shifting towards a cashless society and our current situation is speeding us up on this trajectory, advancements in card payments and the future of payments need to address the obvious safety implications that cards and mobile device payments still carry.
Biometric measures may mean that in the future you won’t need anything you were not born with to make a payment. Some mobile technology and financial companies are predicting that a finger imprint, a scan of your eye, or a tap of an armband that links to your heartbeat will be easier and safer than using plastic.
Fingerprint and retina payments are an idea that is slowly coming to the fore, but the technological infrastructure for these types of transactions to become mainstream is vast and is likely to take many years. This again brings us back to the village shop and local farm shop and how they would adapt to the technological advancements needed to maintain these payment methods. Would they adapt or would they disappear?
Consumer expectations when making payments are changing and the COVID-19 pandemic has done nothing to quell the speed of this change. As we shift to a cashless society, are you ready to keep up with your consumers when it comes to transactions?