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CAN WE EXPECT TO SEE A CASHLESS BRITAIN BY 2020?

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Can we expect to see a Cashless Britain by 2020?

Simon Black, CEO, PPRO Group

A woman waves her smartwatch at the automated barrier to gain entry to the train. When she exits she will do the same and her fee will be automatically calculated. Apart from the one-time set-up of her account, she has nothing else to do; no ticket to order, no card to carry, no ticket to fumble for or lose, and most importantly no time wasted. This is the present reality for early adopters and will be the norm for everyone else in the near future, not just for purchasing tickets, but for any of our everyday transactions. And it will mean the end for cash.

A recent Lloyds Bank survey[1] revealed that a quarter of Brits think that in just five years’ time they will no longer need cash. Payments UK[2] take a more cautious approach, predicting that the number of cash payments will decline by 30 per cent by 2024. What’s for certain is that we are set on course firmly for the end of cash. We live in a culture of increasing convenience which has influenced and will dramatically transform the way in which we’ll pay for items now and in the future.

A new era of Connected Commerce

Mobile payments will become just one of the many options taken for granted in the future. While it’s still in its infancy, the explosive growth of contactless payments in the past 18 months means that in just a few short years from now, payments via smart devices are likely to be just as commonplace as paying by cash, debit or credit card today. In fact, research from Gartner[3] predicts that mobile payment adoption rates will catch on quickly, estimating an annual volume and value increase that will average a 35 per cent growth rate, until 2017.

It is vital for mobile payments to be supported by a range of mobile devices in order to encourage steady growth. However, it is also just as important that merchants install the appropriate technology to accept alternative payment methods. For example, retail brands are already reaping the benefits with one in four mobile commerce sales completed through smartphones[4].

However, businesses and other organisations will also be significant beneficiaries. By being open to accepting contactless payments, retailers can capture payments digitally and acquire data, which can enrich customer experiences, increase customer retention and provide insight that can influence wider marketing activity. The combination of the Internet, smartphones, sophisticated virtual wallets and win/win promotional programmes means commerce will be connected on a scale that was, until recently, unimagined. The effect of a cashless society will lead to Connected Commerce, and the impact to businesses, both large and small, will be revolutionary.

Convenience culture is driving the cashless revolution

It wasn‘t that long ago that we approached shopping online with caution and many of us were concerned that our card details or even our whole identity would be stolen. More and more frequently, value is being placed on speed and convenience, which consumers are willing to make exceptions for and is one of the biggest benefits of mobile payments. Consumers tend to adopt new products, technology or services quickly if they’re simple, intuitive and compelling. It is this culture of convenience that is a major driving force behind the cashless revolution. From using contactless cards to pay for a train journey, quick and easy is winning the war.

This factor, together with retailers installing the necessary technology, has driven the explosion of the use of contactless cards in the UK in the last year, and spending more than trebled to reach a record £2.32 billion in 2014[5]. UK consumers used their contactless credit/debit cards 319.2 million times last year and 10 contactless transactions took place every second. With 41 million journeys made on the London transport network using a contactless card in the first six months after launch, consumers are now forgoing a paper ticket or their Oyster card (a contactless smartcard for public transport across London). The need to store money on a separate card or queue at machines to top up has been removed.

Contactless is the missing link to the widespread adoption of virtual wallets. Once you are comfortable with waving your card to make payments, it’s a small step to waving your phone or your smart watch. In just a few short years from now, payment via smartphone, smartwatches or other intelligent devices is likely to be just as commonplace as paying by cash, debit or credit card today.

Be it mobile wallets, virtual cards or biometric payments, the world of payments is transforming and cash can expect to slip further down the preference list over the coming years until it will most likely become obsolete by 2025.

[1] http://www.finextra.com/news/fullstory.aspx?newsitemid=27784&utm_medium=NewsFlash&utm_source=2015-8-31

[2] [1] http://www.finextra.com/news/fullstory.aspx?newsitemid=27987&utm_medium=NewsFlash&utm_source=2015-10-15

[3] http://www.gartner.com/newsroom/id/2504915

[4] IMRG and Capgemini’s Quarterly Benchmark https://econsultancy.com/blog/66543-50-fascinating-stats-about-mobile-commerce-in-the-uk-2015/

[5] http://www.theukcardsassociation.org.uk/news/contactless_surgeJan2015.asp

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UK might need negative rates if recovery disappoints – BoE’s Vlieghe

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UK might need negative rates if recovery disappoints - BoE's Vlieghe 1

By David Milliken and William Schomberg

LONDON (Reuters) – The Bank of England might need to cut interest rates below zero later this year or in 2022 if a recovery in the economy disappoints, especially if there is persistent unemployment, policymaker Gertjan Vlieghe said on Friday.

Vlieghe said he thought the likeliest scenario was that the economy would recover strongly as forecast by the central bank earlier this month, meaning a further loosening of monetary policy would not be needed.

Data published on Friday suggested the economy had stabilised after a new COVID-19 lockdown hit retailers last month, while businesses and consumers are hopeful a fast vaccination campaign will spur a recovery.

Vlieghe said in a speech published by the BoE that there was a risk of lasting job market weakness hurting wages and prices.

“In such a scenario, I judge more monetary stimulus would be appropriate, and I would favour a negative Bank Rate as the tool to implement the stimulus,” he said.

“The time to implement it would be whenever the data, or the balance of risks around it, suggest that the recovery is falling short of fully eliminating economic slack, which might be later this year or into next year,” he added.

Vlieghe’s comments are similar to those of fellow policymaker Michael Saunders, who said on Thursday negative rates could be the BoE’s best tool in future.

Earlier this month the BoE gave British financial institutions six months to get ready for the possible introduction of negative interest rates, though it stressed that no decision had been taken on whether to implement them.

Investors saw the move as reducing the likelihood of the BoE following other central banks and adopting negative rates.

Some senior BoE policymakers, such as Deputy Governor Dave Ramsden, believe that adding to the central bank’s 875 billion pounds ($1.22 trillion) of government bond purchases remains the best way of boosting the economy if needed.

Vlieghe underscored the scale of the hit to Britain’s economy and said it was clear the country was not experiencing a V-shaped recovery, adding it was more like “something between a swoosh-shaped recovery and a W-shaped recovery.”

“I want to emphasise how far we still have to travel in this recovery,” he said, adding that it was “highly uncertain” how much of the pent-up savings amassed by households during the lockdowns would be spent.

By contrast, last week the BoE’s chief economist, Andy Haldane, likened the economy to a “coiled spring.”

Vlieghe also warned against raising interest rates if the economy appeared to be outperforming expectations.

“It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.

Higher interest rates were unlikely to be appropriate until 2023 or 2024, he said.

($1 = 0.7146 pounds)

(Reporting by David Milliken; Editing by William Schomberg)

 

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UK economy shows signs of stabilisation after new lockdown hit

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UK economy shows signs of stabilisation after new lockdown hit 2

By William Schomberg and David Milliken

LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month hit retailers, and business and consumers are hopeful the vaccination campaign will spur a recovery, data showed on Friday.

The IHS Markit/CIPS flash composite Purchasing Managers’ Index, a survey of businesses, suggested the economy was barely shrinking in the first half of February as companies adjusted to the latest restrictions.

A separate survey of households showed consumers at their most confident since the pandemic began.

Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.

The central bank expects a strong subsequent recovery because of the COVID-19 vaccination programme – though policymaker Gertjan Vlieghe said in a speech on Friday that the BoE could need to cut interest rates below zero later this year if unemployment stayed high.

Prime Minister Boris Johnson is due on Monday to announce the next steps in England’s lockdown but has said any easing of restrictions will be gradual.

Official data for January underscored the impact of the latest lockdown on retailers.

Retail sales volumes slumped by 8.2% from December, a much bigger fall than the 2.5% decrease forecast in a Reuters poll of economists, and the second largest on record.

“The only good thing about the current lockdown is that it’s no way near as bad for the economy as the first one,” Paul Dales, an economist at Capital Economics, said.

The smaller fall in retail sales than last April’s 18% plunge reflected growth in online shopping.

BORROWING SURGE SLOWED IN JANUARY

There was some better news for finance minister Rishi Sunak as he prepares to announce Britain’s next annual budget on March 3.

Though public sector borrowing of 8.8 billion pounds ($12.3 billion) was the first January deficit in a decade, it was much less than the 24.5 billion pounds forecast in a Reuters poll.

That took borrowing since the start of the financial year in April to 270.6 billion pounds, reflecting a surge in spending and tax cuts ordered by Sunak.

The figure does not count losses on government-backed loans which could add 30 billion pounds to the shortfall this year, but the deficit is likely to be smaller than official forecasts, the Institute for Fiscal Studies think tank said.

Sunak is expected to extend a costly wage subsidy programme, at least for the hardest-hit sectors, but he said the time for a reckoning would come.

“It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this,” he said.

Some economists expect higher taxes sooner rather than later.

“Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters’ minds by the time of the next general election in May 2024,” Samuel Tombs, at Pantheon Macroeconomics, said.

Public debt rose to 2.115 trillion pounds, or 97.9% of gross domestic product – a percentage not seen since the early 1960s.

The PMI survey and a separate measure of manufacturing from the Confederation of British Industry, showing factory orders suffering the smallest hit in a year, gave Sunak some cause for optimism.

IHS Markit’s chief business economist, Chris Williamson, said the improvement in business expectations suggested the economy was “poised for recovery.”

However the PMI survey showed factory output in February grew at its slowest rate in nine months. Many firms reported extra costs and disruption to supply chains from new post-Brexit barriers to trade with the European Union since Jan. 1.

Vlieghe warned against over-interpreting any early signs of growth. “It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.

“We are experiencing something between a swoosh-shaped recovery and a W-shaped recovery. We are clearly not experiencing a V-shaped recovery.”

($1 = 0.7160 pounds)

(Editing by Angus MacSwan and Timothy Heritage)

 

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Oil extends losses as Texas prepares to ramp up output

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Oil extends losses as Texas prepares to ramp up output 3

By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.

Brent crude futures were down 33 cents, or 0.5%, at $63.60 a barrel by 11:06 a.m. (1606 GMT) U.S. West Texas Intermediate (WTI) crude futures fell 60 cents, or 1%, to $59.92.

This week, both benchmarks had climbed to the highest in more than a year.

“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.

“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.

Oil fell despite a surprise drop in U.S. crude stockpiles in the week to Feb. 12, before the big freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.

(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Jason Neely, David Goodman and David Gregorio)

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