Skrill’s Chief Financial Officer, Nilesh Pandya, explains how digital payments are creating new ways to shop, bank and do business.
When we think about money we usually think about hard, old-fashioned cash. However, with the rise of new payment technologies the day is fast approaching when we’ll no longer see coins or notes as the single definition of ‘money’.
Here at Skrill, we recently conducted some research for our Future of Money campaign. The study found that one in three Britons carry less than five pounds in cash at any one time. Credit and debit cards, digital wallets or even paying by mobile phone are all increasingly being used by UK consumers and are slowly replacing cash as the central means to pay for everyday items. A significant thirty two per cent of people in the UK said they will use less cash over the next 10 years and we found that – even now – consumers are using cash to pay for less than a third of their weekly purchases.
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One of the barriers to diversification of payment options in the UK has been card issuer fees, but it is now often cheaper for retailers to accept debit and credit cards than cash. There are more efficient ways of making payments than by paper and coins and businesses are increasingly keen to reap the benefits.
Of the 2,000 people we polled for the Future of Money campaign, 35% said they get annoyed if a shop only accepts cash, a third use their cards to pay for everything and 51% think digital wallets and online cash transfers will increase over the next few years.
These figures show that times are changing, with cash, and even credit and debit cards, increasingly making way for online transfers, digital wallets and payments via mobile phones or apps. Consumers are finding it quicker and easier to click a button than fumble with their loose change.
However, while cash usage will inevitably decline, don’t expect it to disappear completely. Our research still showed that 47% of UK consumers are using cash daily, and 45% expected their usage to stay the same over the next ten years.
It is also worth mentioning that there are other global cultures where cash is king, such as unbanked societies in Asia or the many underbanked families in the US where a banking system obviously exists and yet many are opting out.
Digital wallet systems could be argued to have an even greater value to people in these cultures, as they allow them to upload their cash online and still access the huge benefits of shopping and trading online, which would otherwise be inaccessible.
The high street as ‘show room’
Mobile phones are not only changing the way we pay, but the way we shop. Many of us are now using a smartphone to compare prices; 23% of those in our study said they’ve done this when out and about. One in three are using the high street to window-shop, using their phones to see if they can find products cheaper elsewhere, save details for buying online at home or even to make purchases.
There is an evolving shopping ecosystem, where the high street, online and mobile co-exist to deliver an all round experience. A new generation of shopper is emerging – one who is combining their mobile device with the real life high street and the Internet to create an alternative retail checkout process.
While we increasingly hear of the ‘death of the high street’, consumers continue to leave the house for shopping inspiration, even if they then make the purchase via a smartphone or at home on the computer. This is an opportunity for high street retailers to turn browsers into buyers while in-store, to give consumers a seamless experience irrespective of how they shop, and to potentially drive down customer time at checkouts, thereby increasing floor space to sell products.
Benefits of a cashless society
Advocates of a cashless society stress the convenience of alternative methods of payments. As our lives become increasingly digitalised, the cashless society is slowly being ushered in.
Digital cash has the advantage of speed. Digital transactions take around half the amount of time compared to cash. And for businesses, these transactions have additional attractions: customers who are not restricted by the cash they happen to have in their wallet typically spend 20% more at the tills, and customers using wallets deliver valuable information to the retailer.
We’re more mobile than ever before
While credit and debit cards have been instrumental in the move towards a cashless society, even they may become obsolete as people receive, make and manage payments online and on mobile devices.
In the last few years, smartphone adoption rates have soared and, by the end of 2012, there will be more mobile phones than people in the world. A challenge for mobile payments has always been ease of use. In our research, 32% of consumers cited ‘ease’ as what they expect from a payment made via a mobile.
This is why we created our own multi-platform product that can be integrated on mobile: Skrill 1-Tap. It allows consumers to make purchases with a simple one tap of a keyboard or touchscreen, having only entered their details once.
For consumers, a Digital Wallet provides the ability to make payments conveniently and securely without revealing personal financial data, as well as send and receive money cost-effectively simply by entering an email address. For businesses it can offer access to over 100 payment options in over 200 countries and territories, immediately turning international traffic into revenues.
As more and more people adopt a digital lifestyle, electronic payment systems will become the norm. For businesses and retailers, the benefits are clear; ease, convenience and cost saving. If retailers can turn cash into digital money, they will be able to learn more about a customer base they may little understand. However those organisations offering digital payment services will need to partner to address issues such as security, infrastructure and consumer confidence.