Cash is Dead. Long live Cash!
As Computop approaches its 20th anniversary, Ralf Gladis, CEO, contemplates the future of payments.
Much has been said recently on the rise of electronic payments and cryptocurrencies and the demise of cash. In fact, Blockchain co-founder and CEO Peter Smith went as far as to say ‘cash is dead’ in recent interviews. So, is cash dead? What is its place in the future?
There’s life in the old dog yet
Cash is very popular in geographies where people mistrust their banks and their governments. Many Germans and Italians, for example, have more trust in cash than they have in banks or in governments to treat their data privacy properly. Electronic payments do require trust in data privacy because consumers can be tracked and recent scandals around the NSA and GCHQ hasn’t helped to build that trust. As long as consumers have good reason to believe that they will have their privacy infringed, it will be impossible for politicians to introduce a cashless society. Trust comes first.
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Sweden is a good example: People trust their government and their society is innovative, so Swedish consumers have learned to cherish the convenience of electronic payments. Therefore, Sweden is leading the way to a cashless society in Europe. Even in places where cash is still popular, it is on the decline. In 2013 Germans carried an average of 100 Euros in their back pockets. By 2015 that amount went down to 74 Euro. Cash will disappear but it will take a couple of decades to get there.
Solutions like German Barzahlen and Amazon Cash are evolving to bridge the gap of cash and electronic payments: Unbanked people can use these solutions to buy online and pay cash at a retailer’s cash register. However, the vast majority of future payments will be electronic and processed via apps, e-wallets and initiated by mobile devices like a car and wearable devices like a watch with standards like NFC (Near Field Communication).
Amazon Go has shown us that The Internet of Things (IoT) is very quickly becoming a reality. Devices of all sizes will process payments for us from our clothing and glasses to our cars which will automatically pay for petrol and parking tickets. Wearables will pay the Uber bill and our smartphones will become the go-to tool for paying everywhere. Payments will become an automatic process. Silent and frictionless.
We need established payment brands that consumers already trust though. How do you want your car to pay for petrol or diesel? Credit card, PayPal or your company’s’ fleet card? Handing that process over to our devices will be a big change in consumer behaviour. Trusted brands will make the decision easier.On the one hand, e-wallets like AliPay, MasterPass, PayPal and WeChat will become invaluable in coming years. Wallets will process payments online, in-app and in-store via NFC or QR code.
Having said that, I believe a rather old fashion payment method will soon regain mainstream popularity:bank payments/transfers.
We are starting to see evidence of the rising popularity of bank accounts for payments due to the introduction of Faster Payments in the US and UK and Instant Payments in Europe.These make it much faster, easier and more convenient for consumers to send money from account to account. Historically in Europe, with 28 member states and just as many banking systems, it had been difficult, expensive and slow to transmit money between countries. However, with SEPA Instant Payments announced for 2018 it will be easy, fast and cost-effective to send money to any European account within 10 seconds, 365 days per year. Being able to process European payments instantly from account to account will be a big leap forward towards a cashless society. However, without complete consumer trust in data privacy, it will still prove impossible to replace cash altogether.
Digital transformation is changing payment behaviours
Digital transformation will make shopping and payment more convenient. However, culture will continue to play an important role. Even though payments will become a rather silent and automatic process, consumers will still be able to decide whether they want to process payments either through their debit card, through their credit card or through an e-wallet.
Consumers who care about budget control will choose a debit card. Others will like the flexibility of credit. In that sense, consumers probably won’t change their behaviour too much, and the choices they’ll make will still vary according to need as they do today.
Cryptocurrencies will exist, but not take off yet
Cryptocurrencies have existed for many years already. Their lack of success in B2C payments is the result of a lack of trust and convenience. It doesn’t help that criminals of all sizes use Bitcoin for ransom payments. British companies were recently reported to stockpile Bitcoins, mostly for the purpose of paying ransoms to hackers. Cryptocurrencies are global, secure and cost-effective. However, their reputation is still tarnished and the conversion rate to other currencies is extremely volatile. Bitcoin could build trust if it was regulated and anonymity would have to be replaced by trustworthy relationships with consumers. That, however, is the opposite of what Bitcoin currently stands for. Therefore, cryptocurrencies probably won’t become very popular with consumers, at least for the next ten years or so.
The next ‘Killer App’ for payments
Without a doubt, the next ‘Killer App’ in the payments sector will be convenience. I know technically, convenience can’t be an app. However, in my view, whomever best captures true consumer convenience will become the next significant disruptor of payments. We’re already seeing user names and passwords replaced with biometric authentication like fingerprints, face and voice recognition. Biometrics technology is evolving all the time. It’s becoming faster, more secure and reliable. We can’t forget a fingerprint and we won’t have to type in complex passwords on small touch screens anymore. That’s a compelling offer for consumers.
Smooth processes, a global reach and payment schemes that allow automatic processing will undoubtedly make payments popular with consumers. And popularity usually leads to an increase in trust, conversions and turnover for both merchants and the payment industry. That’s the perfect storm for me.