How the future of cash and digital payments is playing out in Europe
By Andrej Eichler, Head of Financial Industry Services, SIX Payment Services
Carrying cash is becoming increasingly rare, particularly for today's urban youth. Millennials can buy almost anything they want — provided it is less than 30 pounds — ($41.42) with a tap of their card or phone, making coins and notes virtually redundant.
This ease of contactless payments has spurred a cultural shift, embraced by the younger and more tech-savvy generations, who are happy to go for days without carrying physical cash and instead opt for their phones — even over cards. Older generations, meanwhile, typically prefer to have the option of the security of traditional physical cash.
In Austria, 90 percent of the 9.5 million debit cards (equal to a debit card per capita) have a contactless function, and once consumers have the opportunity to use this, few decline it. The latest statistics also show that, in Austria, NFC accounts for 31.7 percent of transactions.
Of course, other nations differ in their appetite to adopt this new genre of payments: In Switzerland, 90 percent of point-of-sale terminals are contactless enabled, a testament to their popularity. But in Eastern countries, cash remains highly valued and the public in general tend not yet to fully embrace cashless payments.
However, this differing level of demand hasn't stopped large retail chains and merchants from embracing the technology, with the majority upgrading to contactless terminals, investing in an improved customer experience and providing a faster transaction.
A recent study by Dun & Bradstreet found that, on average, people spend 12–18 percent more when using a credit card over cash. This figure increases again when contactless payments are involved, due to the relative ease of payment and the lack of having to hand over physical cash.
With the public's increasing need for transactional speed and adoption of contactless payments, fueled in part by consumers' ability to rapidly buy goods and services online, it would seem that physical retailers who don't embrace the new technology, may get left behind, forgotten by once loyal customers who value time and ease of service above all else.
As consumers' expectations have steadily increased over the years, their willingness to change suppliers has also risen. Consequently, customer satisfaction and retention across all sales channels is now the focus of many retail payment investments by merchants.
The rise of electronic money isn't just limited to high street, travel or online transactions. The trend for cashless events is spreading across a range of areas, including sporting competitions, music festivals and food and drink pop-up events and fairs.
Event organizers and exhibitors are realizing the importance of providing smooth and efficient services to their customers, and offering cashless capabilities is a key part of this. Cashless transactions are typically much faster than cash purchases, meaning queues are reduced, fewer staff are required and less security is needed to handle and store cash.
For the event attendees, being able to pay either by their card, phone, or, sometimes via a prepaid bracelet or armband also means there is less chance of losing money in the crowds. We have seen this adoption first hand, and in the last three years, SIX has tripled the number of events for which it has provided end-to-end cashless payment solutions.
However, in spite of the increasing trend towards electronic money, I don't believe that we will ever have a truly cashless society. There continues to be a need for unmonitored payments, such as tips in restaurants — to ensure that you waiter reaps the rewards of providing a good service and the tip doesn't go straight to the boss — or giving your children pocket money or cash as a gift.
In addition, people like to feel secure and the physicality of notes and coins cannot be replicated. While countries such as the U.K. have been fast to adopt cashless payment for 50 percent of transactions, I think it will take another decade for this to reach 65 percent.
Having spent much of my professional life installing and maintaining networks of ATMs and payment card programs, I feel very strongly that we will never fully achieve a wholly cashless state.
As a result, we are helping to automate ATM estates to reduce the total cost of ownership for banks or introduce features like QR based withdrawals.
It is undeniable that the payment landscape is changing, and that electronic money is a key part of this. However, technological advancements are also being rolled out across ATM networks, demonstrating the continued demand among consumers for physical bank notes.
While I am, personally, a fan of cashless payments, and even more so mobile payments, I believe that the co-existence of cash, cards and other form factors for cashless payments will continue for many years to come. Merchants who want to flourish need to offer all options, as the consumers, and their cash, remain kings, and this isn't about to change anytime soon.