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Mobile payments gain in popularity as cash loses its crown

For the first time ever, cash payments are now not the most popular way to pay – and that is good news for mobile payments.

In its latest annual payments survey, the British Retail Consortium (BRC) revealed that cards payments now account for more than 50% of payment transactions. While the prospect of living in a cashless society has been growing for years, the news marks the first time in history that cash was no longer the most popular method of payment in the UK. The shift has been driven largely by the introduction of contactless card technology.

While the bulk of payments not made with cash are being made with contactless cards, mobile payments are also playing a role in undermining the role of cash.

According to PPRO Group, 38 million transactions were made in 2016 using mobile payments, accounting for £288 million spent using mobile phones, an astonishing 247% increase on the year before. Pubs, bars and restaurants made up for 20% of all mobile payments processed and ‘Meal Deal’ hotspots for workers buying lunch – such as supermarkets and grocery stores – accounted for 54%, further emphasising the decreasing demand for physical cash.

This is backed up by other figures from Barclaycard’s Contactless Spending Index, which suggest that Mobile payments are also catching on rapidly, with the amount spent by users of Barclaycard’s Android Contactless Mobile app jumping by 90% so far in 2017.

Tami Hargreaves, Commercial Director, Digital Consumer Payments at Barclaycard explains: “As we approach the tenth anniversary of ‘touch and go’ payments, it’s interesting to see just how much UK shoppers are valuing the convenience the speed and ease of contactless payments. Uptake and usage of the technology has evolved at a rapid pace, which is supported by our data which shows a significant surge in recent years.

Hargreaves continues: “With Barclaycard data revealing that more than half of eligible in-store card payments are now made using contactless technology and more innovation in the pipeline to enhance the use of mobile and wearable devices, we expect to see contactless spending go from strength to strength for the foreseeable future.”

This shift is important to retailers. Those that don’t keep up with changing demands will get left behind as consumers increasingly move away from ‘real’ money.

According to Raj Sond, General Manager at First Data, “These latest figures show that it’s ever more important for retailers, no matter how small or portable, to meet their customers’ payment needs. The payments landscape is constantly evolving as new services spring up, with both traditional players and tech firms such as Apple and Samsung introducing mobile payment to the mix.

Sond continues: “For time-poor independent retail owners it can be tricky to keep up, but the link between payment acceptance and customer experience is crucial, and cannot be ignored. Convenience is paramount, and a smooth payment is vital to offering a tailored, seamless service and customer experience. Consumers today expect a variety of options when it comes to transacting with a retailer – and it’s all too easy for them to take their custom elsewhere if their needs are not met. What payment methods a retailer can offer can also have a big impact on profits. With the contactless transaction limit now at £30 customers are spending more, speedier than ever!”

The financial services industry has a clear role to play here too. “The fact that cash is no longer the preferred method of payment in the UK is testament to how payments cards, mobile payments and NFC technology are all contributing to a faster and more convenient checkout process,” says Laurent Dhaeyer, managing director of Secure Trading, an online payments expert. “For banks and financial intuitions, it has become essential to facilitate a variety of payment methods to ensure their business customers remain competitive and provide consumers with the payment options they find most convenient to use.

Dhaeyer concludes: “High-street banking provides a good example of how consumer habits are changing. It’s been a long time since banks employed a long line of cashiers in order to process customer cash, instead the experience has become increasingly digitised, with customers wanting to sort finances on the move. This has enabled banks to streamline operations and focus on delivering digital services both.

“The payment industry must ensure that front-end innovation is being supported by a back-end that enables it to work smoothly. Merchants will begin to grow tired of the inadequate ‘plumbing’ that hasn’t been updated for years, and will turn their backs on banks that don’t innovate for disruptive Fintech start-ups and challenger banks that are built upon modern, innovative foundations.”

BRC Policy Advisor- Payments and Consumer Credit Andrew Cregan, comments: “A growing number of retailers have invested in payment technology to accept cards, contactless payments and new payment applications both online and in store. In part, this has been facilitated by the Interchange Fee Regulation (IFR), which was introduced across the European Union following a successful campaign by the BRC and has led to a significant fall in the cost of collection that benefits retailers and their customers. Looking ahead, the Government should act to retain the benefits of the IFR for retailers and their customers after the UK leaves the EU and introduce further regulatory action to address the alarming increase in other card fees and charges at a time when the retail industry is facing acute cost pressures elsewhere.”

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