The Digital Payment Revolution
Everyone knows that Digital is changing many industries around the world and new technologies are becoming part of our daily lives making fast changes in some businesses and societies around the world.
Some weeks ago we were discussing as part of a lecture of the Master the industries or sectors that were being affected or changed by technology, and some examples came out in class: real state, human resources, agriculture and restaurant industries, all of them have been adapting to the use of new technologies during the past years. But “Payment Systems” was one subject we did not discuss, we mentioned bank web services and apps as customer service improvement allowing financial institutions to reduce fix costs or headcount budgets, but we didn’t go further into the real payment industry’s transformation.
I remember I read an article posted by theguardian.com[i] some months ago about Danish government’s proposal to ban cash transactions, causing some controversy; some other related articles[ii] stated that with this initiative banks will be able to impose negative interest to people as they won’t have any other option than to leave their money in their accounts; but according to the guardian’s article there hasn’t been lot of resistance neither from the society nor from the banks institutions, on the contrary, most people stated that it is easier and more secure to pay with credit card or mobile.
Of course the use of cards is not something new or rare in developed countries and non-cash transactions are increasing around the world; according to the World Payments Report[iii], the growth rate last year was around 9% and each year since 2012 the growth has exceed 7%; supported by a growth across all payment instrument except checks. Although payments by card are still the most recurrent, many private-label cards and mobile apps are being used for a variety of payments, including road tolls, parking, transport fees and micropayment such as Starbucks mobile app (which grew by 64% in 2014 and reach .3 billion).
Between 2003 and 2013, 25% of worldwide non-cash transactions were made in Europe (including Eurozone), between the top 5 we found Netherlands and Denmark, and the country with more transactions per inhabitant was Finland [iv].
Taking these into consideration, it seems more than obvious that people are using less cash, so why it is so controversial that some retailers or business will have the capability to reject cash? Is it really the future?
Some of other articles stated that as a business you need to give people the opportunity to choose how they want to pay or you will lose some clients; but maybe for some businesses it is safer and simpler to manage transactions if they avoid cash. The payment industry continues to evolve rapidly, mostly in Scandinavia, where most people are used to pay without cash, so it seems normal that the government allows businesses and stores to reject cash.
In other regions this may seems absurd, as they still don’t have the necessary infrastructure and where less than half of the population doesn’t even have a bank account, but even though mobile apps are having quite a success, such as Uber in Latam, and more and more, people are getting less afraid and on the contrary, feeling more secure by paying with credit card, than to pay with cash.
Having a non-cash society may now seem a utopia.. I don’t know if one day cash will be useless, but I can tell you from my own experience that I use my credit card for 90% of my purchases, and that I love to pay with apps, as I believe that is easier, faster and safer than dealing with cash (specially with little coins of 1 and 5 cents) and daily cards, online payments and apps are being used by more people worldwide as is a trend that is evolving and changing the payment industry and society.