News from UK, Contactless Payments i.e. debit card transactions overtook cash payments

Coming to America soon.

According to the statistics which was recently released, debit card transactions overtook cash as the most frequently used payment method for the first time towards the end of last year.

There was an increase of about 14% in the debit card payments last year which resulted to a fall in cash payments by 15%, taking the number of transactions recorded for both methods to 13.2 billion and 13.1 billion respectively in 2017.

The body that represent UK’s financial service industry, UK Finance, said the crossover was as a result of an increase in contactless payments which is up to 97% year-on-year in 2017 while the credit and debit card payment which are made through contactless is 5.6 billion.

The increase in the alternative method of payment speaks to the waning power of cash across the United Kingdom; with about 75 percent of adults now using contactless payments and 77% of people within the age 25 to 34 make contactless payments last year. Moreover, the number of consumers that didn’t use cash at all is about 3.4 million.

The UK Finance’s Payment Markets Review stated that “It is expected that there will be a continuous fall in the number of cash payments in the UK over the next decade, as consumers continue to turn to alternative payment methods, most notably debit cards”. The organization likewise offered its projections for what the future payment industry will be like i.e. 10 years to come.

The report suggested that, in the year 2027, cash payment will only comprise of 16% of the entire transactions, but it will still be the second most popular payment method in the United Kingdom.

The report also stated that “rather than the UK becoming a cash free society in the next 10 years,” “it would be transformed into an economy where cash relevance is reduced, but it will still be a payment method to be valued and preferred by majority.”

The increase in cashless payments has collided with that of online banking; this is because 71% of adults are making use of internet banking while 41% of the entire consumers are using mobile banking. This has resulted to an increase in the number of payments processed through the Fast Payment Service.

The Faster Payments Service which is a UK banking initiative has observed a great reduction in the transfer time between bank accounts from a duration of three working days to a few seconds, processed 1.6 billion payments in 2017, and is also expected to process 2.4 billion payments by 2027 due to the continued growth of online and mobile banking.

The UK Finance’s chief executive, Steven Jones said, “The option of payment which is available in the UK is giving people the privilege to use their most preferred means of payment.”

“Although we are far from becoming a society free from cash and despite the transformation into an economy where cash is less important than it was before, it will remain a payment method which many people will value and also prefer.”

It was also added that there is likelihood that these trend would shift further over the next decade. It is expected that there would be an extensive changes in the payment industry as a result of open banking which is a new development. This would likely shape the way we interact with money in the coming years.

It was also reported that there would be an increase in contactless payment from 15% of the entire payment in 2017 to 36% of all payments by 2027.

The significance of such payments services like iZettle, which are developed by business across the UK, was recently demonstrated when PayPal acquired its Swedish rival for a fee of $2.2 billion.

The forecasted growth of debit card payments which UK Finance predicts would increase by 49% to 19.7 billion payments in 2027, the fastest growing payment method will also be driven by the ongoing growth of online shopping, as well as the increasing levels of card acceptance by all business, especially among small businesses.

A senior analyst with Forrester, Jake Morgan said, “There would be a continuous usage of card now but there would be a keen competition later on as a result of open banking innovation which would allow people to pay for their items with a direct transfer from one bank account to another.” Making payment directly from a bank account is generally cheaper because card fees would be avoided.

There would be several changes in shopping habits, such as order ahead and remote purchasing, mobile and contactless payment, and experiments with voice-based payments with the aid of Alexa or Siri, implies that payment can be made with several device.

“The use of card will continue now but innovation which is driven by open banking which bypasses card will enhance the competition at the checkout.”

ALSO CHECK: Top 3 Credit Card Processing Companies