Is a cashless society really just around the corner?
In their recently published research Ascent Journey 2016, the Atos Scientific Community considers the massive adoption of smartphones and advancement in technology that is leading to a mobile payments revolution. 2012 saw a huge increase in global mobile payments but is a cashless society really just around the corner?
Demographic trends, drivers for and against
The authors consider the dominant trends in mobile payment adoption and usage, and how exactly these are driving towards a cashless society. The adoption of mobile payment depends on a combination of demographics and the maturing of the technology. Emerging economies in Africa and Asia, unfettered by an existing cash culture and legacy payment infrastructure, are driving th acceptance of mobile as a primary means of payment. Where there is traditional reliance on cash or even historical attachment to a national currency and an existing financial infrastructure, adoption of cashless micro-payments remains relatively low.
Put simply: consumers are reluctant to change the payment methods that they trust. I have a Paypal account and use it frequently both for personal and commercial payments. But I know people who refuse to consider Paypal as a viable alternative to parting with their financial details direct to a merchant or paying that £20 they owe in cash. This is particularly evident where stored wallet payment initiatives such as Mondex or Barclays’ latest foray into contactless payments never seem to really take off. I can put coins into an “honesty payment” box at an airport but I can’t use the NFC capability of my bank card to pay electronically.
Yet in emerging markets, smartphone adoption really is taking off and mobile payment can become the first and potentially only means of conducting financial transactions. Mature economies face the risk of potentially losing out due to the prevalence of more traditional payment methods.
Digital Natives will lead the way
Digital Natives, formerly known as Gen Y (the DNFKAGYs) are the other major demographic driving force behind mobile payments and more relevant to the mature economies. They are increasingly reliant on mobile devices, not only as a communication platform, but as an electronic wallet. Having grown up in a digital world Digital Natives have a greater level of inherent trust in the power of digital so making micro-payments for apps, music and games with their mobile is as natural as handing paying cash for a book in a book shop.
Life without cash: The economic, personal benefits and the significance of the Kindle
The infrastructure costs of maintaining a cash based economy are huge. Without it, consumers will become more directly connected to the service and product providers when purchasing. This is already happening with people paying for a wide range of services through the acquisition of mobile apps which creates a whole new value chain and a new business model for businesses of all sizes and sectors of the economy. Businesses will continue to have to adapt to stay competitive, even today’s so called leaders.
The Kindle e-reader gives users the ability to purchase Amazon books directly from the device without the need for an app and is a great example of a cashless payment device. People who might not normally use micro-payments are in fact doing this every time they purchase a new book using their Kindle. Users naturally use cashless payments on their Kindle because it has brought about a change in their behaviour without necessarily even registering the change.
Can we really expect to say goodbye to cash?
Over time mobile and contactless payments will become the preferred and even only payment channels for common purchases and transactions. But this can only happen by parting with traditional and even entrenched reliance on cash and accepting mobile and contactless payments as the norm. As the adoption of the technology grows and business models evolve, the role and relationships of the stakeholders in the whole payment value chain will inevitably change.