Have contactless cards cut down the flow of cash?
- The World Bank Group found that that access to contactless payment technology had caused a sizable increase in the use of debit cards for small-value payments
- Even so, it may take more than a pandemic to shift most of the world towards a cashless society
The impact of the pandemic revealed limitations with traditional payments and highlighted the need for seamless and secure transaction systems, including contactless cards. However, for countries where cash is still king, central banks are not in a rush to join a cashless society, suggests the World Bank Group.
With organizations and consumers quickly acclimating to a landscape where cash is no longer the norm, the adoption of alternative payment methods like mobile wallets is rising exponentially. The Work Bank, according to its blog posting, had found that access to contactless payment technology causes a sizable increase in the use of debit cards for small-value payments.
Yet, the Group highlighted that the average impact of cards and other contactless payment options impacting the use of cash and the demand for cash, is economically small and statistically insignificant. “Our results suggest that central banks — in cash-affine countries — might still have some time to get ready for the cashless society,” it said.
Although tapping a card on a terminal has become an accelerated part of the ‘new normal’ in many countries globally, in particular since the outbreak of the pandemic, it does not necessarily mean this payment technology will drive more card payments in “normal” times. So how long before cash actually becomes obsolete?
Necessity is the mother of invention
Back in 2003, according to the World Economic Forum (WEF), digital payments and e-commerce launched in China in response to the SARS epidemic to avoid unnecessary human contact, and use of alternative, contactless payments only grew in the outbreak’s aftermath.
Nevertheless, there are trends that indicate cash may be slowing down its reign on the global stage in general: the central banks of both China and France are working on their own digital currencies, whilst the US has been discussing a digital dollar for quite some time and Sweden was just running an e-krona pilot project until the end of 2020. The momentum is there – payments are becoming more digitalized, not only on a micro level but also on a larger scale.
If anything is certain, it is that the advantages of digital and mobile payments will survive the crisis, and we will see an increase in digital payment adopters and converts. Given the challenges facing retailers, providing customers with more options to complete purchases, would be in the best interest of businesses.
Asia still triumphs
According to the annual Global Payments Report by Worldpay from FIS, which examines current and future payment trends across 41 countries, the use of mobile wallets exceeded cash for the first time in in-store payments worldwide last year. Cash usage dropped 10 percentage points in 2020 to account for just one-fifth of all face-to-face payments worldwide.
The study also reveals that the Asia-Pacific region continues to lead in the use of mobile wallets at the POS, with about 40% of in-store payments in the region now executed through contactless payments. However, the use of mobile wallets accelerated across all regions in 2020 and now accounts for about 10% of payment methods in North America, 8% in Middle-East-Africa, 7% in Europe, and 6% in Latin America.
The report projects that by 2024, cash will account for less than 10% of in-store payments in the U.S. and only 13% of payments worldwide. Over that same time period, the report projects digital wallet payments to account for 33% of all in-store payments across the globe, including 16% in the world’s largest economy, the US.