Cashless transactions have caused dramatic changes to the financial ecosystem. With card payments pushing out cash, new research reveals the countries where digital technology is helping economies thrive. Briony Richter reports
Market Research has analysed cashless transactions in 28 European countries, and found a number of factors that are driving the rise in digital payments.
Go deeper with GlobalData
Across all market segments, cashless transactions are on the up. In the UK, the surge of digital-only banks is driving the cashless revolution and transforming how consumers interact with money.
The report considers the number of cashless transactions and total revenue from digital payments to determine the countries with the most digitally ready businesses. It found that, of the European countries studied, the UK has become the biggest supporter of cashless.
The UK generated a staggering £81.3trn ($106trn) in cashless payments in the year ending 2016, and the highest total number of cashless transactions, at 25.2 billion. As digital technology in the payments space continues to evolve, card payments in the UK have now surpassed cash for the first time.
The frictionless process and convenience of use are clearly driving the relentless rise in popularity of cashless spending. In September 2018, Mastercard released new data revealing a 95% rise in contactless transactions across the UK for the year to date. Contactless now represents almost one in two in-store card transactions carried out by UK consumers.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataSpeaking to EPI, a spokesperson for Mastercard comments: “Cash will have a role to play for years to come, but what is clear is that cash transactions are declining in favour of card payments. This is partly driven by the rise of online shopping, but it is also true of the high street.
“Research shows that consumers are carrying less cash with them because of the ease of contactless. Whether cash will ever completely disappear remains to be seen, but ultimately people need choice in the way they make payments. One size doesn’t fit all.”
Germany second
The report placed Germany second in terms of readiness to adopt cashless payment methods. Although 80% of transactions were conducted with cash in 2014, the nation has moved forward quickly, with measures such as bringing in card payments in all taxis in Berlin in 2015.
That move triggered a shift to contactless, and Germany’s annual cashless spend is now £48.7trn.
Expert Market lead researcher Jared Keleher comments: “Over the past few years, we’ve seen that even the most traditionally cash-loyal countries like Germany are slowly coming around to the idea that digital payments are a central part of business in the 21st century, with contactless card payments hitting the 1% mark for the first time this year.
“In the UK, where card and contactless payments have been widely adopted, card payments actually surpassed cash for the first time this year. The availability of simple card payment systems has certainly helped small businesses that previously relied upon cash payments – even beach-front chippies and small markets now offer quick and easy contactless payment. With more and more people choosing to pay via phones and smartwatches, it is not a stretch to say that cash and even cards might become obsolete here in the coming decade.”
Dragging its feet is Malta, where cashless payments only accounted for 89 billion transactions. The report highlighted that, in comparison, the UK scooped 535 times more cashless transactions.
Whether countries go completely cashless is yet to be seen; however, digital payment methods are certainly causing a shift in how countries and governments look at money.
The Mastercard spokesperson highlights: “Clearly there will be always be local nuances when it comes to payments. In Germany, for instance, online payments are far less popular, and many shoppers pay on delivery for goods ordered through e-commerce sites.
“However, the commonalities tell a stronger story. For instance, in the physical store environment, contactless continues to witness strong growth, consistently, across every country.
“We are not expecting huge differences in the adoption of biometric payments from one market to the next. The technologies are already in place with fingerprint and facial recognition on smartphones. And with strong customer authentication becoming law in September next year, banks will need to offer their customers biometric authentication as well as one-time passwords. So, from this point on, while we expect a spike in biometrics payments, this should be consistent across the entire region.”
Of course, with an increase in cashless transactions, the question of data security must be addressed. Although certain types of financial crime would stop, cashless opens the door to an increased amount of cybercrime, and that concerns a lot of consumers over the privacy of their financial data.
As many countries free-fall into an increasingly digital world, it will be imperative for them to ensure banks and other financial organisations have a sufficiently robust infrastructure to cope.
