Cash payments are dying and technology is taking over. As we move into an increasingly digitally-focussed world, it is our wallets which are next.
E-commerce has changed the way that people think about shopping, and with around £104bn spent on online payments in the UK alone last year (thats 24% of the total retail market) brick-and-mortar shops are working to find new ways to keep customers spending money in-store.
So why have people begun shifting away from in-store purchases? And how can innovations in the way we pay for things change this?
1. Ease of Use.
GfK FutureBuy found that most people head online due to the ease in finding the best price. Comparing several deals against each other, including getting more information about them and reading customer reviews about the items becomes a much simpler process than heading to several shops, comparing prices and making cash payments there.
We have become accustomed to our modern tech overcoming outdated habits. Whether this be mobile, tablet, laptop, or console, these devices have become crucial to every part of what we do, and are consuming other industries as they grow.
With the potential of mobile payments, and the growth of the internet of things, even our coffee machines work via the internet, so why not our shopping experience?
Perhaps of lesser importance to most, ‘cashlessness’ avoids crime. Whether or not this is a main driving factor behind the shift is debateable, but it should be seen that cashless economies have far lower levels of crime due to both reduced robbery and drug movement, and to a more trackable, less fraudulent marketplace.
In reaction to these growing demands, the market has responded in several ways. In addition to the well documented growth of e-commerce, there have been numerous innovations of payments. From electronic cards to interactive wallets, the future of payment is definitely digital.
A digitised credit card.
Developed from Kickstarter’s crowd-funding platform, Coin aims to cut down the clutter of your wallet and bring it into the modern era by replacing all your cash, credit and debit cards with one single unit. Shaped and sized like a regular plastic credit card, Coin allows you to select from several payment options with a button click - meaning you only ever need to carry a small, light card.
Coin attempts to address the three reasons people are moving online, but will a moderately different wallet change the way we pay, or incentivise in-store purchases?
By design Coin (and its competitors plastc and Final) is designed to be familiar and usable in our established payment patterns. It doesn’t offer a substantial impetus to completely change how customers purchase from retailers.
They also flag issues of compatibility, and still do not completely remove the need for petty cash, rather undermining the benefits which an ‘all-in-one’ digital credit card can provide.
Mobile is the new black.
Since it is undeniable that the mobile industry is exploding, a more tangible solution is seen in the growth of mobile payments. Cash payments are on the way out, and just like it did with cameras, calendars, calculators, mp3 players, letters and landlines (to name but a few), mobile technology is here to sweep up your physical wallet too
Since more people have access to a mobile than a toilet, and with all the major players on board, it looks increasingly clear that the future of payment will be on our mobile phones.
Launched on phones in 2006, Near Field Communication (NFC) allows mobile users to send and receive data from their phones to a nearby corresponding device. Similarly to the older and more limited Bluetooth, NFC has gradually grown in prominence in line with advances in technology and now is found on most new smartphones.
These advances have been seized upon; it has begun to be used as a contactless payment option, with Apple, Google and Paypal squaring up to develop the app which changes everything. With the growth of wearables and the internet of everything, growth here has meant that people are now paying for coffees using their watches. Move over DeLorean.
By touching your device on a NFC machine, TechRadar report that the retailer is able to “identify your account (and even your personal preferences, shopping habits and even your most frequently travelled route home) and takes payment through an app on your phone.”
Amongst others Starbucks has begun a ‘pre-pay’ mobile option in some stores. Allowing customers to avoid the queues and get straight to their fix.
These developments open up fantastic opportunities for retailers to customise shopping experiences by understanding more about their customers, speeding up the checkout process, and opening up potential for re-marketing and targeted offers.
It also opens up fantastic opportunities for the customers, whose shopping process is now quicker, more modern, more relevant and safer. Apps like Google Wallet also allow you to keep track of spending with complete ease, and digitised drivers licenses are even in place in some states.
Due to this huge potential, Forrester Research estimate that $34 billion in annual transactions will be made before the close of the decade using in-person mobile payments alone. The beginning of the end for our wallets?
These developments are not without problems. Google already knows where you live, who you speak to the most, and even how often you look at pictures of cats on the internet. It also sells this information on to the highest bidders (more or less), and with the growth of the digital wallet do you really want to surrender every last drop of privacy to them?
Also, whilst making fewer cash payments has been seen to reduce crime rates, there are issues of scamming and hacking, as a retail store is not always best equipped to notice or eradicate technical theft. This could result in data and money being intercepted by a thief with the know-how.
Another major hurdle lies in interconnectivity and compatibility. New technology without the infrastructure to support it is useless to retailers and consumers alike.
There are plenty of challenges to be hurdled before these innovations of payments succeed cash payments, however with the major players in the digital sphere all fighting to lead the way, the right money and attention will overcome these issues.
Our wallets will soon become redundant in the face of mobile payments, and whilst nobody expects to see e-commerce slowing down anytime soon, this transformation will make a big impact on brick-and-mortar stores. If responsive to the changes in the industry, retailers can really capitalise on these new ways to pay, accelerating their growth and profits.
Do you use, or do you intend to replace your wallet with a digital replacement? Has your retail store looked into NFC payments? Drop us a comment below to join the discussion.