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The death of cards and what to expect next

The death of cards and what to expect next 41

By David Maisey, CEO of MultiPay Global Solutions

Payments are one of the most exciting areas in fintech. Being a big part of our day-to-day lives, payments have become a key element in the customer experience journey, and an important way to gather data to help improve services and business offerings. It’s no wonder that we have seen huge innovations in payments over the last 20 years or so. For consumer-facing businesses, however, it is an ongoing race to stay on top of the latest trends. Not too long ago and cash was king, with it accounting for 58% of payments in 2009. Now however, it is card that is the primary payment method making up over half (51%) of all payments in 2019. While many saw the death of cash coming, few have realised that cards too will soon be replaced by mobile payments.

Looking at recent data from UK Finance shows the shift that is happening with mobile payments. Already in the UK, 10 million adults have registered for mobile payments. What is most striking is the age demographic of those wanting to use them. The fact is that much of the adoption is coming from those aged between 25-34 years old, which represents one of the largest groups with disposable income. With Gen Z consumers also keen to use mobile payments, it is quite likely that as these age groups progress and make up a bigger proportion of consumers, then mobile payments will soon be the dominant method. For consumer-facing businesses, like those in the retail sector, there is a need to ensure they are meeting the demands of their customers and pivoting to become mobile payment first.

The switch to being mobile payment first is good news though, thanks to their inherent ‘stickiness’. Adoption is continuing to grow. However, consumers who have made the switch are becoming increasingly used to making payments via their mobile devices. Currently usage is up at nearly half (48%) of those that have registered for mobile payments in the UK using them at least once every two weeks. We can expect the level of usage to only increase as more consumers and businesses make the switch too.

Growth and ‘stickiness’ are good news for businesses as it is helping to create new opportunities to improve the customer experience. For example, with most retailers offering a digital version of their loyalty cards, mobile payment enables customers to pay and receive loyalty points all through their mobile device. This removes a barrier to the success of loyalty card programmes, as a physical card can be lost or left at home, while consumers almost always have their mobile device on them. Going a step further, and retailers can even develop software that combine the whole retail experience into a mobile app. This could see payment, loyalty cards, customer support and even in-store guidance provided via one single app. By offering these new types of service, retailers can improve their customer experience and gather more insights and data on customer preferences too.

It doesn’t stop there either, as mobile payments are also more secure than card payments too. With mobile devices requiring a biometric authentication or PIN to confirm a transaction, they make it much harder for fraud to be carried out. With fraud losses on face-to-face purchasing costing retailers over £64 million in 2019, reducing this figure will have a huge positive impact on many retailers’ bottom line. Nonetheless, it is not just the reduction in fraud that enable mobile payments to boost profits. Mobile payments also enable the launch of new payment methods such as instant payments. Already in use in other countries including Denmark, Switzerland and Italy, instant payments enable bank-to-bank transfers between a customer and a retailer’s bank account. In doing so, they offer huge savings thanks to the removal and reduction of interchange and acquiring fees that are charged by card providers. With many retailers still recovering from the pandemic, the advantages that mobile payments offer will helping them return to profit.

To access these benefits, retailers need to ensure they have the right payment infrastructure in place. Having a payments system that can process transactions regardless of payment type, acquiring bank or currency ensures businesses can keep pace with the latest payments trends and deliver a first-class customer experience. With payment solutions now available that not only help deliver a better customer experience but also reduce the complexity of backend systems, transitioning to a mobile payment first approach can be quickly achieved.

Payments are constantly shifting and evolving, and retailers need to be ready for not only the death of cash but the eventual demise of cards too. As younger consumers continue to push the growth of mobile payments, forward-thinking retailers have an opportunity to not only stay on top of the latest payment trends but to also look to leverage it to improve customer service, reduce operating costs and increase innovation too. It’s time businesses make the shift and stay ahead of the next evolution of payments.

The death of cards and what to expect next 42

David Maisey, CEO of MultiPay Global Solutions

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