Since the inception of modern banking the way we pay for goods and services has always been subject to change – from the cheque to the credit card, each generation seems to find a new way to pay. Now many are predicting that both cash and debit cards may have a limited lifespan as mobile wallet payments soar among the young. Research from money transfer app Moneymailme indicates that 64% of 18–25-year-olds use a mobile wallet, and six in ten feel frustrated if they are forced to make a payment with cash. Nearly half believe that cash will be obsolete within 20 years, and there is certainly precedent with countries such as Iceland and Sweden leading the way in cashless payments. In 2016, cash payments constituted just 1% of the total value of transactions in Sweden and that figure is forecast to fall to just 0.5%.
Yet cash in the UK certainly is not dead yet – the government has recently ruled that banks may be compelled to keep branches open to ensure access to cash for those who are vulnerable including pensioners and the disabled. This is being contested by the major banking providers who claim it is putting them at a competitive disadvantage against new challenger banks such as Starling, Monzo, and Revolut. It is likely that many of Gen Z have barely set foot in a bank branch, and with the rise of payments from devices such as an Apple Watch, both cash and the act of drawing it from a physical ATM seem archaic.
This is part of a wider trend among the young to view finance as a digitised and dynamically changing world, existing on their mobile device and being interlinked with highly volatile currents such as cryptocurrency. This is perhaps unsurprising as Gen Z have reached maturity in a period of record low interest rates where saving is discouraged, and they have on average much less disposable income when compared to earlier generations. App based banking and mobile wallet payments therefore represent a significant sea change in the payments sphere going forward. Even the nature of debit and credit cards is changing, as Mastercard announces it will do away with the magnetic strip on its card and move towards biometric technology instead.
What does this all mean for merchants? To many, the payments ecosystem which once simply consisted of cash and card payments has proliferated into a myriad of different devices and payment methods, often bringing with it bugs and incompatibilities. Samsung, Google, and Apple Pay have established themselves as firm stalwarts, but acceptance of other alternative payment methods (APMs) remains patchy and device dependent. Yet with millennials now constituting the largest demographic in the US, it seems like the payment revolution will continue at a pace. Both in store and online, adaptability is the name of the game as not being able to pay in a convenient way is among one of the top reasons for purchase abandonment.
In practical terms this may mean configuring your card machine to accept popular payment methods, ensuring your eCommerce payment gateway has the broadest range of payment options available, and keeping your POS devices up to date. Where once cash was king, now the consumer is king, and facilitating their payment preference is a key part of maximising conversions.