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The spread of non-cash payments: a shift change in the way we pay for goods and services

While coins and paper money have remained the predominant means of conducting everyday transactions, technological advances in the 20th Century heralded the advent of increasingly sophisticated electronic transactions. The majority of financial market transactions are now conducted electronically, with stock, currency, and commodity exchanges updating continuously during trading hours through digital markets. Digital exchange mechanisms are so integral to global finance that cutting off access to the exchange network of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payments system has been considered recently as a sanction against rogue states.[1]

For ordinary citizens in the developed world, the spread in the latter half of the 20th century of more sophisticated electronic platforms such as debit, credit, pre-paid payment cards, means we are less reliant today on access to physical money to conduct everyday financial transactions. Prior to the instillation of the first automated teller machine in London in 1967, the only way to access cash was by physically going to the a bank branch. Access to one’s money at any time of day or night through ATMs revolutionized our financial access and was an early example of the impact that technology can have on making services more fluent and tailored to our needs. Technological developments in recent years are serving to enhance financial fluency. Contactless and mobile payments allow us to pay for goods and services without the need to enter a passcode, making us ever less reliant on coins and paper money to pay for things smoothly and quickly.

According to data The UK Cards Association, the trade body for the cards payments industry in the UK, some £47.5 billion was spent on payments in September 2014 alone, with average growth in spending increasing by 6.6% and the average transaction value falling as it has done so since 2011. The UK Card Association’s September 2014 Card Expenditure Statistics Report states that the rise in payments card spending “reflected the ongoing migration of low value payments from cash”. The report also points to an increasing use of contactless cards.[2] This is supported by data from the GfK Financial Research Survey (FRS). Since we started tracking use and penetration of contactless payment cards in December 2012, the proportions owning and using contactless cards have increased markedly. The proportion of respondents claiming to have made a payment on a contactless debit card in the past month has increased fourfold from just 3% in December 2012, to 11% by September 2014. Contactless credit card payments have also increased, this time three fold from 3% in December 2012, to 8% by September 2014. Further, three quarters of debit card users did not have contactless cards in December 2012 had fallen to less than two thirds by September 2014.[3] We would expect these upward trends to continue in the short to medium future, as contactless payments become more established.

Contactless payments are not limited to paying just for goods. In the UK, 2014 has marked a significant shift away from cash to non-cash means for paying for transport. Contactless payment cards are now an accepted on the London Underground, while cash payments are no longer accepted on London buses. It is not just on public transport that cash payments are being restricted, recently the Dartford Crossing, a major cross across the Thames east of London, stopped accepting cash payments at their toll booths, encouraging drivers to switch to a pre-payment card scheme called ‘Dart Charge’ (or pay remotely via other means such as over the phone or internet). The removal of a physical payment facility is designed to reduce congestion, which again shows the importance of fluency in modern societies. Many modern citizens lead busy and pressured lives, and non-cash payments offer a fluent means of transaction. While it is hard to imagine the death of physical money in the near to medium future, technology is increasingly widening the means of transactions available and thus further diminishing our reliance on coins, notes, and our bank managers.

For more information contact Phillip Westwood at phillip.westwood@gfk.com.

[1] See: http://www.economist.com/news/international/21633830-blocking-rogue-states-access-worlds-financial-messaging-network-potent-measure

[2] http://www.theukcardsassociation.org.uk/wm_documents/September%202014%20Full%20Report.pdf

[3] GfK Financial Research Survey, November 2014

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