Digital payments are undoubtedly becoming more popular around the world.
Debit cards are set to overtake cash as the most frequently used payment method for the first time in the UK this year, according to UK Finance. At the same time, the volume of cash being taken out from ATMs is rapidly declining, with the value of withdrawals in 2016 down by £6 billion compared to 2015.
Data gathered by The Guardian shows the trend of notes and coins being rapidly replaced by digital payments is most pronounced in cities, with evidence that customers are using cards even for small purchases, such as a coffee.
By 2026, UK Finance figures forecast that cash will be used for just 21 per cent of all payments in the UK. This compares to 40 per cent in 2016 and 62 per cent in 2006.
Beyond the UK, Mastercard has forecast that by 2020, 38 per cent of payments made throughout Europe will be digital. Some countries are further along the road than others when it comes to digital payments. In Sweden, for example, half of the country’s retailers predict they will stop accepting cash before 2025.
But in other modern economies, physical cash remains a major factor. Indeed, research by Capgemini and BNP Paribas claims that cash is still the mainstream payment method. So what approaches are being used around the world to accelerate the adoption of digital payments?
In Brazil, Visa recently invested in Conductor, a digital payments processing platform, with the express intention to accelerate “innovation in payments” and to reinforce “the companies’ shared vision for driving adoption of digital payments across e-commerce and mobile commerce in Brazil”.
The areas that Visa and Conductor plan to work on include developing solutions for tokenising payments via mobile wallets, improving access to Visa APIs, expanding use of push payments with Visa Direct, and increasing acceptance of digital payments among SMEs.
Visa has also invested in numerous other companies that are driving digital payments, including Paidy (Japan), Behalf (Israel), Klarna (Sweden), Square and Stripe (both US).
MasterCard has made similar investments, such as the acquisition of mobile payments company Oltio, aimed at accelerating digital payment adoption in the Middle East and Africa. The company has also developed its Digital Enablement Service to enable commerce devices to make payments through tokenisation. Likewise, American Express partnered with GreenSky, bring enhanced digital payments and financing capabilities to merchants.
By supporting innovation in payments through partnerships, acquisitions and in-house development, these major payments providers are clearly looking to drive digital payments adoption.
Many national governments are also making an effort to boost the uptake of digital payments.
In Singapore, for example, a new regulatory framework for payment services has been introduced. This aims to streamline regulations and expand the scope of regulated activities to included traditional and newer forms of payment service providers.
Also in Singapore, the government recently appointed payment services company Nets to run a unified digital payment system for small food businesses. The system will be offered at canteens, coffee shops and hawker centres (open-air complexes containing cooked-food stalls) – all locations where cash still dominates.
And in Kuwait, moves were recently made to increase transparency and boost consumer confidence in digital payments with legislation requiring all service providers to register on a central e-payments system. The hope is that this legislation will create growth in the country’s digital payments market.
The butterfly effect
In Singapore, the adoption of digital payments has been boosted by the popularity of ride-hailing firms. Singapore leads the way in digital payments adoption in South East Asia, with 52 per cent of citizens using such services.
According to the e-Conomy SEA 2018 report from Google and Temasek, the fact that ride-hailing provides have made digital payments a cornerstone of their strategy, has boosted adoption. Many of these services provides offer various online financial services, including money transfers.
In Sweden, the payment app Swish, created by a group of Nordic banks, has proved such as success that it is now used by around 60 per cent of the country’s population. The impact of this is clear, with people in Sweden making the most digital transactions on average (461.5) of any country in 2016.