The payments landscape is changing rapidly due to disruptive technologies - like open APIs, blockchain, cloud and 'The Pay’s' - and yet the most dramatic change underway is mostly being ignored, particularly by the banks.
This is the view of Jeremy Light, Accenture’s UK head of European payments, who claimed the UK is sleepwalking its way to a cashless society.
Light has estimated that contactless card transactions in the UK will rise to between 6 billion and 9 billion and between 20 and 30 billion across Europe this year. This is a huge jump on the 3 billion transactions last year for the UK and 9 billion for the Eurozone.
Consequently, he is expecting to see a sharp decline in cash usage of between 15 per cent and 30 per cent right across the continent.
“I don’t see anyone else making these predictions and I suspect that few are prepared for this scale of change, this quickly, in the UK or Europe.” he told AB+F.
"I could of course be wrong, but the signs are there is a dramatic change underway in the way we pay - but have banks planned for this, does the public realise it is happening, is it being managed?"
Managing the transition
Light cited the recently-released UK Payments Strategy Forum, which introduced its flagship initiative designed to shape the next generation of UK payments.
“However, it makes only one reference to the reduction in cash usage and no reference to contactless. Planning and managing the transition to a cashless society is not an objective in the report,” argued Light.
This matters to him because displacement of cash with electronic transactions is an issue of privacy.
"Not only are once-unrecorded cash transactions now recorded as electronic transactions, but the PSD2 comes into force next year in the European Union and makes these transactions public. They will be available to any authorised third party who requests them, albeit with your consent, but once given, the genie will be out of the bottle, and with it, your privacy,” he said.
“Payment transactions need to be private because they tell your story – your daily, weekly, monthly, yearly life. Where you eat, where you shop, who and when you send money as gifts, where you holiday, donations to political parties and charities, contributions to school events, how much you pay for your mortgage and so on."
While the PSD2 and open access to account data will benefit innovation and consumer services, it is unclear to the financial adviser who benefits from access to the detailed information on low value payments, apart perhaps from advertisers and government surveillance agencies.
On the face of it, Light said, it is great to get rid of cash, it is expensive, inefficient and unhygienic, but cash is also private, and privacy is priceless.
“It is impractical to believe we can cling on to notes and coins, their decline is inevitable, but the payments industry needs to address this privacy issue. It should innovate and develop creative solutions to replace cash that preserve privacy and trust, and go far beyond the capabilities of contactless transactions in their current form,” he said.
As Light sees it there is little evidence of innovation going down this route.
“There are examples, such as Tibado, Tibit and of course cryptocurrencies but adoption is low at the moment, with none I am aware of being developed or adopted for mainstream use by the banking industry or the fintechs serving it,” he said.
“It is telling that despite heavy investments in fintechs and innovation labs in banks, it is contactless technology from ten years ago using card networks created in the 1960s that is driving cash displacement.”
His other predictions include:
The use of payments in the Internet-of-Things (IoT) will grow, in particular with connected cars and utility meters.
Voice payments solutions will start making a hit with the public - perhaps through Siri on iPhones, Alexa on Amazon and at point-of-sale.
Alternative payment mechanisms such as PayPal, iDEAL in the Netherlands and Klarna (Europe and US) will continue to grow by up to 30 per cent for e-commerce, driven both by convenience and by high fraud rates in card-not-present transactions.