Is it the end for cash?

Ian Vickers ponders the future of cash versus mobile payments in the wake of the coronavirus pandemic.

How many of you ICPA members and Accounting Practice readers have been using less cash – and more mobile and contactless payments – during the last few months?

We’ve definitely noticed a change. According to a new report from Link, who run the UK network, cash machine/ ATM transaction volumes fell as much as 62% at the start of the Coronavirus lockdown.

We’re seeing similar trends in many European countries, where cash use has declined significantly during the pandemic. In Ireland, for example, the daily value of cash withdrawals from ATMs fell 40% after lockdown measures were introduced.

Another report reveals that 27% of the 2,000 adults surveyed said they have not shopped with cash at all during the pandemic, because of the risk of spreading Coronavirus, despite reassurances by central banks and the World Health Organisation over the safety of cash payments.

Contactless limit raised

The survey found that 76% had used a contactless credit or debit card, 61% had made a PayPal payment, 17% had used a smartphone system and 15% had used BACS.

I’m sure the increase of the contactless limit from £30 to £45 had some impact here, with 8% using a contactless card for the first time during lockdown, while 7% made a payment with their phone for the first time.

Some people I’ve spoken to have said that they no longer carry cash, and would be happy to live in a cashless society.

So, change is inevitable and is accelerating as a result of Coronavirus, with the effects being felt through the entire world banking system.

Contactless or NFC (Near Field Communications) technology provides the ability to complete in-store transactions using mobile wallets, e.g. market leaders such as Android Pay, Apple Pay, Samsung Pay. These wallets store your card and account details, secured using the mobile’s built-in biometric and other security features.

Mobile payment apps, such as Amazon, eBay, PayPal, make use of mobile wallets or their own payment solution to streamline the online shopping experience.

Mobile wallets and payment apps are about convenience and security for the consumer; with the objective of making transactions as easy, seamless and secure with no delays or hassle of fumbling with cash or cards.  All you need is your phone – and you’ve always got that with you, haven’t you?

They also provide opportunity for merchants of all sizes to provide integrated shopping experiences to their customers, including discount and loyalty schemes, thereby gathering valuable market intelligence and encouraging repeat business.

Sounds great doesn’t it?  So, what are the downsides?

We need a solution to the long-standing issue of identity theft and fraud associated with card and contactless payments; a truly reliable and fraud-proof way to identify who is the owner of a card or bank account.

SCA (Strong Customer Authentication), which is set to come into force this year, demands a two-step verification process for all European online purchases over EUR30, meaning customers will need two of the following: something they know (like a password), are (fingerprint/face ID), or have (phone).

Microsoft has been testing SCA for nearly a year, showing that consumers are abandoning purchases at high rates when challenged at the checkout.  This is bad news for merchants of discretionary or impulse purchases, at a time when economies generally are in need of an uplift.

With billions being invested in FinTech globally, solutions to these two issues will be found, and the transformation of the way we pay for things will continue.

This has focused our work on current and future development at Prelude – constantly looking at exciting new ways of utilising cutting-edge mobile and payment technologies. We are working in-house and with technology partners to develop our way of meeting these challenges in the months and years ahead. We’ve been busy during lockdown you might say….

Rest assured, we will be announcing the launch of these to ICPA members as soon as they become available.

In the meantime, stay safe – and secure.

• Ian Vickers is Managing Director of Prelude Software Limited. Email info@preludeaccounts.com or call 01656 725800.

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