Customers are using contactless card payments in record numbers.
Not only are card payments outstripping cash, but contactless makes up more than 60% of debit card payments in the UK now – according to the latest stats from UK Finance.
Plus, more shoppers are turning to eWallets and using things like Apple Pay and Samsung Pay on their smartphones.
What they all have in common, is that they’re rejecting cash in favour of faster, more convenient ways of paying for items.
Consider this research from Capgemini.
It found that since the first UK lockdown in 2020, more than a third of shoppers have switched their payment providers in favour of ones which offer a better contactless option.
According to Capgemini’s report published towards the end of last year:
- 45% of customers have increased and will continue to increase their use of digital in store payments
- 46% will use more digital payments as their first choice in the next 6-9 months
- 40% prefer to shop in places that offer contactless payments
It would be wrong to assume this rush to contactless is only a result of COVID-19.
Yes, it’s helped move customers towards contactless payments quicker, but the truth is many were already heading that way.
An earlier report by Capgemini in March 2020 found that customers had already started to switch towards contactless payments – either card payments or digital payments – before the 2020 pandemic.
In fact, 70% of customers in that survey said they’d already been using their mobile phones to make payments more often.
For a business there are a number of reasons why it’s becoming riskier not to invest in new payment technology.
Contactless taking over
Debit card payments will account for about 22.3billion transactions a year by 2028, with contactless making up about two thirds of that – according to research.
We’ve already seen how 2020 brought more people into the world of contactless.
And according to a number of surveys, those who have started using contactless payments for the first time in 2020 say they’ll be unlikely to go back even when things return to normal.
The fact is that more customers are moving past contactless cards and closer towards digital payments, either over a smartphone or newer payment technology like smart watches, than are considering going back to using cash.
Contactless encourages higher value transactions
In 2020 the spending limit of contactless payments was increased to £45 (from £30) to help people use it more conveniently.
That may now increase again to £100 as more customers get used to contactless.
Some studies have shown customers would encourage another increase in contactless spending limits to make it more convenient over a bigger range of transactions.
Plus, customers who use contactless payments are known to spend more than those who rely just on cash.
That’s because they know they’re not limited to the value of notes of change in their pocket, so think less about making impulse purchases as they walk around.
For businesses this means higher value transactions, that can be processed quicker and more often during the day.
Customers are being charged to withdraw cash
According to consumer group Which? more than a quarter of high street cash machines are now charging people to withdraw their own money.
According to the research, the collective fees that people are now paying to take out their cash has risen from about £75m in 2018 to £104m in 2019.
It’s thought that the increase in fee charges is linked to the number of customers who are now using contactless payments, which is impacting how cash machine networks are funded.
One thing that can be certain, is that if customers have the option of simply paying for something in seconds using a contactless card, or paying to withdraw their own money so they can spend it, they’re far more likely to pick the cheaper, easier option of contactless.
Less administration, less fraud, more money
Ultimately, an investment in a contactless card machine will come down to two things.
How much money can a business save or make by switching, and how easy are they to use.
On the money side, businesses can clear more transactions in a day by using contactless cards because all a customer has to do is tap and go.
There’s no messing around counting cash and change, so businesses can get through more transactions in a day.
Plus, they’re more convenient for everyone.
Then there’s the fact that using contactless card payments removes the risk of fraud from counterfeit money.
Despite what you might read, contactless is incredibly safe for customers and businesses. The risks of accepting fake notes on a busy day are far greater than getting caught out on a digital payment.
That’s because payments are only authorised once it’s been confirmed the customer has the funds to complete the transaction. If they don’t, it doesn’t go through.
Plus you don’t have to worry about keeping cash on site.
Also, there’s less administration involved in contactless payments. All your payments are collected, stored and are viewable from a single place. You don’t have to spend hours at the end of the day matching receipts to takings.
Cash is no longer king
Cash will always have a small place in the business world.
Some customers still rely on it. In the UK the government is even looking at ways to protect cash usage in the future for those customers who do still rely on it. So it’s not going anywhere.
But the number of customers who use it are dwindling every day.
The fact is that contactless is now king.
Whether it’s cards or digital payments, customers just prefer the speed and convenience of tapping a machine to pay.
For a business, this means investing in the things that provide customers with what they want.
It’s a lot riskier NOT to make those investments.