Cash is king, but for how long?
The latest Global Payment Cards Data and Forecasts report by RBR, released in February 2019, highlights the sharp rise in the acceptance and usage of payment cards. But are merchants ready for a cashless economy?
In 2017, approximately $25.1 trillion worth of purchases were made with payment cards compared to 2016. In this same period, e-commerce card expenditure reached $4.5 trillion; an increase of 13%. According to the study, card expenditure worldwide is expected to be valued at $45.2 trillion by 2023. E-commerce will make up a substantial part of this figure as it is predicted to hit $11 trillion.
Low-value payments are becoming more frequent
One explanation for the rise in card expenditure is consumers are increasingly using their cards for low-value payments. In recent years, mainstream adoption of cards as methods of payment has been buoyed by improvements in convenience.
One notable exception to the trend in China. Chinese consumers generally reserve cards for high-value purchases. Nonetheless, the Asia-Pacific region, with its 28% share in payment volume, is still responsible for 50% of global card expenditure.
Access to cash in a cashless economy?
Consumer attitude is changing when it comes to commerce. In Europe, many businesses and festivals have started to eliminate cash as a payment option. Another development in the payment landscape is the passing of the Payment Services Directive (PSD2) by the European Parliament. The directive provides a much-needed regulatory framework within which European banks and fintech companies can coexist and allows for greater access to alternative banking options.
However, these changes and shifting attitudes have left some wanting. As younger generations do most of their banking online, brick and mortar bank branches have been disappearing across Europe. According to an analysis in the UK by the Consumers’ Association Which?, ATMs are disappearing at a breakneck pace, especially in rural areas. In 2018, approximately 200 British communities either had poor or no access at all to cash machines. As the access to cash becomes a problem, card expenditure will undoubtedly continue to rise. But are merchants ready for the cashless economy?
Securing revenue in the online world
The more we spend online, the more we need to be aware of the pitfalls. As the value of card transactions drops and the frequency of use rises, merchants will increasingly see the need to take measures to protect their business by securing their revenue. Avoiding costly chargebacks and outsmarting fraudsters are among the top challenges for online merchants.
Furthermore, as e-commerce spreads to new markets and international consumer purchases become more prevalent, the need for tools like SEPA e-mandates and digital payment reminders will only rise. How are you preparing for the cashless economy?
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