Mobile payments have sparked a renewed appetite for a cashless society
When a country that loves hard cash as much as Germany shows signs of moving towards a cashless society, it’s time to take notice. The European Central Bank is currently examining taking the €500 note out of circulation, and banning cash transactions of more than €5,000.
Germans conduct 80% of their financial transactions in cash, compared to 50% cash transactions by Americans, according to a 2014 study by Germany’s central bank. Germans also carry twice as much cash in their wallet than Americans, and less than a third own a credit card. If the picture needed to be any clearer, the German word for debt, schuld, also means guilt.
And yet, mobile payments are becoming a vital part of the future of retail, and deserve to be more than just a mere afterthought in retailers’ strategies.
Mobile payments certainly make a compelling case to retailers. For starters, they could actually save money. In the US alone, physical currency costs companies more than $200 billion every year due to ATM fees, theft and lost tax revenue. From a practical point of view, it means shorter queues and less staff time fulfilling transactions. When it comes to the bottom line, people who make mobile payments are more likely to spend more.
Mobile payment, according to Prof. Dilip Soman of the University of Colorado, leads to the “illusion of liquidity,” where consumers confuse their ability to spend money with their means.
Showing how it’s done, under the gaze of countless mobile payment startups, Sweden is edging ever closer to becoming a fully cashless society.
Four out of five transactions in Sweden are now cashless. Public transport only accepts electronic payments, and even sellers of the homeless charity magazine The Big Issue accept credit card payments. Cash transactions are down to just 3% and three of Sweden’s largest banks are phasing out the manual handling of cash in their branches.
“People trust each other, the government and the banks more in Sweden. Plus we have very little corruption – so we don’t need to have physical cash in our hands to feel safe,” Niklas Arvidsson, associate professor of industrial dynamics at Sweden’s Royal Institute of Technology told the Guardian.
The global potential
This rosy picture of Scandinavian good nature may be at odds with the more bullish populations elsewhere, but there are signs that a cashless society could also thrive in hardier climates.
M-Pesa is Kenya’s most popular mobile-payments service. Launched in 2007, it handled $22 billion in transactions in 2013. Used by rural cow herders and entrepreneurs in Nairobi, M-Pesa is a safeguard for secure transactions in a country where crime is rife. And it seems to have potential across the continent. In sub-Saharan Africa, nearly a quarter of the population bank on mobile phones.
M-Pesa has entered the European market – first stop, Romania – but until recently mobile payments have been slow to embed into Western society. In October 2014, almost overnight, this began to change with the launch of Apple Pay.
Mobile payments go mainstream
Within three days of its October 2014 launch in North America, Apple Pay became the world’s largest mobile payment service. What this really means is that Apple Pay is the most accessible mobile payment service, being available across its iPhones, iPads and Apple Watch.
Now in 2016, Apple Pay has a 20% adoption rate, is set to enter China and there are predictions that US banks such as Chase and Wells Fargo will allow customers to transfer money using Apple Pay.
If Germany moves towards a cashless society, it may not do so alone. It’s Nordic neighbour may have up to 60% of cash usage out of government control. Allegedly used in money laundering schemes and black market deals. Norway’s largest bank DNB has called for the country to go totally cashless to curb crime.
With changes in consumer behaviours and banks’ attitudes to cash, it seems our wallets are set to become lighter as physical money is left at home and cashless payments hit the shops. It is vital that today’s retailers not only offer products that shoppers want to buy, but give them the desired means to do so.