Key trends in person-to-person payments

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/   Insights

The emergence of new technology solutions in the past few years has affected almost every aspect of the financial sector, but one area where this is making a real difference is in the person-to-person...

Cause and Effect: If you build it, will they come?

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/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

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/   Spotlight

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Making Banking Fun: Gamification in Financial Services

August 5, 2013
/   Insights

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Technology M&As: The Beats Go On

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/   Insights

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What We’re Reading

May 5, 2011
/   Spotlight

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November 21, 2012
/   Insights

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every...

What We’re Reading: Thanksgiving Edition

November 22, 2012
/   Spotlight

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom. Mobile Thursday? Plans for Thanksgiving...

The most recent headlines reference a survey undertaken by Starcom in UK into consumer perception of cash use.  One headline claimed that “A third of Brits expect cash to be extinct by 2031”.  Delving deeper into this interesting research and cross referencing with other data highlights that eradicating cash in less than 15 years in the UK would require an unprecedented change to consumer behavior – particularly to all those who undertake the 2.8 billion cash withdrawals annually at UK ATMs that amount to almost £6,000 GBP every second!

The dash for cashless
When looking at the detail of the survey (which was of 1,500 UK consumers), 73% of respondents “don’t expect to be using cash in 5 years”.   The majority think the 1p coin, 2p coin then £50 note will go at some point.  As expected the younger generation, millennials, are less concerned about move compared to those older.  Recent figures from Halifax in the UK also imply that consumers are moving in their droves to cashless.  Cashless payments have increased to account for 83% of all consumer current account transactions, compared to just under 17% of transactions that are cash withdrawals.  Faster payments still only account for 2.7% of the volume of transactions, though they are gathering pace.

Concerns remain about cashless society
It would therefore seem to be “full steam ahead” with banks and the financial technology industry and media on the benefits of cashless, when reading many of these articles.  That may not be the case though.  Even in the previously mentioned Starcom survey – 50% of those surveyed believe they will have less knowledge on how much they are spending if cash went away.  Twenty-five percent of consumers also raised concerns as they feel more prepared and secure using cash.  These figures are of interest also when considering the following points also to highlight how cash and cashless will likely exist together.  Here’s some quick cash facts from the UK:

  • Cash in circulation in UK is increasing at a rate of 5% p/a (Bank of England)
  • 91% of UK residents withdraw cash from ATMs monthly (Payments UK)
  • There are more than 70,000 ATMs installed in the UK – an all-time high (Retail Banking Research 2015)
  • Every hour there are 320,000 cash withdrawals at UK ATMs totaling £21.4 Million (Retail Banking Research 2015)
  • Each year almost £190 Billion GBP is withdrawn from UK ATMs (Retail Banking Research 2015)

The emotional attachment to cash
So why do concerns remain?  Generally speaking, going cashless means a big shift in consumer behavior and asking people to change habits to conform to transacting exclusively in a way financial institutions want them to.  An element that becomes interesting with use of cash is the emotional and physiological aspects associated with paper money.

This is highlighted by researchers from the University of Toronto, the University of North Carolina – Chapel Hill, and Duke University’s Fuqua School of Business, who recently published their findings in the Journal of Consumer Research.

These three academic institutions used the example of two friends each buying the same lamp for $150. The only difference is one paid in cash and one paid with plastic. The dollar amounts are the same, the purchased product is identical, but this study found that the levels of emotional investment in that lamp are very different.

“The form of payment clearly influences the subsequent value of the purchase to the consumer, even when the objective monetary cost remains constant,” concluded the study. “Using cash or check seems to increase the psychological ‘pain’ or sacrifice of the act and creates more affinity with the product or brand.”

Very interesting findings from the research, it perhaps backs up and provides reasons for what was published by Payments UK – cash remains a very commonly used payment mechanism in the UK and worldwide.  Cash is highly valued by consumers from all walks of life for its familiarity, wide acceptance and speed of transaction. During 2014 over 18 billion payments were made in cash, accounting for 48% of all payments made in the UK, worth around £250 billion

So it seems, cash will actually be here to stay for some time yet.  Secure, trusted, familiar and convenient, it clearly is still important for consumers and I’ll predict very unlikely to go the way of the dinosaur or the dodo bird and be extinct by 2030.

Colin Gordon is a SelfServ Marketing Manager at NCR Corporation and is based at NCR’s R&D Center in Dundee, Scotland. Colin is responsible for the marketing of NCR’s Financial hardware portfolio with a specific focus on Cash Dispense ATMs & financial trends.

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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp