For the last few years, developed countries around the world have been witnessing an unrelenting march away from cash, as consumers take advantage of new technologies such as fast payments, contactless and mobile to complete transactions without resorting to notes and coins.
But this trend isn’t limited to the West. In fact, by far the biggest potential exists in emerging markets where there has been very little signs of a move away from cash – until now. According to a major new study, the non-cash baton has been passed to consumers in China and India, who are now taking the lead as cash is being displaced in favour of alternate forms of payment.
This is among the key findings of the 2015 World Payments Report, published by Capgemini and Royal Bank of Scotland. It found that on a global level, non-cash payments are expected to increase by 8.9 percent in 2014, to reach a total of 389.7 billion transactions. This is up from the growth rate of 7.6 per cent recorded in 2013.
Many nations around the world, both developed and emerging, have enjoyed strong growth in non-cash payments in the past few years, with Germany, the UK, Belgium and France all contributing to an increase of 5.1 percent for Europe for 2012-13 – up from 3.6 percent for the previous 12-month period and significantly outpacing GDP.
However, it was in Asia where the biggest gains in non-cash transactions have been seen. The ‘Emerging Asia’ region as a whole saw growth of 21.6 percent in 2013 and is expected to reach 27 percent in 2014. China in particular is leading the charge, with an increase in non-cash transactions of 37.7 per cent in 2013.
Newer technologies help Asian markets
One of the key reasons for this record growth is the rapid roll-out of new technology such as mobile connectivity to more locations. For example, increased penetration of mobile phones in smaller towns and cities outside of China’s main hubs is resulting in increased numbers of mobile payments.
Last year, transaction volumes for mobile payments in the nation rose by 170 percent compared with the previous 12 months, reaching a total of 4.5 billion. This technology therefore made up almost a third of total non-cash payments. Meanwhile, Chinese online payment services Alipay reported more than half of transactions in the first 10 months of 2014 (54 per cent) came from mobile devices, up from just 22 percent in 2013.
At the same time, efforts from regulators in China to speed up the deployment of point-of-sale equipment to merchants throughout the country, as well as opening up the domestic payments card market to allow greater competition from overseas providers.
Likewise in India, there has been a lot more effort to boost non-cash payments. The Reserve Bank of India has relaxed rules requiring a PIN for card transactions up to Rs. 2000, which will mean low-value contactless transactions can take place a lot more easily. Meanwhile, lawmakers are also looking at rolling out tax breaks for consumers and businesses who use electronic payments over cash.
Developing nations set to close the gap
The World Payments Report observed that payment services remain much more advanced in developed economies than emerging ones – and cultural differences in spending habits, such as a greater reliance on credit mean that developed nations tend to have higher per-inhabitant rates of non-cash transactions.
However, it added that factors such as the global rise in ecommerce and continuing innovations in payment technologies are expected to lead to the gap narrowing in the next few years.
It observed that if current trends continue, developing markets’ share of global non-cash transactions is set to climb from 27 percent in 2013 to 33 percent by the end of the decade.