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/   Insights

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/   Insights

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Intuit 2020 Report: The Future of Financial Services

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/   Insights

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Fast Facts: Student Loans

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/   Insights

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/   Spotlight

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/   Insights

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/   Insights

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What We’re Reading

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/   Spotlight

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/   Insights

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What We’re Reading: Thanksgiving Edition

November 22, 2012
/   Spotlight

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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.

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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