Are we becoming a cashless society? Research by Capgemini and BNP Paribas suggests that might just be the case; their recent study projects that digital payments will reach 726 billion worldwide by 2020. And we are only scratching the surface.
In fact, in the U.S., Generation Z consumers (ages 18 to 24) are “twice as likely to make a mobile payment as the total population,” reports creditcards.com. Beyond mobile, research published on Statista estimates the global market for wearable technology this year to be at a staggering $6 billion. And we have yet to experience the impact of 20 billion IoT-connected devices that are projected to flood the market by 2023.
Which begs the question: should credit unions be preparing for a cashless future?
Why Dollars Still Make Sense
Despite the rise of mobile and digital payments innovation, cash is still the predominant payment method in many countries. Additionally, nearly a third of U.S. consumers visit an ATM at least once a week to withdraw cash.
Why do we continue to cling to dollar bills? Why haven’t they gone the way of the typewriter, CD’s or the landline? There are several benefits that cash offers:
- Convenience – While technology in most cases does offer convenience, there are still some situations where cash is the most convenient way to pay: cash tips at local businesses, wedding gifts, buses and other transportation, are a few that come to mind. And let’s not forget there are still many restaurants and bars that do not take cash or charge fee for credit card transactions.
- Safety – Although digital payments are on the rise, consumers still cling to cash out of concerns around fraud and data usage. Paysafe research found that a full 50 percent of those surveyed cited “fraud as the greatest barrier to using emerging payments; 48 percent expressed concerns around the use of their data.” and 56 percent referred to “checkout-free stores — where smart technologies tally items in the shopping basket and automate payments” as risky.
- Tangibility – Consumer research shows that for many “card and digital payment seem less real than cash” and can quickly lead to overspending or lack of budgeting. For those hoping to practice fiscally responsible spending, cash provides a tangibility to the transaction process.
Members Want Options
It is clear that cash isn’t going away anytime soon but that doesn’t mean credit unions should not be heavily focused on payments innovation. Research suggests that what consumers want more than anything is payment options. They want the ability to choose which method of payment they use for different transactions and they expect their financial institution to enable that behavior. That is why payments are and will continue to be most important factor for gaining PFI status with your members.
There is no shortage of new payments innovations to implement at your credit union, though some are more desired by members than others:
Contactless payments have become more prevalent over the last few years, particularly with Generation Z. In countries like the UK, 30% of all card payments at retail stores are contactless. Although some have expressed concerned over data privacy and security issues with contactless payments, it is clear that payments through services like Apple Pay, Google Pay and FitBit are not going away any time soon.
P2P payments have been around for years but only recent have they become serious contenders in the payments space. Several apps are vying for dominance in the market but Zelle Network by Early Warning appears to have the biggest trajectory and is expected to hit 27.4 million members by the end of 2018. CO-OP has partnered with Early Warning to enable a quicker and less expensive integration of the Zelle P2P network while leveraging existing infrastructure and connectivity.
Cardless ATM Access:
With the ATM being a valuable member touchpoint, credit unions are investing in enhancements to make the ATM experience faster and more secure. One of the most popular trends is cardless access, which enables members to withdraw cash from their phone, avoiding ATM lines and the threat of cardskimming. CO-OP will be unveiling some new enhancements in the cardless access space very soon.
Winning the Payments Race
With digital payments experiencing unprecedented innovation, we may see a sharp decline in the use of cash in the near-future. Credit unions should focus on providing a full range of payment methods and processing services in order to stay top-of-mind and top-of-wallet.
Join us at an upcoming CO-OP Roadshow event, where we’ll be sharing strategies for winning the “Accelerating Payments” race: