Contactless and mobile payments are growing fast. Does this spell the death of cash?
The cash machine turned fifty last year. First unveiled in Enfield in 1967, it went on to completely transform our payment habits by making cash always available, everywhere. It’s hard to imagine, but before the Automated Teller Machine (to give it its proper name), you had to get cash by lunchtime on Saturday or wait till the banks opened again on Monday morning. It’s a far cry from the life we’re used to where almost anything is on-demand.
Use of cash is in sharp decline
But as a nation, our love affair with cash is cooling fast and visiting the cashpoint is now a pastime in decline: in 2017, the number of people using the UK’s 70,000 cash machines fell for the first time following a decade of year-on-year growth, and 40% of all payments in the UK were in cash – that’s compared to 62% in 20061. UK Finance2 now expects cash will account for just 21% of all payments by 20263. I know I can quite easily get through a week in London without needing cash; things change slightly when you leave the city but it’s still very doable.
Contactless payments are growing strongly
So what’s changed? Cards, and in particular contactless cards, are replacing cash for many small transactions. In food shops and coffee queues across the country, you’ll find customers using their contactless bank card to pay, making for much faster transactions and no fumbling with coins. It’s a rapidly growing payment habit – in 2016, we spent £25 billion in the UK using contactless, a figure almost matched in just the first six months of 2017. The average value of a contactless payment at food and drink retailers (the most popular sector for the cards) was £9.704, showing its direct equivalence to the loose change in your pocket.
This strong trend has, in fact, been some years in the making. The first contactless cards were introduced in the UK in 2007. And back in 1995, the first stored-value payment card or “electronic purse” was introduced. You could load the Mondex card from your bank account via an ATM or over the phone and use it for cash-type transactions – for example, at the newsagents or to pay for parking. These early schemes stored the value on the card itself (so-called “closed loop”) and ultimately failed to build compatibility and scale – but the technology continued to develop leading to, for example, pre-paid cards such as Transport for London’s (TfL) hugely successful Oyster scheme. Contactless bank cards were first accepted for travel on London’s buses in 2012 and then introduced across the TfL network in 2014 – the year that use of contactless started to accelerate. Contactless can increasingly be used to pay for transport elsewhere across the UK.