Retailers No Longer Coining It in As Digital Payments Displace Cash
Published on: 30th May 2013
Fears over the cost complexity and the capacity needed to change legacy systems have slowed the transition towards a society dominated by mPayments. However this cautious approach to changing the UK's payment infrastructure is not dampening consumer thirst for virtual currencies.
According to data published by KPMG, 63 percent of delegates at the 21st International Payments Summit accept that real-time payment services are the key ingredient for driving revenue growth between now and 2018. Yet, despite acknowledging the role that digital payments play in generating an immediate transfer of funds, 24 percent suggest that legacy systems mean that changes to payment systems can be difficult or risky. A significant proportion also argues that the cost is prohibitive (20 percent) and some suggest that other priorities mean they can't dedicate sufficient resources to deliver the required change (18 percent).
"Digital currencies such as Bitcoin may not yet be the mainstream money of choice, but their rise in prominence and growing acceptance amongst merchants and payment providers is the clearest sign yet that consumer demand for simple and swift transactions is forcing a rethink about the way money changes hands. It's also why the 2014 introduction of peer-to-peer bank transfers by mobile could be a real game changer," says Mark Hale, head of payments and transactional banking at KPMG Management Consulting.
KPMG's research goes on to reveal that consumer preference for notes and coins has dropped over the past year. In 2012, 14 percent still claimed traditional coinage would be the 'payment instrument' of choice by 2020 - but this figures has dropped to just 8 percent, today. In contrast mobile phone has risen to 49 percent (up 3 percent) and digital wallets are now predicted to dominate by 23 percent of respondents.
According to the data, the face of the payment marketplace will change unless current providers adapt to - and adopt - new technology. Yet despite nearly three-quarters of respondents hinting that new players will emerge, the majority of today's payment houses are failing to act. Asked, for example, whether they make use of social media as a way of driving digital payments 29 percent said 'no'. A further 34 percent admitted it is 'hard to invest in developing payment technology' as there is only a small amount of discretionary spend.
However, it is encouraging to see that many payment houses are using technology to improve the services they offer and to mitigate risks to customers. Just over 1 in 4, for example, believe they should re-engineer their payment process. Two-thirds (36 percent) also think consolidation of IT platforms and applications will improve the customer experience.
Encouragingly regulatory compliance is top of the agenda when respondents were asked to identify the risk deserving the most attention over the next 3 years. Respondents also gave (almost) equal importance to a range of regulatory issues which they felt would have a positive impact on the payments marketplace. 22 percent, for example, suggested that regulation to improve payments governance and accountability would be worthwhile, whilst 26 percent called for 'better protection and more transparency for customers'.
Mark Hale concludes: "Technology may enable change, but revolutions happen because of changes in behaviour. Over the past few years we have begun to see these changes take place and it is no longer a sweeping statement to suggest that money is about to change forever. It might not be tomorrow, but the direction is set and it is only a matter of time and circumstance before cash is materially displaced."