How cash and digital payments can coexist going forward

5. July 2018.

By Cleopatra Mavredis, global marketing manager for channel solutions, NCR Corp.

Users and providers of financial services are experiencing a modern payments environment defined by unprecedented diversity. From traditional cash to the latest innovative digital and mobile payment platforms, consumers have never had so much choice when it comes to paying for goods and services.

The development and growing popularity of technologies like mobile wallets and contactless payments has led some to suggest that these methods could one day replace cash altogether; however, the more likely scenario is that physical and digital payment options will continue to coexist, providing valuable choice and flexibility for consumers. This prediction is backed by plenty of evidence showing that, while digital payments are steadily growing in popularity, cash remains very much a part of consumers’ financial lives even in the least cash-friendly countries.

A diverse and dynamic market

One clear conclusion we can make, based on recent trends in the financial services industry, is that the increasing prevalence of new transaction methods does not necessarily mean that more traditional payment mechanisms are being left behind. Consumers will always value freedom and choice, particularly where something as significant as how they spend money is concerned. While some will be eager to try the latest technologies, others will stay loyal to the payment types they feel most comfortable with.

Various reports have provided insights into these respective preferences. The World Payments Report 2017 from Capgemini and BNP Paribas, released in October 2017, predicted that digital payment volumes will reach a global total of 726 billion transactions by 2020. That would represent growth of nearly 11 percent.

As far as cash is concerned, data released by Retail Banking Research in December 2017 showed that there were 107 billion cash withdrawals made at ATMs worldwide in 2016, six percent more than in the previous year.

The Federal Reserve Bank of San Francisco published a blog in November 2017 stating that “reports of the death of cash are greatly exaggerated”. This was based on analysis of cash-in-circulation (CIC) data from 42 countries between 2006 to 2016. In all but two countries (Norway and Sweden), CIC growth was found to have matched or exceeded increases in gross domestic product.

In light of statistics, one big question facing financial institutions is how they will meet the diverse payment needs of their customers across physical and digital channels?

Spanning physical and digital

By working with the right partners and finding the most effective solutions to meet customer demands, businesses can make the most of new opportunities arising in the evolving payments market.

Adopting omnichannel transaction processing can enable various types of organizations – including issuing and acquiring banks, payment service providers and merchants – to install a single system supporting all transaction types.

This delivers big benefits in terms of giving consumers the services they expect on various platforms, as well as reducing the business costs involved in managing different silos to oversee each channel.

Banks should also be looking for ways to break down any remaining barriers that exist between physical and digital channels, delivering ultimate convenience and choice for their customers. In the case of the mobile and ATM channels, for example developments like contactless withdrawal are helping to unify the customer experience by allowing users to pre-stage a transaction on a mobile device, which is then presented to a contactless reader on the ATM. Furthermore, removing the need to physically enter a card into the machine eliminates the threat of skimming.

Financial institutions that embrace a hybrid payment ecosystem will demonstrate the right amount of flexibility necessary to support consumer payment choice. This will become increasingly important as technology continues to evolve with the consumer being both at the heart of it but also leading the change.

Cleopatra Mavredis is global marketing manager for channel solutions at NCR Corp., and has more than 20 years’ experience in the ATM industry. The NCR channel solution portfolio comprises APTRA Vision, Inetco Insight and OptiSuite solutions.

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