While the payments eco-system evolves at breakneck speed, massive amounts of traditional cash payments still prevail, representing a significant avenue of growth for card payments in the years to come. Here we look at some trends helping drive the growth of payment-by-card around the world, and the ways in which the decline of cash represents an opportunity for growth of the payment card ecosystem.
Despite the rapid decline of cash payments worldwide, a recent Accenture survey indicates that as many as six out of ten customers still make five or more cash payments per month. In Germany's highly developed economy, card payments only surpassed cash as the most used payment method in 2021. While the global payments industry continues to evolve rapidly with innovations like IoT and biometric payments, the most significant growth potential lies in converting the remaining substantial volumes of cash transactions to card payments.
One of the greatest changes was the increase in ways to pay-by-card seen around the world, and the Covid 19 pandemic significantly accelerated the shift from cash to card payments, for users of all types of payment cards, including premium metal cards. While consumer behavior had been shifting gradually for years, the change seen over a few months was monumental. In 2021, for example, 40% of adults in low and middle-income economies who made non-cash payments had never done so before the outbreak of the pandemic in 2020.
In order for non-cash payments to grow in popularity, the places where consumers can pay by card, known as card acceptance, must grow, and we are currently witnessing the global expansion of these payment networks. The number of card-accepting merchants is projected to rise from 75 million in 2019 to 96 million by 2025.
A key driver of this growth is the rapid development of SoftPOS technology, which transforms smartphones into tools for accepting payments. For example, at the end of a cab ride, a customer can simply tap their card on the driver's smartphone to make a payment.
Another crucial factor influencing the shift away from cash is the widespread adoption of contactless payments. By Q3 2022, over half of Mastercard's global transactions were contactless, according to the company, as consumers worldwide choose to tap to pay more frequently.
And the variety of locations at which one can make a contactless payment is expanding. Collection boxes, traditionally used to collect donations in the form of bills and coins, can now accept contactless card payments, allowing individuals to tap their card to donate a specified amount. Vending machines, which have been a stronghold for cash payments, are now being equipped with tap-to-pay functionality as well. Consumers are clearly embracing that change. The share of contactless payments made at vending machines in the U.S. increased from 18% to 43% within less than a year of the deployment of these devices. Public transportation systems have replaced tickets, tokens and proprietary cards with tap-to-pay systems that take users’ payment cards at turnstiles.
We are also witnessing the emergence of entirely new and significantly improved user experiences enabled by card acceptance. Some pubs allow customers to pay for their drinks by tapping their contactless card to a beer pump. This action unlocks the pump, allowing customers to pour their own pint instead of waiting in a potentially very long line. Similarly, some clothing stores now provide payment terminals inside fitting rooms, eliminating the need for a traditional checkout experience.
In conclusion, the growth of new and innovative payment technologies is expanding the ways in which consumers can interact and pay for products and services, taking the place of cash at a rapid rate. Yet the prevalence of cash in some situations represents an opportunity for even greater expansion.
“There is still a tremendous amount of cash and check spent globally… payments remains a massive opportunity," said Ryan McInerney, CEO of Visa. “There is a very long runway of growth in this business.”