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April 17, 2019

Consumer Appetite for Frictionless Payments is Rapidly Accelerating. Don’t Get Left Behind

Cash – once the king of consumer payments – has been losing market share to electronic payments methods that deliver fast and secure experiences for consumers and merchants.  Any business that sells goods or services to consumers — online or in person — must decide what forms of payment to accept.  Given that consumer preferences are moving toward electronic payments, businesses are investing in expanding payment options to include next generation technologies like wearables, mobile, and contactless. 

According to data from the Federal Reserve, the total number of credit card transactions in the United States since 2000 has doubled to over 33 billion per year. Debit card transactions increased even more, from 8 billion in 2000 to 59.6 billion in 2015. Between 2000 and 2015, according to the Federal Reserve, the number of noncash payments American households made on average per month grew 94 percent, outpacing cash and checks. 

That’s a substantial increase for electronic payments, driven by the proliferation of new payment technologies like peer-to-peer apps, mobile wallets, mobile apps from retailers and eCommerce. Just seven years ago, a Federal Reserve payments study found that cash made up the single largest share of consumer transaction activity, at 40 percent.  

In total, there are now over 161 billion non-cash transactions in North America every year, representing the movement of $6 trillion from consumers to businesses via electronic payments. Seventy percent of all retail purchases are made with electronic payments. 

There are still consumers that favor cash. According to Mercator, 18 percent of consumers surveyed said it was their preferred method.  But Americans carry and use less cash than ever before, and write even fewer checks, opting for the convenience and savings provided by new technologies like contactless cards, online ordering, in-app purchases and loyalty programs. 

Take ordering ahead as an example. Historically confined to calling a favorite pizza shop and reading sensitive payments information over the phone, electronic payments innovation has powered fast, secure and easy mobile order-ahead solutions. Six in 10 American consumers in the 25-34 age bracket have used a restaurant or coffee shop mobile order-ahead service, and two in three Americans report choosing a restaurant specifically because it offers order-ahead. These services are growing quickly, and merchants that implement order-ahead mobile payments can provide more convenient experiences to their existing customers and engage new customers searching for dining options via their smartphones. 

Mobile wallets also offer a great opportunity for merchants to boost sales and consumer engagement through smart loyalty programs and discounts. Ninety percent of American consumers participate in rewards programs, and through easy integrations, consumers can stack up rewards and discounts directly in their payment apps. Look no further than the Starbucks or Walmart app, which have rewards programs and coupons built into their mobile apps.  Similarly, mobile payments services from Google, Apple and Samsung incorporate rewards programs as a proven tool for driving sales, and payments service providers are investing billions into making them easy and accessible for merchants of all sizes. 

With hundreds of millions of contactless-enabled cards – which are loaded with very fast tap-and-go technology – finding their way to American wallets in 2019, merchants who enable contactless acceptance can stand to benefit from decreased checkout times, increased card use and favorable customer payments experiences.  Contactless card use is particularly prevalent outside of the U.S. – in Australia, for example, more than 80% of card payments are contactless tap-and-go transactions.  For smaller ticket purchases in quick service restaurants and convenience stores, contactless transactions most frequently replace cash.

Consumers care most about two things: convenience and savings. A payments strategy that embraces omnichannel acceptance — capturing customers whether they are order-ahead lovers, rewards program loyalists, or tap-and-go advocates — gives merchants tech-forward tools harness consumer trends towards cashless payments. Broadly, it will be critical for merchants to build their presence in an increasingly digital marketplace. 

The proliferation has left many business owners wondering: is it time for my business to go cashless? Some have. Sweetgreen, a quick-service salad restaurant based in the Mid-Atlantic, has gone cashless at six of its retail locations. The restaurant has reported a 5 to 15 percent increase in the number of transactions an employee can perform in an hour, according to a report in the New York Times. 

These innovations are backed by the fundamental advantage of electronic payments: they are safe, secure, efficient and protect merchants and consumers in the event of fraud. According to a study from Visa, electronic payments acceptance costs up to 57 percent less than payment types like cash and checks for small and medium businesses, because the losses from inaccurate cash handling, cash fraud, theft, procedural costs and labor expenses significantly exceed the costs and time associated with accepting digital payments.

The decision is ultimately one for business owners to make, based on the preferences of their customers. New payments innovations offer benefits to businesses and consumers, and cash usage is not likely to grow in the future. But it’s also true that some consumers prefer or primarily have access to cash, and that cashless storefronts might alienate certain retailers’ customers. 

Merchants know their customers and their businesses better than anyone else. They know how their customers pay and how they want to pay; they know their costs and the potential gain from adapting their payments acceptance to a fast-innovating marketplace. Whether new payments innovations like contactless cards and mobile order-ahead replace cash or supplement it should be left to each merchant to decide. Regardless, the payments technology companies that power these solutions are ready to help them make their payments the best they can be. 

When retailers adapt a payments strategy that takes an omnichannel approach to payments acceptance, that is well-tailored to the needs of their customers, and harnesses the latest innovation from the payments industry, then consumers and retailers are best positioned to experience the benefits of electronic payments.


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Amy Zirkle is Vice President, Industry Affairs with the Electronic Transactions Association (ETA).  She oversees the critical relationships between ETA member companies and the association, as well as ETA’s education and professional credentialing programs.  Ms. Zirkle is an industry thought leader on business policy issues arising in the payments technology space, and represents the association before external organizations including industry forums, think tanks, and standards setting organizations.

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