7 payment technologies that could spell the end of cash – and change the way you do business

From contactless cards to facial recognition software - how will we pay in the future?

Since the first plastic credit card made its appearance in Britain in the 1960s, the question of how we will finally become a cashless society has popped up regularly. As we inch closer to that goal, more innovative payment technologies are emerging to help businesses make it easier for their customers to pay. So if we ever do wave goodbye to cash, it won’t necessarily mean we’ll be paying just by card.

A growing range of options will mean we’re likely to pay for goods and services via a range of methods. It is already possible to march onto the high-street armed with just a phone and use it to buy a burger with Bitcoin.

The end of cash

Cash has been used as means of payment for in excess of 4,000 years, so wiping it out in a few short decades might sound like a tough sell. But use of cash is declining fast.

A recent survey by Sage Pay found that 64% of people now prefer to pay by card, while one in three consumers will put goods back on the shelf if card payment isn’t an option. In London, TfL is proposing that buses go cashless from 2014 after cash made up less than 1% of all payments this year, down from 20% just 10 years ago.

When we do use cash, it is usually for smaller value purchases. According to payment company WorldPay, two-thirds of all retail transactions are still made in cash, but two-thirds of the value of those transactions are paid for by card.

Geoffrey Barraclough, head of corporate propositions at WorldPay, says that many shops would like to dispense with cash as soon as possible. “In places like shoe-shops, cash has declined to the point where if they can get rid of the cash, then they can get rid of the till, which means they can free up space.

“You can have the shop assistant wandering around. No cash-drawer means you can reconfigure the whole shop floor and get more stock out there and also get your people talking to customers rather than being stuck behind a desk.”

Card issues

So what are the barriers to businesses moving from dealing with cash to taking card payments?

Mathew Jaffa, senior development manager at the Federation for Small Businesses, says that their member businesses, which typically have fewer than five employees, tend to use traditional payment methods with a significant proportion remaining dependent on cash and cheques.

The chief barrier is the expense associated with chip-and-pin sales. “There is concern about the cost,” says Jaffa. “If you’re not turning over a huge amount, costs are high in relation to footfall and getting people through the door, so you’re not getting bang for your buck. You need a provider that is going to ensure that it’s low cost and with a low admin fee.”

Sales through chip-and-pin devices are charged at a rate of about 2-3% for credit card transactions, or are set at a fixed cost of between 20p and 30p for debit cards.

Simon Black, CEO of Sage Pay, says it is important for firms to take the plunge: “Lots of it is to do with education and understanding the value of initially accepting card payments.

“Even as a small business you need to support the consumer whichever way they want to shop with you by offering multi-channel payment options.”

So what are the payment methods we’ll find ourselves using in the near future? And how can SMEs benefit from embracing them?

1. Receiving payments

Many small businesses are providing increased payment options by taking card payments over their mobile devices with the help of small card-reading devices. Technologies such as those developed by app manufacturer Square, and WorldPay’s Zinc, allow small businesses to receive card payments on the move.

“We’re seeing a lot of interest from the service sector,” says Barraclough. “People like chiropractors, therapists, dentists - people who actually don’t take that many transactions, but [the transactions they do take] tend to be quite high value. Electricians, for example, are quite tech savvy.

“Do you really want to do a job and then send someone an invoice and then have to chase them up? You could say, ‘I take card, why don’t you pay me now?’ ”

2. Contactless payments

The latest payment innovation to make serious inroads with consumers and larger businesses is contactless card payments. Banks now issue all their customers with contactless cards, and the number of retailers accepting contactless payments has grown quickly.

“I love it. It’s quicker than cash,” Barraclough adds. “Card can be a bit slower than cash depending on the way the shop operates, but with contactless it’s just tap and go.”

3. Single device payments

The next step towards mobile device payments is to use your phone in the same way as a contactless card. Barclaycard has trialled a sticker scheme, in which you affix a sticker to the back of your phone, and use it to pay.

Black says: “You probably have a cheque book, but you don’t get it out that often – the actual plastic card will go the same way. In Western countries, and certainly the UK, you will begin to simply tap your smartphone. You will still have a credit card account and a debit card account, but you will start to use the physical plastic less and less.”

4. Mobile payments

The biggest growth area for payment technology comes as online shoppers shun their laptops and desktop computers in favour of smartphones and tablets. But entering long card numbers, sort-codes and expiry dates without a mouse and keyboard can be a fiddly operation that results in ‘basket abandonment’. As a result, several companies are offering online “wallets”, in which you enter your card details once, and then store them online for use when making payments. Current players include PayPal, Visa, Google and Zapp.

Barraclough says accepting various forms of payment will become essential for businesses to remain competitive.

“Firms will be able to sell more on mobile, which is the route customers increasingly prefer to buy with. And not having the most up-to-date ways of being able to pay on mobile will mean you will lose sales compared to your competitors who have them.”

iphone smartphone apple

While mobile payments in this way are unlikely to be used to revolutionise paying for groceries in a supermarket, it could work in particular offline scenarios, such as at restaurants, where the average time between finishing a meal, paying, and leaving is estimated to be 19 minutes. Barraclough says: “If anywhere in the offline world is going to move from card to another way of paying, it’s going to be there first. You’ll be ready to go, you’ll open up the app, look at the bill, say ‘yeah, I’m happy with that’, add a tip, and away you go.”

5. Pay with your face

In the UK, it’s only the Queen who can currently pay with her own face, and that’s because she’s on all the cash. But elsewhere, companies are looking at cutting-edge military grade technologies that can let you pay using a hi-tech facial recognition system. Uniqul, a Finnish company, has developed a system that recognises and checks users’ unique biometric information using cameras. Payments can be made in five seconds, and users need neither card nor phone.

6. Pay with your hands

Gesture technology is something most of us are already familiar with, even if we aren’t aware of it. The rise of touchscreen surfaces mean that we are now increasingly swiping and tapping our way into the future.

This is the inspiration behind Secret Handshake – a payment technology that also dispenses with owning any physical hardware. Instead, users will make a sequence of gestures to pay for goods. For example, extending a finger, followed by making a fist could approve a transaction and charge an account the user has linked to Secret Handshake via an online dashboard.

7. Pay with your watch

A modern chip-and-pin or contactless card is essentially a bit of circuitry embedded in plastic. So it is surprising, given the rise of contactless payments, that we haven’t seen the technology embedded into more objects. Watch2Pay, in collaboration with Mastercard, is set to change that, with their specially designed contactless payment watch. The watch is paired up with a pre-pay card and can be used at vendors with Mastercard’s PayPass terminals.

Looking ahead

Convincing consumers to change their habits is not easy, particularly when palpable differences may initially be fairly minimal – you carry less cash, or fewer cards, and save a few seconds at the checkout.

Barraclough approaches the boom in interest in payment technologies with a degree of scepticism.

“Over the last few years there’s been a lot of noise, and the last time we counted there were 850 venture capital funded payment start-ups in Europe and the US,” he says. “But in reality you can count the payment innovations that have stuck on the fingers of one hand.”

For now, cash is set to remain a fundamental part of life. But as we become accustomed to increasingly speedy payment methods, the rare occasions when we must delve into pockets to pull out a handful of coins and notes will eventually become peculiarly anachronistic.

 

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