embracing a future without cash, cards and paper...embracing a future without cash, cards and paper...

Digital Disruptions at an Even More Fundamental Level Humans have invented and embraced technologies for millennia. Whether they were fire, the light bulb or the computer, all have been valued for improving our lives, making us safer, extending life expectancy, allowing us to be more productive and enjoying more of life.

Now, we live in a time of transformational disruptions – primarily digital disruptions – that seek to provide even more value, although very fundamental elements of our lives will change, including the use of cash, credit/debit cards and paper.

As with all technological change, some people are early adopters and are embracing these changes without hesitation while other are wary and cautious, even dismissive that these changes will occur and be beneficial.

Transitioning to a society without cash, credit/debit cards and paper will be a steep climb to the top of a very tall mountain, but all indications are it will happen – and with all the digital/technology disruptions of recent years, we are already on the path.

The introduction of credit and debit cards decades ago has already affected Americans’ use of and attitude towards cash, but new technologies are quickly making those cards less attractive.

As much as we still rely on paper in our lives and businesses, 67% of those participating in a November 2018 Ipsos poll said digital will eventually replace printed materials.

As with many of these digital transformations, age is always a contributing factor, as throughout most of human history young people have embraced the “new” faster than older adults. Having relied on cash and paper for most of their lives, they are understandably reluctant to make such radical changes.

As Media Group Online has advocated in our Special Reports that focus on emerging technologies, now is the time for retailers and all local businesses to educate themselves about these changes too. They will occur and you can position yourself as the best source of these insights, which generates greater trust with your prospects and clients.

Embracing a Future Without

Cash, Cards and PaperA Special Report from Media Group Online, Inc.


Cash, Cards and Paper

www.mediagrouponlineinc.com

The Cashless Revolution – and ResistanceAn interesting place to start an understanding of the use of cash today is US Federal Reserve data. As of 2017, there was $1.57 trillion dollars of US currency in circulation, but $1.25 trillion of it was $100 bills, which wouldn’t be found in most people’s wallets. Most of those $100 bills, or $1.07 trillion, were held abroad.

These rather strange comparisons may be one of the reasons fewer Americans are using cash to make purchases. According to a September/October 2018 Pew Research Center survey, it has decreased 25% for all or almost all purchases since 2015.

Americans’ Use of Cash to Make Purchases, 2015 vs. 2018Use of Cash 2015 2018

All or almost all purchases 24% 18%

Some purchases 51% 52%

No purchases 24% 29%

Pew Research Center, December 2018 The study also found fewer Americans feel the need to have cash in their pockets.

Americans’Cash on Hand, 2015 vs. 2018Attitude 2015 2018

Always have cash on hand if needed 60% 53%

Less concerned since there are multiple payment options

39% 46%

Pew Research Center, December 2018

According to Cardtronics’ Health of Cash 2018 Study, based on a June 2018 online survey (with more Gen X and Baby Boomer than Millennial participants), cash is just one of the preferred payment options – and not even the first.

Americans’Most Preferred Payment Methods, June 2018Method Percent

Debit cards 37%

Cash 28%

Credit cards 20%

Digital 13%

Check 2%

Cardtronics, 2018

The cashless revolution, however, has spawned resistance from various quarters. Many states and local municipalities are concerned cashless stores, in particular, would “discriminate” against people with lower incomes, as they are less likely to have the credit rating to acquire credit/debit cards or own a smartphone.

In fact, during the writing of this Special Report, New Jersey banned cashless stores, and Philadelphia did recently.

Additional data from the Pew Research Center clearly indicates lower-income adults rely on cash to make purchases much more than those with higher incomes.

Comparison of Lower- and Higher-Income Americans’Use of Cash to Make Purchases, June 2018Income All or Almost All None

Less than $30K 29% 18%

$30K–$74,999 17% 30%

$75K or more 7% 41%

Pew Research Center, December 2018




On the Go with Digital DoughAlthough it may be wishful thinking on the part of Dan Schulman, CEO of PayPal and Venmo, its mobile payment service, he stated during a February 2019 CNBC interview that the digital payment industry could become a $100-trillion market.

His optimism is likely based on the $19 billion that was transacted through Venmo during Q4 2018, an 80% YOY increase, and a forecast of $100 billion in payment volume during 2019.

Despite Venmo’s growth, just 26% of consumers said they used a mobile phone for transactions and even fewer, or 17%, make an in-store purchase. According to eMarketer, the trend is advancing, as it reported 55.0 million Americans used proximity mobile payments during 2018, which will increase to 61.6 million for 2019.

Mr. Schulman may not be pleased with the results from Logica’s 2019 The Future of Money Report, which revealed survey participants’ current and future (2023) preferences for online payments (PayPal’s preference is projected to decrease).

Current and Future Preferences for Online Payments, Spring/Fall 2018Preference Current 2023

Credit card 28% 20%

Debit 27% 17%

PayPal 24% 18%

Pre-paid card 7% 4%

Amazon Pay 4% 3%

Visa Checkout 4% 4%

Apple Pay 2% 4%

Google Pay 2% 3%

Cryptocurrency 1% 4%

Samsung Pay --- 2%

Future, unknown technology --- 12%

Logica, February 2019

Of the consumers participating in the 2018 Synchrony (Bank) Digital Study, 60% predict the average shopper will carry his or her phone, but no wallet, but 42% don’t want all their credit and rewards cards on their mobile device.

The 2018 US Mobile Consumer Report from Vibes revealed, however, that smartphone users, and Millennials and Gen Xers, specifically, have more interest in mobile wallets when they provide access to the best promotions and offers.

Reasons Smartphone Users Would Be Attracted to Mobile Wallet Use, March 2018Reason Percent

Access to better promotions/offers 30%

Make life easier with organization of offers, loyalty cards, boarding passes, etc.

27%

A tutorial 15%

Enhance experience with favorite brands/companies

13%

Receive important informational updates 10%

Targeted with relevant offers based on past purchase history/location

9%

Vibes, 2018




Retailers’PerspectiveWhile consumers still have many payment options, retailers are being compelled to innovate their operations because more consumers are adopting and embracing new payment methods.

In their October 2018 study, Retail Innovation Readiness Index, PYMNTS.com and AEVI surveyed more than 400 retailers in 9 different sectors and 81% of the top 60 companies cited the reason above for why they are innovating.

Unfortunately, the percentages decline precipitously among the middle and bottom 60 businesses, 47% and 0%. The primary difference is larger retailers are more focused on responding to customer demands and enhancing loyalty. The bottom 60, in particular, said they don’t view innovations in new payment methods as a path to growth and a competitive advantage.

Reasons Retailers Choose to Invest in Payment Innovation, October 2018Reason Percent

Remain competitive 84.6%

Increase sales 77.4%

Improve customer loyalty 65.4%

Address demand to shop in stores 62.0%

Understand customer behavior 59.8%

Respond to demand to use new payment methods

55.6%

Improve relationship management database 52.6%

Improve business analytics 43.6%

Improve data security 37.2%

PYMNTS.com and AEVI, October 2018

More restaurants continue to implement a cashless-transaction policy not only because customers want to spend less time waiting for their orders and consuming them, but also so restaurants can increase the number of customers served – and paying – during a given period of time.

Another compelling reason for retailers to embrace cashless transactions is to avoid their share of the more than $90 billion in swipe fees from credit-card companies during 2018.

According to the Mobile Payment & Fraud: 2018 Report from Kount, The Fraud Practice and Braintree, 29% of merchants accepted mobile wallets during 2018, a substantial increase from 2017’s 22%. (70% of surveyed merchants do business in the US and 44% in Canada.)

Plus, merchants in the largest revenue categories accepted mobile wallet payments from consumer: $100M–$250M, 42.9%, and more than $250M, 36.5%.

Mobile Wallets US Merchants Accepted, 2017 vs. 2018Mobile Wallet Brand 2017 2018

Apple Pay 48% 35%

Android Pay 38% 25%

Samsung Pay 15% 14%

PayPal 58% 64%

Visa Checkout 26% 28%

MasterPass 16% 15%

AMEX Express Checkout 9% 16%

Chase Pay 6% 6%

CapitalOne 4% 6%

Alipay 8% 10%

Other eWallet --- 10%

Vemno --- 5%

Square Cash --- 4%

Gyft 1% ---

Other 3% ---

Uncertain 15% 22%

Kount, The Fraud Practice and Braintree, 2018




Are Credit Cards the Next Victims?In addition to his prognostications on page 2 of this report, Dan Schulman, CEO of PayPal and Venmo, declared at a May 2018 conference that he expects credit cards to become mostly obsolete during the next 20 years. He was wise to indicate a 20-year period for his prediction, because almost 30% of all 2018 holiday shoppers applied for a credit card.

Mr. Schulman’s wisdom extended to an important insight: Although consumers will need one method or another, or multiple methods, to pay for purchases, they are more likely to choose that method because of “front-end benefits.”

Exclusive data from Business Insider Intelligence seems to support this insight quite clearly, as 35%, the largest percentage, of surveyed consumers said “types of rewards offered” was the top reason they used one credit card more than others. “Rewards offered” is certainly a front-end benefit.

Reasons Why Consumers Use One Credit Card More Than Others, May 2018Reason Percent

Types of rewards offered 35%

Higher rewards rate 25%

Lower interest rate (APR) 11%

Account-opening bonus 6%

Higher credit limit 6%

Only credit card 5%

Accepted at more locations 3%

No interest charged for first year 3%

Other 6%

Business Insider, July 2018

Millennials’Fear of DebtAs more Millennials launch into their careers, marry, start families, buy a home and become mainstream consumers, and drawing on their $200 billion in spending power, their attitude towards credit cards is important for local retailers to understand.

Multiple sources have reported Millennials continue to avoid acquiring credit cards and using them as a result of their experiences during the recession and the overwhelming burden of student debt.

According to an October 2017 survey of 500 adults 18–34 from Credible, Millennials said they actually feared credit card debt more than death!

What Scares Millennials Most During Their Daily Lives, October 2017Scare Factor Percent

Credit card debt 33.2%

Dying 20.4%

The threat of war 16.8%

Being unable to retire 11.0%

Climate change 6.4%

None of the above 12.2%

Credible, May 2018

Nonetheless, Millennials have slid into the same often poor relationship with credit cards since financial institutions first offered them. Although stating the average credit card debt of US adults is tricky because it can be defined in a number of ways, Experian reported it was $6,354 during late 2017.

The average credit card debt for Millennials (or at least those Credible surveyed during October 2017), was $5,290, less than the rest of us, but Millennials have plenty of buying years/decades to increase the average.




Contactless Cards and Other Technologies

Contactless cards may prove to be a benefit for both consumers and retailers, as this technology is an alternative to Apple Pay, Google Pay and other smartphone apps. According to A.T. Kearney, banks will be distributing these cards on a broad basis during 2019, and all of the 10 major banks will do so by early 2020.

These are credit cards with the EMV chip and an NFC (Near-Field Communication) antenna as a stripe on the face of the card. Much like using Apple Pay from a smartphone, contactless-card users simply tap or place the card in close proximity to a card terminal. The card can also be inserted into the terminal, as many consumers do today.

The Growth of Contactless Cards, 2018—2022Metric 2018 2019 2020 2021 2022

Penetration rate 5% 19% 41% 52% 56%

Transactions 200 M 700 M 1.7 B 3.5 B 4.6 B

Payment volume $2.9 B $13.2 B $31.3 B $62.3 B $78.4 B

A.T. Kearney, 2018

As of January 2019, all Target stores were able to accept contactless cards from Visa and Mastercard as well as Apple Pay, Google Pay and Samsung Pay. Previously, Target was one of the biggest retailers excluding Apple Pay as a payment option.

Biometrics technology, in the form of fingerprints, facial recognition and even the veins in the palm of your hand, is likely to become the next payment method. A 2017 Visa survey found 86% of people are interested in the technology as a form of payment identity.

One of its compelling advantages to other cashless payment types is it will work when buying online via a computer, smartphone and all other devices.

According to Goode Intelligence, a London-based biometrics research and consulting firm, 54% of biometric payments will be initiated remotely and 46% in a store by 2023. During that same year, mobile biometric payments are expected to be more than $1.67 trillion.

Scan-and-Go technology is Amazon’s widely-reported foray into the future of consumer payments. A May 2018 survey from GPShopper revealed 48% of US Internet users expect the technology to make shopping easier – and grocery shopping is where they would like to use it most.

For Which Product Categories US Internet Users Would Like to Use Scan-and-Go Technology, May 2018Category Percent

Groceries 50%

Home goods 30%

Fashion 27%

Beauty/Cosmetics 25%

Sports and outdoors 21%

Automotive/Car supplies 20%

eMarketer (GPShopper), February 2019




The Fraud FactorThe risk of fraud in consumer transactions is almost as old as the invention of currency and the first counterfeit coins.

The US Department of Treasury estimates $70 million to $200 million counterfeit bills are in circulation or a range of one note in 10,000 to 4,000. Credit card fraud (stolen and hacked) decreased by 51% from 2015’s estimated total of $3.5 billion to 2018’s estimated total of $1.8 billion and the significant improvement is attributed to the introduction of the EMV chip.

According to the 2018 Mobile Payments and Fraud Report from Kount, The Fraud Practice and Braintree, 53% of surveyed merchants considered “ease of use” in mobile commerce to be most important, with “security/fraud risk” second, at 38.9%.

After excluding the 34.8% of merchants who said they do not track mobile fraud (which is an astonishingly large percentage), 57.8% said mobile fraud attempts increased from 2017 to 2018, while 34.1% said they remained the same and 8.1% decreased.

The 50% of merchants who said the mobile channel requires specialized tools for risk management is the smallest percentage of the 2013–2018 period, but those with larger revenues, understandably, think specialized tools are needed.

Merchants’Perceived Need for Specialized Risk Management Tools for the Mobile Channel, by Revenues, May 2018Revenues Yes No

Less than $10M 27.7% 72.3%

$10M–$25M 39.1% 60.9%

$25M–$100M 70.0% 30.0%

$100M–$250M 57.9% 42.1%

More than $250M 63.3% 36.7%


Among the many tools and services merchants use to prevent mobile fraud, CVV, fraud scoring and AVS (Address Verification Service) were the top three during 2017 and 2018.

Top 10 Tools and Services Merchants Used to Prevent Mobile Fraud During 2018Tools and Services Percent

CVV 62.1%

Fraud scoring 43.3%

AVS 38.9%

Device ID 26.6%

Velocity checks 25.1%

Rules 24.6%

Mobile geolocation 21.7%

3D Secure Cardholder Authentication 20.2%

AI/Machine learning 18.2%

Telephone number identification 18.2%


Not-for-profits used CVV the most, at 86%; followed by jewelry, 74%; apparel/accessories, 73%; digital streaming/downloads/education and health/beauty, 72% each; and kitchen/home furnishings, 65%.

Among emerging technologies, telecom companies were first in the NFC category, at 15%, and games/gambling was first in the use of biometrics, at 14%.




Slowing the Paper ChaseMuch like the enduring strength of cash as the primary means of payment among most Americans, paper is also still highly regarded as a communications and records storage method.

According to a November 2018 Ipsos survey of 2,010 US adults, 47% said they would “feel sad” if there were no printed materials, compared to just 5% who would “feel happy” and 1% would “feel relieved.”

Despite a continuing attraction to printed materials, 64% of the survey respondents expect print materials will decline into the future, and especially those younger than 55, at 68%. Reading books was the top preference for printed materials, at 76%, with printed cards sent to family members and friends a close second, at 73%.

Another interesting finding from the Ipsos survey suggests the written/printed word is still very important to convey information and ideas. Although 76% said the quality and graphics of print are critical to attracting their attention, 56% disagreed with the 39% who said they preferred less text and more graphics.

You only have to open your home’s mailbox every day to realize that often a majority of the mail received is printed ads (junk mail) and 67% of the survey respondents said they were annoyed at so much of it.

For those who advocate a paperless society (or at least a movement in that direction), 55% of the survey respondents said they try not to print documents and other materials as a means to improve the environment. Another environmentally-friendly trend is the 56% who said they use more digital content than printed content.

Paper receipts is a particular category of printed materials of interest to consumers and retailers. An August 2018 YouGov Omnibus survey found 68% of US Internet users preferred a paper receipt, compared to just 19% preferring a digital receipt.

Somewhat surprisingly, even the youngest adults still preferred paper receipts, but they had the largest percentages of those preferring a digital receipt.

Receipts Preferences of US Internet Users, by Age, August 2018Age Group Paper Digital None

18–24 53% 21% 17%

25–34 52% 26% 13%

35–44 59% 24% 9%

45–54 74% 18% 5%

55+ 83% 13% 3%

Total 68% 19% 8%

eMarketer (YouGuv), August 2018

Undoubted, the disappearance of cash, credit/debit cards and paper will be a major disruption in the daily lives of us all, but all trend lines strongly indicate that that is the future. The benefits are evident and will only become more so throughout the remainder of the 21st century.

Sources: Wealth Management Website, 3/19; Pew Research Center Website, 3/19; Cardtronics Website, 3/19; PYMNTS.com Website, 3/19; Ars Technica Website, 3/19; CNBC Website, 3/19; eMarketer Website, 3/19; Logica Website, 3/19; Synchrony Financial Website, 3/19; Vibes Website, 3/19; AEVI Website, 3/19; The National Website, 3/19; The Star Website, 3/19; Kount Website, 3/19; Business Insider Website, 3/19; Retail Dive Website, 3/19; Credible Website, 3/19; The Balance Website, 3/19; Experian Information Solutions Website, 3/19; A.T. Kearney Website, 3/19; NBC News Website, 3/19; Credit Union Times Website, 3/19; Wikipedia Website, 3/19; Statista Website, 3/19; The Motley Fool Website, 3/19; Ipsos Website, 3/19.

Prepared: March 2019

© 2019 Media Group Online, Inc. All rights reserved.

embracing a future without cash, cards and paper...embracing a future without cash, cards and paper...

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