While the way customers will pay businesses in the future will undoubtedly change, for now it appears cash is still king.
I was reading a report by Retail Finance Intelligence (RFi) which said that, on an annual basis, credit card balances have grown by only 0.5 per cent in 2012, the slowest growth in almost three years. In the same period, cash withdrawals using a debit card rose 42 per cent. Credit card debt levels are at their lowest level in 14 years.
Tracking of consumer spending over a week in May 2012 by RFi shows cash is still the most preferred payment method of businesses and consumers in a number of everyday situations but is second behind cards for making larger purchases and buying petrol.
Payment methods such PayPal and contactless cards (where you don’t need to sign or enter a PIN) are gaining ground. In RFi’s September survey, 40% of Australians said they owned a contactless card (up from 19 per cent in June 2011) and just under a quarter had used contactless in the past (up from 7 per cent in June 2011).
The Report says business appears to be the stumbling block to a cashless society. According to RFi’s small to medium enterprises (SME) survey in September, cards and direct transfer payments lag behind cash and cheque as accepted SME payment methods. While 67 per cent of small businesses accept cash payments, 57 per cent accept direct transfers, and 52 per cent accept VISA or Mastercard, the majority do not accept contactless payments.
The growth of online shopping will change the use of cash. Around 10 per cent of the average Australian’s spending is done online. Credit cards still dominate online spending, but PayPal is being promoted as offering more security. While more than half of Australian businesses use PayPal to make payments, only 23 per cent accept PayPal payments.
Businesses will need to monitor and adapt their payment systems to meet consumer demand and take advantage of business efficiency.
This blog also appeared in the Newcastle Post November 14