How payments will evolve in the next decade

By Helen Fowler

Have you ever wondered how you will pay for purchases in 10 years' time?  After all, the payments world changes quickly; it wasn't that long ago that we all had to make a cheque out to "Self" in the brick-and-mortar bank to get cash. Now, cash payments are declining and plastic payments -- both debit and credit -- are on the rise. Someday those may be phased out, too, supplanted by mobile and other digital payments.

The latest statistics give a picture of our payment choices today, and what they might be in the future.payment-progression

Cash and cheques will be old-fashioned
Despite all of the payment advances, cash is still the top payment method as of 2013 -- but maybe not for much longer. Shoppers are using cash less than ever, according to the British Retail Consortium's 2013 Retail Payments Survey, with consumers relying instead on plastic to pay for purchases.

Between 2008 and 2013, not only did cash use fall (by 14%), but the average cash transaction value fell as well (by 17%). In other words, Brits are using cash less frequently, and when they do, it's for smaller transactions.

Cheques are headed in the same direction. In 2013, the Payments Council published a report that predicted cheque use would continue to decline. In 2012, Brits used about 477 million cheques. The report forecasts we will use only about 186 million per year in 2022.

Credit, debit and contactless card use will be almost mandatory
According to the BRC survey, the percentage of sales transactions made with debit cards went up 7.9% between 2008 and 2013, and debit cards now account for 50% of sales turnover.

The survey says the percentage of sales turnover attributed to credit and charge cards remained steady, though Brits made 12.6% fewer transactions with the cards -- meaning they spent the same amount but on fewer items.

One segment of the plastic market that's seen huge growth is contactless payment cards. According to the UK Cards Association, monthly spending on contactless cards rose above £100 million for the first time in March 2014, up by more than 200% since the same month in 2013.

New technologies will thrive
Brian Munjanja, management accountant at Kettering-based AFP Services, predicts there may come a time when people no longer see a need to use wallets, relying instead on laptops, phones or other portable equipment for all their payment needs.

This is evident in the rising momentum of mobile wallets -- apps that allow you to store information for all your credit cards on your smartphone, then pay with that at the checkout rather than swipe a card. Mobile wallets are already making an impact. For instance, Starbucks says 11% of its sales volume comes from its mobile wallet app.

Another technology-driven change: the increasing popularity of Bitcoin. The decentralized digital currency represents a digital wallet that allows anonymous payments using the web.

Finally, there is Barclaycard's PayBand. Initially tested at large sporting events, the band allows you to make secure contactless payments (£20 or less) using a bracelet. You can add money to the PayBand from any UK-issued Visa or MasterCard credit or debit card -- in other words, you don't need to be a Barclaycard customer to get one. There's no charge to obtain or use a PayBand.

"People are coming up with things, looking for one thing that does everything," says Munjanja. "Payments will become portable. We could do away with [physical] money."

See related: Old-style scams increasingly used by fraudsters, Should kids and credit cards mix?

Published: 19 June 2014