In 1976, British economist Friedrich Hayek suggested an alternative to cash in one of his books. He suggested the replacement of cash with “plastic tokens” with electronic markings which can be sorted out by every cash register, and the 'signature' of which would be legally protected against forgery just like any other document of value. In 45 years we didn't just bypass that, but we also leapfrogged straight into digital payments networks.
This article covers:
Switzerland and Norway have relatively low offline payments compared to the rest of Europe, with offline payments representing less than 25% of GDP in these countries. On the flip side, Croatia, Russia, and Portugal’s, in-store payments made up over 72% of GDP.
Online shopping penetration, on the other hand, is high in most European countries. Consumers from the UK spent 200 billion euros on online purchases in 2019 – roughly twice as much as their French counterparts. And Germany was Europe's third-biggest online market, with a revenue of roughly 60 million euros.
According to domestic sources, there are significant differences in the use of cash across Europe. Overall, cash saw the lowest use in the Nordics and parts of western Europe such as the UK, and France. However, cash saw the highest use in Hungary, Cyprus and Germany. That being said, it remains difficult to establish the exact use of cash as Europe does not have a unified approach for reporting payments.
Looking at the increasing popularity of eCommerce and at the declining usage of cash, it becomes clear that the pandemic has accelerated the use of alternative payment methods.
A research report by the DNB revealed that the likelihood of debit card usage at the expense of cash has increased by 13% in the Netherlands. The pandemic has also had the largest impact on payment behavior for the elderly.
Furthermore, Research found that in September 2020, about 44% of consumers were using a debit card as their primary payment method for in-store transactions compared to 35% pre-COVID-19.
Funny enough, the European Central Bank recently reported that demand for cash grew by 11% during the pandemic, which is exceptionally high year-on-year, compared to a 5% annual growth over the past 10 years. The key driver for this growth in demand is the use of cash for “precautionary purposes”. This is a prime example of the “paradox of banknotes’ where the demand for Euro banknotes has constantly increased while the use of banknotes for retail transactions seems to have decreased.
In Germany, where consumers are known for their preference for cash and their scepticism about cashless payments, the country is showing a declining usage of cash.
A Euromonitor study expects the value of card payment transactions in Germany to surge by 28% from 2019 to 2025. Additionally, The German government further sped up the shift by doubling the transaction limit on contactless payments to €50.
Finally, it is undeniable that cash usage is dropping significantly even in the most stubborn markets. At the same time, the importance of cash cannot be denied. What's even more important is that there remains a portion of the population that for a variety of reasons are simply not able to perform cashless payments. Therefore, this minority cannot be excluded in the economy. Our question of the day is, will cash make a comeback in the post-pandemic era?
As competition in the payments ecosystem is riling up between traditional and challenger banks, reshaping core systems and technologies of traditional banking is long overdue. When talking about future-proofing banks and financial services, the term Banking-as-a-service is starting to come up a lot. But what is banking as a service all about and how is it reshaping the industry?
Apple’s push to secure a spot in the payments ecosystem is still going strong. Or at least that’s the plan — executing on it may be … well, not that simple. This is because Apple has been making moves to build a network of merchants, among the most critical components of the payment value chain … with functionalities that are already out there in the market.
If you’ve even moderately kept an eye on any payments related news source, there’s no way you have not been bombarded with the Buy Now Pay Later craze in 2021. Almost all the widely known payment players in the field who could partake in the BNPL craze… actually did. We are quite sure that you have heard about the likes of; Klarna, Affirm, and Afterpay, but industry Giants such as Mastercard, Paypal, Visa, Square, Monzo, Revolut, Amazon, and even Walmart, are all offering BNPL options at checkout or are partnering with BNPL companies to offer this service to their customers. Even mighty Apple is climbing aboard.