Will cash survive amongst new electronic payments?

With consumers being opened up to multiple new payment methods, retailers have been left questioning the cost benefits of new electronic payment systems. Growth in the use of prepaid cards, contactless technologies, mobile devices,

and electronic wallets is being used as an indicator as the death of cash payments. But evidence suggests that cash queries have been more than exaggerated.

Research from the British Retail Consortium (Cost of Payment Collection) illustrates that although there is a movement in consumers looking for alternative methods of payment, its growth and popularity is very slow. Between 2007 and 2009, the amount of cash used decreased modestly from 33.8% of all transactions by value to 32.2%. It also accounted for 58.2% of transactions by number in 2009 compared with the slightly higher 60.6% in 2007.

Payments consultants across the board seem to feel that paying with new electronic methods will remain static for the immediate future.

Results show in the 2009 Cost of Payment Collection Survey that transactions cost an average an average of 2.1p to process whereas a debit transaction typically costs retailers 8.5p and a credit card is a much higher 33p to process.

The cost of retailers accepting prepaid cards varies widely according to BRC policy advisor Richard Braham, who says there are over 270 different levels of charges (interchange fees) on various plastic cards – the and Visa branded.

“Retailers are agnostic about payments. They are not sitting there favouring one method over another. Everything the BRC has done is for fair costs for processing payments. We don’t understand why with a swipe function, where we should be getting more cost efficiencies, we are seeing a rise in fees. And it is non-negotiable and non-accountable,” explains Braham.

Certainly making payments via mobile phones is where much of the payments industry is looking to and the ultimate realisation of consumers having electronic wallets on their phones is expected by many experts.

Among them is Cameron McLean, general manager for merchant services at PayPal, who says: “We’re seeing huge consumer behavioural changes as people move to smartphone technologies… and a lot of that is helped by PayPal offering ways to pay.”

Time will of course tell but imminently a good old cash payment doesn’t look to be going anywhere.