Draw your mind back to the last purchase you made.
How did you pay for it?
A few decades ago, that would be a question with a limited number of answers: cash, card, or cheque.
Now though, there are many more ways to pay — PayPal, Apple Pay, Bitcoin (to name a few!) – each with their own unique advantages. So this raises the question: Are traditional forms of payment on the way out?
In this article, we are going to look into that possibility…
The History of Payments
Cash certainly stands out as the most recognizable payment method globally. But it wasn’t always that way. Cash as we know it first appeared in around 700 BC in the form of coins, and paper money didn’t enter circulation until the year 806 AD. Before that, various items, including animals, were used as currency.
The first cheque was written in 1659, making cheques 357 years old at the release of this article. Cheques were once a very popular form of payment, but since the millennium, their usage has started to decline. By 2007, cheques only accounted for 6% of all personal transactions that did not involve cash in the UK; and today, two-thirds of under 25s have never written a cheque.
In the history of payments, there was only ever one real rival to cash: the card.
Although card payments rival cash in the present day, they were phased in slowly. The first ‘charge cards’ started appearing in the early 1900s and allowed people to pay at establishments like department stores and hotel chains without cash.
The first widely-used credit card wasn’t introduced until 1950. It was called the Diners Club Card and was mainly used for travel and entertainment purposes. Upon witnessing the popularity of the Diners Club Card, two banks, American Express and Bank of America, introduced their own credit cards.
Today, we tend to pay by card because it is more convenient than paying with cash. But, more and more frequently, digital payment methods are appearing that are even more convenient and safer than this…
The Payment Processing Ecosystem
At its most basic level, making a payment is simply the process of transferring information from one party to another.
With the ever-growing power of “the cloud”, digital payments have become safer, more convenient, and ultimately more popular — particularly within the business world. EFT (electronic funds transfers), such as BACS (Banker’s Automated Clearing Services), payments are the favoured payment processing methods in the UK. Last year alone, 6 billion UK payments were made through the BACS system with a total combined value of more than £4.4 trillion.
To help make sense of the current state of the payments industry, Business Insider created an intelligence report earlier this year entitled: ‘The Payment Processing Ecosystem 2016’. The report details the dizzying array of stakeholders involved in the payments industry, as summarised below:
Rising trends within the payments ecosystem include a demand for in-app payments and the implementation of immediate payments. Currently, around 35 countries across the globe have implemented or scheduled hard launch dates for immediate payment systems and the number is expected to increase significantly in the near future.
Perhaps one of the most interesting takeaways from the report is that 2016 is set to be a watershed year for the payments industry. Among the important changes being made is the improvement of security for digital transactions, and expansion of mobile offerings. Take a look at the full report, here.
A Cashless Society?
With all of these new payment methods becoming more and more popular, are we close to a cashless future?
Some sources believe that a cashless society is inevitable, and that as the shackles of traditional financial systems loosen, the real innovation can begin. Take a look at this snippet of an infographic by Visual Capitalist:
From this image, created using data gathered just this year, we can see that 52% of all transactions in the UK are cashless.
Although the use of cash and cheques continues to decline, it may be a while before traditional forms of payment disappear altogether. New digital payment methods have many benefits: they’re safer, quicker, more convenient. But, humans are sentimental creatures. With cash, comes a sense of national pride and identity, and we might not be ready to let go of that yet.