Going cashless is all the rage. Leaps and bounds seem to be occurring in payments technology, but how is consumer adoption tracking? Financial innovation pivots around 3 things: technology, regulation and consumer adoption. Adoption is absolutely key.
The Guardian this week had a look into Britons’ habits regarding cash and new payments methods. With less bank branches, customers are carrying less cash. Also, businesses don’t want to do the associated accounting when cash is involved. By going cashless, it is possible to save ‘at least half a day’s work,’ benefitting an SME immensely. This offsets transaction costs associated with credit cards.
Cashless societies around the world
Some countries have more widely adopted fintech than others. Cash represents less than 10% of the national GDP in Finland, France, Ireland, the Netherlands, Sweden and Switzerland according to the Global Cash Index. Europe does power ahead for cashless adoption.
In emerging markets, fintech adoption is particularly high due to a young, tech-literate population being financially underserved, says EY’s FinTech Adoption Index 2017 .
Cashless in China
Chinese customers increasingly use mobile payments to buy goods and services. In a way, they have leapfrogged the payments cards system; going straight from cash to mobile payments, suggested Brookings. Fintech innovation and adoption is strong in China to match this trend. Nine of the 27 fintech ‘unicorns’ – fintechs worth more than USD 1 billion – are Chinese. There are 12 from the United States.
Part of the reason China is bounding ahead is strong internet usage and systems. Added to the less-developed banking industry in China, it makes sense for mobile payments to be preferred to credit cards.
By Grace Appleford, Research Analyst.