09 April 2015
Consumers in the UK embrace new payment methods
With new payment methods, more contactless payments, and the rise of smartphone payments, it is clear the UK is embracing the paperless payment era. The only hurdle left to take is the security issue.
Spending on contactless cards more than trebled over the last year to reach a record £2.32 billion in 2014, according to data published by The UK Cards Association. The total spend of contactless payments in 2014 was more than double of all the previous six years combined. “Year-on-year, annual spending rose by 255 per cent from £653.4 million in 2013. UK consumers used their contactless cards 319.2 million times last year, with ten contactless transactions taking place every second. The total number of contactless transactions jumped from 100.4 million in 2013.”
Everyday use of contactless payments
Commuters can now pay for their travel with the new initiative from Transport For London and this has proven to be a popular choice of payment. “Since the launch, 41 million journeys have been made so far using contactless, with around 415,000 journeys now made every day.”
It is clear that Brits are getting used to paying with other methods. A new study reveals that a third of the UK population (33%) believes credit and debit cards will no longer be the preferred method of payment in 2020. The findings show that while cash and card payments still dominate, people believe that alternative methods of payment such as smartphones will become more widely used over the next five years. In this timeframe, 67 per cent of respondents felt cash will decrease in popularity, while two in five (41%) think there will be a decline in the use of credit and debit cards as they currently are.
Retailers should follow customer demand
UK consumers are enthusiastically embracing new payment technologies, but this is also increasing their expectations of retailers. A new Verifone survey found that vendors were expected to keep up with customer demand, with 56 per cent of respondents saying the range of ways to pay in-store was important to them.
A good example of keeping up with customer demand is the recent introduction of payments via Twitter. Barclays now allows British consumers to make payments using Twitter handles, with the Pingit mobile phone app. Users will have to link their Pingit profile with their Twitter account to facilitate the service, with the service setting a maximum limit of £1,500 per day.
Security concerns with new payment methods
With this technology, transactions are made within the Pingit app and not via Twitter, which erases the security concerns regarding the nature of the social media channel. As with every innovation within the financial sector, there are security concerns in the UK. Not limited to payments via Twitter, but also with contactless and smartphone payments.
The main reason smartphone payments are not currently the preferred method of payment is because of the fear of a data breach. Almost half of people surveyed (46%) feared their identity might be stolen online, while 60% of smartphone users said they had no malware protection on their devices, leaving them vulnerable to hacking. This risk can be reduced; as most banks have a limit for £20 per transaction meaning if a card is stolen a series of these small payments could flag up an issue to the bank. The press release of The UK Cards Association shows that instances of fraud are rare with the contactless payment method The latest figures show that contactless fraud totaled £51,000 over the first six months of 2014, just 0.007 per cent of contactless card spending.
New forms of payments are becoming mainstream, but British consumers still have many security concerns to fully embrace the new methods. Companies need to address the security issues so that Brits continue to use paperless payment. The UK is spearheading the movement towards these payment technology innovations, because cash payments remain as popular as ever in France, Germany, Italy and Poland, with new payment methods being slow to catch on.
- Industry insights