31-08-2022

When you leave home, you check that you’ve got your phone, keys and most importantly wallet or purse, containing your payment cards. You’ve probably got some cash on you but not enough to pay for your day’s financial transactions. This is the world we live in where a touch of a card makes your life easier and more secure.

Cash is (no longer) king
Whilst research shows that cash is most definitely still around, payment card usage is most definitely growing and unlikely to disappear any time soon.
In a recent article, the Brazilian Central Bank head was quoted predicting the death of credit cards. But if you look at the alternatives, the odds against this happening are minimal, certainly at an international level, especially when looking for a globally accepted payment method. It is like saying that we now have electric cars and charging points in some areas so surely the electric car is ready to replace the combustion engine car for cross country trips. This may well happen at some point but not in the near future and certainly not instantly globally.

Travelling light
Although the US dollar and UK sterling are acceptable currencies in some countries other than their home countries, non-domestic currencies are rarely welcome at merchants when traveling. Even just crossing the border from Scotland to England with Scottish banknotes may see your transaction being rejected. And whilst travellers’ cheques hardly exist or are acceptable today, take your card out almost anywhere in the world, and the doors open.
According to Guy Raymond El Khoury, CEO of Accomplish (formerly Accomplish Financial), payment cards still remain the only product most compatible internationally. “Even though cards have been around for 70 years, they are not going away any time soon. They are the only payment method set up to automatically be used 24/7 practically anywhere in the world, no matter the region, time zone or local currency.”

Phone apps
There is talk of P2P digital payment apps (like Venmo, PayPal, WeChat Pay, etc.) becoming the new standard for payments. “The problem with a phone app from a single service provider is that they usually do not interact with competitor apps and platforms and usually require a user to have multiple apps in order to make payments. Even then, the underlying technology to access your funds is often still reliant on the existing card standards and infrastructure,” adds El Khoury. “Until there is a proper standard message for communicating between all apps this will remain a big challenge.”
Other practical challenges occur such as when you may not have enough signal or access to data, a problem that is more pronounced outside of busy town centres – without data access most App-based solutions will not function properly, if at all. Furthermore, speed is always an issue, and not just the issue of being required to sign up to a new system whilst trying to pay when you are in the queue at a busy supermarket, but the speed of making an actual payment – we expect near instant payments and very few app payment experiences match, let alone beat the speed of a card payment.
“Today, we’re looking at mobile phone tokenised payments (i.e. Apple Pay, Google Pay, etc.), wearable or other type of payment cards, but they still come back to the same underlying payment technology – the card.”

Economic sense
Whilst the existence of cash is perhaps still needed for certain scenarios and circumstances, even the smallest businesses today have access to, and use card point of sale devices. One of the reasons for this is the low cost of these devices. Whereas in the past such methods for smaller merchants were seen as expensive, today payment system costs have come down, both for the buyer and the merchant. Prices of card devices have also lowered, with competitors offering cheaper and more usable options.

The world of crypto currencies
So where do crypto currencies fit into the payments ecosystem? “There are still a lot of regulations and technology challenges to cover before we get to a point where cryptocurrencies can become a feasible, practical solution” says Guy El Khoury. “When you’re dealing with a payment technology that relies on similar requirements of App connectivity, mobile signal, etc., you have the same challenges as App based P2P solutions. Cryptocurrencies however, have the advantage of being more universally compatible across multiple apps and service providers. However, issues concerning trust, volatility and secondary issues such as speed also play a role. Ultimately, cryptocurrencies may provide a good solution for a translation layer of sorts between different Apps, however, it is quite likely that the stability of a solid Central Bank Digital Currency will probably become the more widely accepted method. The remaining hurdle of payment acceptance at a point of sale still remains, and cards and card-based technology still remains the most prevalent interface to making payments.

No power needed
With a payment card you never run out of battery or have to have it recharged – it works anywhere. Even if you physically break a card the chip will usually still work as will the magnetic stripe. Cards have been designed to have a large degree of resilience and compatibility and again they don’t need power or any kind. Their design, created for longevity, means they can usually withstand an accidental run through a washing machine or even a dip in a pool or the ocean. Although trying either out is probably not the best idea.

“Whichever way you look at it, there are very few viable alternatives to cards right now and with constant review, research and improvement they will be around for many years to come,” Guy Raymond El Khoury confidently predicts.

Some Transaction Data from ukfinance.org.uk as at 17 August 2022

Annual data comparisons are impacted by the reduction of spending due to various lockdown restrictions and the economy re-opening, resulting in large percentage variations when compared to 2021.

Card transactions by UK cardholders both in the UK and overseas:

• There were 2 billion debit card transactions in May, 12.9 per cent more than in May 2021. The total spend of £60.8 billion was 1 per cent higher than May 2021.
• There were 357.4 million credit card transactions in May, 26.9 per cent more than in May 2021. The total spend of £19.9 billion was 33.1 per cent higher than May 2021.
• Outstanding balances on credit card accounts have grown by 9.6 per cent over the twelve months to May.

Card transactions made in the UK by cardholders from both the UK and from overseas countries:

• There were 2.1 billion debit and credit card transactions in the UK in May, 17 per cent more than in May 2021. The total spend of £74.6 billion was 9.1 per cent higher than May 2021.
• Contactless payments accounted for 60 per cent of all credit card and 74 per cent of all debit card transactions.
• There were 1.5 billion contactless card transactions in May, 34 per cent more than the 1.1 billion in May 2021. The total value of contactless transactions was £22 billion in May, a 61.2 per cent increase on £13.7 billion in May 2021.
• The number of contactless credit card transactions was 52.5 per cent higher than May 2021. The number of contactless debit card transactions was 31.4 per cent higher than May 2021.