Businesses in the U.S. need to prepare for a future where consumers never elect to pay with cash. As credit cards, debit cards and other electronic modes of payment gain greater traction, it’s possible that the vast majority of the population will elect to stop paying with paper. Business owners will need to prepare for the future by optimizing their payment processing terminals for as many modes of payment as possible.
More than 65 percent of the $63 trillion recorded in consumer payments during 2011 were completed without cash, according to the MasterCard “Cashless Journey” report. The U.S. was identified as being on the “tipping point” toward becoming a cashless society, as approximately 80 percent of all domestic consumer spending recorded during 2011 were done without cash.
The report suggested that the few consumers left paying with cash in the U.S. – instead of using electronic options, such as paying with a card at a credit card terminal – were doing so out of habit. It was also noted that the switch to cashless payments would be beneficial for the society in a general sense.
“What seems to be overlooked in the policy dialogue is that cash takes time to access, is riskier to carry, and costs a country up to 1.5 percent of its GDP,” said Peer Stein, director of access to Finance Advisory Services at the International Finance Corporation. “We can’t expect the journey from cash toward electronic payments to be completed overnight, yet driven by technological advances and public-private partnerships this trend has gathered significant momentum over the past few years.”
The factors that allow a society to become cashless vary, according to the report. MasterCard’s research indicated that accessibility and affordability of financial services, the level of technology – such as credit card processing terminals – available, the market share of retailers and other factors help to influence if and when a society can become cashless.
“While each nation’s journey is unique and requires an understanding of local realities, the benefits that come with a more cashless society are universal: more convenience for consumers, better efficiencies for governments, higher productivity for businesses, and greater financial inclusion for society as a whole by bringing more citizens into the economic mainstream,” said Kevin Stanton, president of MasterCard Advisors.
The benefits of real-time payment methods
Leaders across the U.S. are excited by the prospect of a cashless society – and are also looking forward to future advancements in the payment processing industry.
The next step for payment systems in the U.S. will be to approach “real-time” payment options for retailers, according to Sandra Pianalto, president and CEO of the Federal Reserve Bank of Cleveland. Pianalto spoke at the 2013 Chicago Payments Symposium, noting that she feels debit card payments made at electronic terminals are close to being “real-time,” but that future advancements may lead to a better system.
Pianalto noted that the Fed envisions a future where most payments will be executed electronically and immediately, according to the news source. She also expects that future generations will reserve their business for services that are able to process their payments in an immediate manner.
“They will gravitate to financial institutions and other providers that offer this level of service,” said Pianalto, according to Payments Source.
Pianalto also noted that some forms of paper payment – such as transactions made with checks – can be costly for retailers, negatively affecting the economy. She felt that eliminating these transactions, as well as devising a more efficient means of cross-border business transactions, will help the U.S. payments system to improve.
“That is 60 million transactions per day, and America’s payments system is costlier as a result,” said Pianalto, according to the news source.Back To Blog