The UK has reached a cashless tipping point

As we move into 2016 I’m sure all payment players have reflected on the events of the last couple of years and have envisioned the environment for 2016. Not all will agree I’m sure but this is my personal perspective.

The introduction of Apple Pay is good for the industry. It has made lots of noise, increased awareness of a different (smartphone) manner of settling a transaction, it has stimulated some modest usage and acceptance from consumers for contactless transactions. In short, it is helping move the industry towards the tipping point of increased engagement in payments with a mobile device. You need deep pockets for that at this stage. I’m fairly sure that Facebook, with their equally large deep pockets, will also stimulate some consumer adoption of its new P2P offering in the US. Though marketing muscle is no sure fire guaranteed success, for example Google has been spectacularly unsuccessful in its payments forays but then it is a tricky business. So I would say that despite some buzz from Apple Pay the bigger players have not made any significant impact on the payment ecosystem or the mentality of the consumer. I would say that TFL and Uber are probably the most significant protagonists in the payments space. Ironically neither is a payments player but with TFL I believe they have catalysed contactless card use and it is now increasingly ubiquitous. Uber have adopted a new consumer service with embedded payments and in so doing changed consumer behaviour. Both of these still use the traditional card payment “rails”and it will be interesting to see if anyone can break through with an alternative model! The MNOs seem to have blown that chance but I would say “watch this space".

The payments industry needs the big companies to invest in new concepts and the market as a whole, helping to raise awareness and interest. All initiatives combine to reduce the relevance of cash and whilst the mobile and digital environment do face the new challenges of cybersecurity there is a huge amount of attention on it from the financial services industry and this is probably the key area where collaboration makes most sense. There is definitely nothing to say that the new digital payment initiatives are less safe than a pocket full of cash or leaving your credit cards lying around! Yes there are some unique things in the card and customer not present world but as I say, I believe the industry is on the case, making developments and in an international context the UK is really not too bad.

It is very challenging for the large players (primarily the banks) to provide targeted services as they are committed to largely supporting their overall mobile banking strategies and they need to provide a service for every type of consumer. The focus of the large players on providing “something for everyone” paves the way for startups like Payfriendz to concentrate on being efficient and create an engaging customer experience for specific segments. There are some challenger banks but they are embryonic and their focus is banking not payments. Banks such as Barclays with bPay are experimenting with formats and looking at how they need to evolve their offer but I wouldn’t consider these as "revolutionary” and they are unlikely to have sufficient weight behind them to change consumer behaviour. At Payfriendz we will aim largely at P2P with marketing and chat functionality in what we believe to be the most readily adoptive segments. One of the things we have learnt is that it is rather futile to try and “teach consumers a use case”. This was also corroborated by some discussions I have had with people working on one of the major UK bank payments initiatives for this year. So we will focus on promoting our product/service and putting it into the hands of significant numbers of very smart millennials. Then let’s see what they make of it. I think it will be something.

Howard Allen, ‎CFO & Development Director at Payfriendz

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