Cashless society may have seemed a futuristic vision ten years ago, but new research from TowerGroup suggests that it may be a reality to come in a little as ten years from now.
TowerGroup's research report, The Cashless, Cardless Society: Coming Soon to a Paypoint Near You, suggests that a combination of market-ready and emerging technologies is already aligning to drive a majority of consumer payment transactions from cash toward other payment methods, including the internet, mobile phone-based, and contactless payments.
According to Theodore Iacobuzio, managing director for TowerGroup's Executive Research Office, "By 2015, a substantial share of consumer payments globally will have moved from cash to other payment mechanisms. Many of these new form factors are already being tested in broad consumer settings in countries around the globe - from contactless payment terminals and fingerprint recognition payments, to mobile and micropayment roll-outs."
Highlights from the research report include:
- Over time, TowerGroup believes payments will move increasingly toward a "pay-as-you-go" model, where consumers buy what they want wherever they are. But while payments will be made increasingly through clicks and texts rather than cash or even traditional plastic, the majority will still be fuelled by traditional bank relationships and run through established payments networks and infrastructure.
- TowerGroup expects the total market for micropayments in the United States to reach US$11.5 billion by 2009, with almost US$5 billion of that amount transacted via mobile phones. The global mobile commerce market is expected to become a major industry with revenues of US$50 billion to US$75 billion by 2009 - with global micropayments generating about US$40 billion in revenue.
- As payment mechanisms shift away from cash and traditional card forms, stronger authentication methods will become increasingly critical - particularly to move beyond micropayments in the mobile realm to allow the purchase of high-value items. TowerGroup expects to see aggressive movement in the financial application of biometrics authentication technology over the next 10 years, fuelled in part by government adoption.
- TowerGroup notes that financial institutions dismissing evolving payments models as quirky or meaningless to their current business strategies risk being supplanted by more nimble and far-sighted competitors. They must also consider the impact of non-traditional payments players, such as telecommunications companies looking to grow their share of the nascent mobile payments space.
Payment methods lose relevance?
Iacobuzio believes that, ultimately, control of the payments network itself will be more important than changes in the form factors of payments: "While certain non-traditional players may make headway in taking share of new payments mechanisms, we believe that the payments network as a whole will remain firmly in the grip of financial services institutions - although the definition of what constitutes such an institution is currently in flux."
The nature of the payment form factor should eventually be largely irrelevant to financial institutions, as long as they are willing to engage in innovative partnerships to keep up with both technology and consumer desires. But, Iacobuzio warns, those that ignore this issue could fall far behind.