Payments revolution forecast as cards take over from cash
Retailers are preparing for a major revolution of the way that customers pay for goods after new legislation comes into force next year, experts have claimed – as new figures showed that debit cards have overtaken cash as the most common form of payment in the UK.
The new European Union Payment Services Directive, which is to be introduced early next year and is likely to be adopted into UK law when Britain leaves the EU, will open up the world of payments away from cards and traditional bank-controlled methods, meaning that shoppers could pay using only a password or even biometric data, while retailers would save on hefty card charges.
The news came as the British Retail Consortium’s (BRC) annual Payments Survey revealed that cards accounted for more than 50 per cent of all retail transactions by volume for the first time last year – driven by customers increasingly using cards for lower value payments and a rise in contactless transactions.
Andrew Cregan, policy advisor at the BRC, said that Britain was still a long way from becoming a cashless society, but pointed to the increase in popularity of virtual wallets such as Apple Pay – and contactless card transactions.
He said: “We are definitely not in that space right now and any idea of cash becoming extinct is certinly over hyped.
“However, we might see new payment channels evolving, although we do not have any particular sight of those at the moment in what they will look like.”
He added that retailer reward cards may be one way that companies could use the new technology, which could see customers able to pay by giving some other form of authorisation such as biometric data or a password once the new laws open up access to a consumer’s bank account without a card through Payment Initiation Services.
Richard Koch, head of cards at UK Finance, said that it was forecasted that half of all payments would be done on contactless cards within the next decade.
He said: “There will be massive growth. It will also be potentially possible under the new legislation for a big retailer to introduce their own payment system which could be linked up with reward cards and which you could pay using your phone.”
The study said that retailers’ investment in payment technology has facilitated greater customer choice over how they pay for their goods both in store and online. It added that retailers still spent over £1 billion last year to accept card payments from customers.