How much cash do you have in your wallet? If you’re like most people these days, you carry around little- to no cash anymore.
According to a survey from U.S. Bank, roughly half of consumers surveyed keep less than $20 on hand, and 76% keep less than $50. The instances where they spend this cash appear to be shrinking as well, with 46% claiming they use cash fewer than eight days each month, and 5% saying they never use it.
The U.S. Bank survey uncovered a number of additional insights:
- 48% of men have used P2P apps in the last six months vs. 38% of women.
- When using cash, consumers prefer to spend it on dining (36%), travel/transportation (15%), parties (14%), and family functions (14%).
- When using P2P digital payment networks, consumers surveyed prefer to pay for bills (51%), items from another person (40%), gifts (35%), and concerts (8%).
- 73% of previous P2P users participating in the survey reported being more likely to use a P2P service if payments are secure and backed by a bank, and 78% reported they are more likely to use a P2P service if they can access funds almost immediately.
These trends will only increase as more and more consumers adopt mobile wallets and make digital payments. And with the growing consumer preference for digital payments, it’s not surprising that the number of digital payment platforms on the market has exploded. There are already dozens of established providers around the world — mobile wallets like Apple Pay, Google Wallet, Samsung Pay and Android Pay; P2P platforms like PayPal, Venmo and Square Cash; mobile card readers like Square and Shopify.
But what about cash? Hasn’t cash always been convenient and secure? With digital payments on the rise, the use of cash is definitely on the decline. According to a study from Accenture Consulting, 67% of consumers used cash regularly in 2015, but that had dropped to 60% only one year later. By 2020, even fewer consumers say they expect to have cash on hand regularly. This means a big opportunity for mobile payment platforms, who will likely surpass all other forms of payment in the not-so-distant future.
When making digital payments, consumers can instantly track and monitor purchases, see rewards balances and discounts — something they simply can’t do with cash. Additionally, as consumers increasingly live their lives in digital channels, it only seems natural that the use of digital payment platforms would be a part of that transition.
Paying the sitter. Splitting the check with friends. These used to be major inconveniences which often required a trip to the ATM, getting the right amount of change, or (ugh!) writing a check. Now people can make P2P payments simply by tapping a few buttons on an app. In fact, 32% of Millennials say they have used their mobile phones for peer-to-peer (P2P) payments, compared to an 18% average for other groups.
While Millennials are using digital payment platforms, they’re not the only ones. According to Accenture, 56% of consumers say they are aware that there are technologies that allow them to use their phones to pay. Millennials and Mass Affluent consumers (those with an income of $100,000 or greater) are leading the way. The interesting thing about Mass Affluents is that they aren’t one based on age, as are the traditional generational segments (i.e. Baby Boomers, Generation X, Millennials and Traditionalists) but rather based in income and wealth. That shows us that income level and wealth can affect the use of digital payment platforms in addition to generational segments and age.
Increasing Adoption Rates of Digital Payment Platforms
Digital banking users who are actively engaged with services such as digital payments and person-to-person payments are loyal and valuable customers. Increasing adoption rates for those not using these platforms should be a key initiative for retail banking providers.
For those consumers who have yet to join the digital payment revolution, the key driving factors for adoption will be awareness, an enhanced customer experience, access to bank accounts and payments, joined with with rewards, loyalties and discounts. In other words, they have to know it exists, it has to be worth their time and provide benefits beyond traditional payment methods.
So does this mean the end of cash completely? Perhaps, but not any time in the near future. To totally replace cash, consumers will have to rely on digital payment platforms for 100% of their transactions. And that requires the retailers and financial institutions/digital platform providers to all work together to allow 100% of transactions digitally.
In the meantime, for financial institutions and digital payment platform providers, it’s all about awareness and adoption. The more consumers that are using these platforms, the more merchants will accept digital payments. And when that happens, digital platforms may actually be in a position to take over cash payments for good.