Increasing digitalisation and financial inclusion power shift away from cash

Increasing financial inclusion efforts, the rapid uptake of contactless and mobile offerings and new payment systems are contributing to growth in cashless payments worldwide, according to RBR.

Its new study reveals that in 2018 the number of cashless payments grew by 18% to reach 784 billion. Payment cards and credit transfers were the greatest contributors to this growth, with direct debit payments increasing by just 6%.

Cheques continue to fall out of favour, and declined by 7%, dwindling in most markets as consumers and businesses alike move to digital. The number of cashless payments is growing much faster than expenditure, indicating a shift from cash to cashless for ever-lower amounts, while the number of cash withdrawals at ATMs fell for the first time in many years, by 3%.

Cards account for 57% of cashless payments. The uptick in payment card spending can be attributed to more people entering the banking system as a result of financial inclusion efforts – such as in India and Indonesia. Additionally, increased issuance of contactless cards, for example in China, where all newly-issued cards must be contactless, is driving card usage, boosted by rising numbers of EFTPOS terminals which accept such cards.

$1.2 quadrillion was spent via cashless payment methods in 2018, up 6% on the year before. While cards saw the highest growth in expenditure, they account for just 2% of cashless spending, being typically used for everyday, low-value payments.

Mobile payments, popular particularly in areas with high smartphone penetration, are contributing to growing card usage for lower value transactions, for example on public transport. Credit transfers, meanwhile, retain the lion’s share of cashless expenditure, at 85%.

New alternative payment methods abound, for example in Russia where the Faster Payments System introduced in 2019 allows consumers and businesses to make instant funds transfers via mobile phone numbers and QR codes. Such initiatives, combined with rising levels of e-commerce which increasingly drive card payments and credit transfers, indicate that cashless payments have yet to peak.

RBR’s Daniel Dawson comments: “With increasing digitalisation and more people entering the formal banking system, there is still plenty of potential for cashless payments. The shift away from cash is likely to continue over the coming years as e-commerce rises and consumers opt for convenient alternative payment methods.”