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Mastercard Europe President Javier Perez


The king is dead, long live the king. According to President of Mastercard Europe Javier Perez, cash is no longer king in society and electronic payments will effectively dethrone it as the main method for financial transactions in just a matter of years.

It may come as no surprise that a senior figure at one of the world’s largest plastic card issuers has this view, but all the evidence points towards a speedy progression towards at least a predominantly cashless society in the not-too-distant future.

A world without physical money altogether is an unlikely scenario, but the advent of mobile technology and recent trends reported by bodies such as the Payments Council would suggest that cash is no longer the choice of the majority.

“There is a perfect storm coming together that should accelerate the adoption of electronic payments,” Perez explained to Retail Gazette.

“I do believe we will see the elimination of cash over time. I think it will accelerate, but whether we will see the complete disappearance of cash remains to be seen.”

Arguably, the retail industry will feel the impact of these changes more than most.

Payments Council research indicates that cash was replaced as the consumer’s payment method of choice for the first time ever in 2010, and by the end of the year £26 billion more was spent on debit cards than in notes and coins.

This margin has continued to widen in 2011, but soon it could be smartphone payment fuelled by near-field communication technology that dominates the transactions landscape, argues Perez.

“New technologies are lowering the cost of electronics payments,” he added.

“Retailers will not need an expensive terminal because they will use mobile devices to make payments.

“The cost of accepting payments will be reduced considerably in the next three to five years.”

There is an argument that the use of mobile as a payment method will be primarily reserved for the younger generation, and indeed Mastercard’s own research into m-commerce last month focused on this demographic as the source of its answers.

Its study found that 64 per cent of 18-30-year-olds in the UK regularly use their mobiles to access the internet, 30 per cent frequently use their handsets to do their online grocery shopping and that the mobile phone is the new “shopping buddy for young people”.

Does this mean the baby boomer generation and their elders will continue to use cash, and only tentatively dabble with new technology in its various formats when it comes to everyday transactions?

“Smartphones are being deployed very quickly, and phones – at least in Europe – get replaced every three years or so and have a very short lifespan,” Perez stated.

“You can assume in the next few years that 80 per cent of the population will have a smartphone.

“What this means is that it will be extremely simple to use a card on these phones, whether you are in the physical world or the mobile space.”

His figures add up, with many telecommunications firms already reporting that around three-quarters of new contracts are for smartphones, and traditional handsets make up a much smaller share of the market.

Both consumers and businesses are expected to benefit from the advent of mobile technology; the former from quick and convenient purchase options and the latter in numerous ways, such as money-saving and through data collection.

In an age of austerity when it is rare to go more than a week without another retailer or other business blaming the current economic environment for impacting their bottom line, cost-effective solutions are very much a la mode. And as Perez points out, it is “very expensive” for firms to be handling cash.

And even though plastic and electronic payment options such as Tesco Clubcard and the Boots Advantage Card have acted as pocket-sized data munchers for some time, new payment options being put on the table will further satiate retailers’ hunger for more data about their customers.

Indeed, Perez expects that many of the customer relationship management tools it has helped introduce with airlines such as Lufthansa, including queue-busting cards and loyalty schemes, will soon become more ubiquitous on the high streets and shopping malls of the UK.

“Historically we have associated plastic with banks – three years from now you will associate it with retail,” he said.

“Plastic is much more useful to a retailer than a banker because of many of the things I have described. From a retailer’s standpoint this is where the future lies, this is where there is evolution and we see real progress.”

So even if the way retailers use new plastic and electronic payment technology in the future is still not perfectly clear, what is certain is that there has been a huge shift in payment processes in the UK and across Europe.

As Perez states: “The old saying cash is king is no more; electronic payments will be king in a very short period of time.”

Published on Wednesday 19 October by Editorial Assistant

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