Retail payments are increasingly diverse, involving a growing number of variables: the value, the frequency, the actors involved (business, consumer, and administration), the spending category, the channel used, the device, etc. The result is a complex matrix of transaction types.
At the same time, payment instruments are growing increasingly specialised, dedicated to a specific channel such as online payments, a specific spending category such as travel, or a specific merchant. In London, the Oyster card has been introduced for electronic ticketing on public transport; it has been designed to reduce the use of paper tickets and phase out cash transactions. It is a stored-value card which can be loaded online, at payment card terminals, or with cash. In June 2013, it was revealed that nearly £100 million of passengers’ money is lying on dormant cards9
. Similarly, dollars loaded on Starbucks cards totalled $1.4 billion in 201410
. Other instruments are used specifically for online payments or for peer-to-peer transactions.
Cash on the other hand can be used for a broad range of transactions. Numerous consumer payment surveys have shown that cash is widely used for low-value transactions. In the US, according to the 2012 Consumer Payments Diary 11
(see below), 66% of transactions under $10 are settled in cash. But 9% of transactions over $100 are also paid in cash. Looking at spending categories, cash is the first or second most widely used instrument for all categories except housing-related items.
Cash is widely used in traditional channels such as face-to-face payments in a shop, or person-to-person payments, but is also widely used for other transactions.
According to the World Bank, remittances – international money transfers often initiated by migrant workers – totalled $582 billion in 201413
, involving some 232 million migrants. They represent an essential source of funding for developing countries and are three times larger than official development assistance. Remittances rely largely on cash which is used at one or both ends of the transaction: cash-to-cash, account-to-cash and cash-to account amount to 56% of transactions as illustrated below. Cash products are also one of the most cost-effective ways to send money.
Cash is also widely used for consumer-to-machine transactions. In Europe alone, 3.77 million vending machines generate an annual turnover of €11.3 billion. The majority of these machines accept cash.
Cash is also used for online transactions. In 2012, the world’s largest retailer, Walmart launched ‘Pay with Cash
, which enables its customers to shop online and pay with cash at stores. “Our new ‘Pay with Cash’ offering makes it easier for our customers to shop the way they want, where they have access to a broader product selection at Walmart.com coupled with the convenience of payment and shipping as they want.” said Joel Anderson, president and CEO of Walmart.com. In the UK, according to research from online payment services provider, Ukash15
, one third of online shoppers would prefer to use cash when buying from websites. And 18-24 year-olds are the most likely to want to pay with cash online, with 52% of this group saying they would prefer this method. In India, the taxi-hailing application, Uber offers users the option to pay in cash16