Consumers Are Using Cash Less — And That’s a Good Sign for Digital Marketers

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Screen Shot 2014-05-20 at 5.48.30 PMThe mobile payments sector has stumbled recently, but one innovation — the dongle — appears to have made a lasting impact. A new report finds that consumers are turning away from cash in favor of credit and debit cards more than ever before, due in large part to the rampant adoption of mobile payment processing tools like Square by small, and often mobile, businesses, which have traditionally be unable to accept card payments.

The report, released yesterday by Javelin Research, found that in-store cash sales in the U.S. dropped from $874 billion in 2012 to $788 billion last year — a 10% decline. Over five years, the research firm expects consumers to spend $100 billion less with cash in-stores, opting instead to pay using credit and debit cards due to the growing ubiquity of credit card acceptance. The company also expects that cash will account for less than one-fifth (19%) of total in-store retail spending for the first time ever this year.

The decline of cash is a critical driver for the local technology ecosystem. The long-term value of local marketing and commerce software stems from its ability to pass and collect information seamlessly throughout the entire consumer purchase process. The more consumers rely on a data-driven payment environment (e.g. any service that relies on an exchange of information, not physical material) the larger the addressable market for local marketing and commerce software becomes.

The existing payment infrastructure is not perfect — but it’s good enough. The card payment networks, though exceedingly closed and complex, process payments by transferring information, which means the infrastructure to create a layer of transaction data is in place. Meaningful investment in alternative payments models will likely force the existing payments industry to innovate, and address the plenitude of issues that make working with these networks a challenge.

Steven Jacobs is Street Fight’s deputy editor.