When Will We Be Able to Say That Cashless Payments Have Finally ‘Arrived?’

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paying through smartphone using NFC technology

Propelled by increasing adoption of mobile payments, 2015 was a year that added a great deal of fuel to the already warming fire of cashless payment adoption. The ubiquity of smartphones, new payment technology platforms and ease of use have clearly caught the eye of many technology innovators and consumers, not to mention businesses who otherwise would have remained cash-based. But why is this the year to pay attention? Why now are companies and consumers alike not only poised to benefit from cashless payments, but ready to take them mainstream?

Reason #1: Muscle
While mobile payment technology introduced by Apple Pay and Google Wallet certainly brought cashless payments front-and-center in the past, Paypal‘s recent successful IPO and the IPO announcement from Square (in the midst of a tech IPO drought) demonstrate that not only is there interest, but opportunity in mobile and cashless payments. Further, USA Technologies has seen an increasing number of customers choosing to adopt cashless technologies — including NFC/mobile — on 100 percent of their unattended machines, with Q4 connections to its ePort Connect cashless payment service up from 25 percent from the same quarter last year. Couple that with Samsung Pay throwing its hat into the ring, and banks and credit cards making frequent announcements on mobile payment capabilities, and it’s clear that lots of big players are working on ways to get in.

Reason #2:  They’re Everywhere!
Almost everyone who has a smartphone can buy something with it, and actual retail usage of mobile payments has been growing steadily. According to the most recent Consumer and Mobile Financial Services survey put out by the Board of Governors of the Federal Reserve System (Governors Survey), in 2014, 87 percent of the adult population in the U.S. had mobile phones — and of those, 71 percent were smartphones (up 10 percent from the previous year). And while Aite Group reports that mobile payments account for only one percent of all retail transactions in the US., with Apple Pay reporting double-digit growth in transaction month after month during its fourth quarter conference call in October, it is clear that a growing population of smartphone users is becoming more comfortable using their phones for purchasing.

Further, according to the Governors Survey, 22 percent of all mobile phone owners reported having made a mobile payment in the 12 months prior, and 39 percent of all mobile payment users with smartphones had made a POS payment using their mobile phone in the 12 months prior. And that was before Apple, Google and Samsung were even playing.

Reason #3: Purchasing Power
When people buy without using cash, they buy more and they spend more. According to the results of our own 2015 Knowledge Base Study which culled from a dataset of 100,000 cashless vending terminals, consumers are spending, on average, 32 percent more when they pay with a card versus cash on small-ticket purchases. Further, they are choosing goods with a higher price point. On average, when consumers made a purchase using a cashless payment method, they would spend $1.21 when buying with cash, versus $1.60 when buying cashless — a 32 percent increase. And cashless sales were up 28 percent over last year on an average. This equates to higher purchase power from the consumer, and an opportunity for higher revenues for businesses. The jury is still out on the “mobile effect” on sales, but machines with a higher percentage of mobile payments activity appear to be better-performing machines overall.

Reason #4: Consumer Engagement
Cashless payment tech lets companies get to know their customer with data unavailable through cash-based purchases.This provides a valuable window into understanding each consumer’s purchase behavior and preferences, and an opportunity build smart programs that encourage brand loyalty and create return customers, driving recurring sales.  According to Consumer Insights Group, 54 percent of consumers will increase business with a company for the rewards, and 70 percent of total sales can be represented by loyal customers. With the cashless payments infrastructure in place, it’s loyalty programs are sure to follow suit with tailored programs impossible for businesses that only accept cash.

We’ve seen growing interest with our own loyalty program, MORE™, where consumers can earn cash back rewards on their point-of-sale purchases, access exclusive offers and promotions and find valuable product information and locate their favorite brands at a locations they frequent, and recently announced we’ve opened up the program to consumer product companies and retailers nationwide.

Reason #5: Target Practice
Every person carrying a mobile phone presents opportunities for businesses to increase sales, drive up price points, and build repeat purchases. And with advanced technology platforms making it easier for businesses and consumers to interact in a cashless world, adding cashless has never been easier and more lucrative.While data is still rolling in, Deloitte predicted that by the end of 2015, five percent of the base of 600-650 million NFC equipped phones will be used at least once a month to make contactless in-store payments at retail outlets, compared to .5 percent  as of mid 2014. Further, Deloitte expected NFC-smartphone transactions and range of spend value to increase steadily over time as consumers become more familiar the process, more banks and merchants in more markets accept this form of transaction.

Cashless and mobile payment technology may still feel like “early days” for many businesses, but if we consider the transition from in-store banking to ATMs and online banking, it didn’t just happen overnight. People of a certain mindset may always feel more comfortable saving their money under their mattress, and keeping cash in their pockets. However, as Gen X, Y and Z embrace the convenience and ease-of-use brought by cashless technology — particularly technology driven by mobile payments platforms — and smart businesses tap into the growing momentum by matching usage with cashless technology and loyalty programs, tomorrow may be sooner than you think.

2016SMaeve-McKenna-DuskaMaeve McKenna Duska is Senior Vice President of Marketing for USA Technologies (USAT), the leader in wireless, cashless payment and M2M/Internet Of Things (IoT) solutions specializing in the small-ticket, self-serve retailing industries.