Time to embrace a digital future

12/14/2015

Black Friday may have been lacklustre on the High Street, but it broke all records online. According to Experian-IMG, UK online shoppers spent a record £1.1 billion on Friday the 27th of November, 36% more than last year.

Black Friday may have been lacklustre on the High Street, but it broke all records online. According to Experian-IMG, UK online shoppers spent a record £1.1 billion on Friday the 27th of November, 36% more than last year. This milestone is testament to UK shoppers' love of a bargain and the ease and convenience of armchair shopping with a credit or debit card.

It is not only online that customers are flexing the plastic. Cash might still be king on the High Street but, according to Payments UK, it won't be for long.

In a new report, UK Payment Markets 2015, the trade association for the payments industry predicts that next year (2016) the volume of non-cash payments made by consumers will exceed cash payments for the first time.

Over the next 10 years, Payments UK expects the average number of annual cash payments made by an adult consumer to fall by about one third, from 345 to 225, and the number of debit card transactions to rise from 172 to 282. Over the same period, the number of cheques written will go down from 7 to 2.

For obvious reasons, the transition from cash to electronic payments is much more advanced in the business world. In fact, when you consider business and consumer transactions together, we have already passed the point at which cashless payments outstrip cash ones. That happened in July 2014.

Big retailers, banks and the Government all want us to give up using cash and switch to electronic payments – and are using both carrot and stick to encourage us to do so, from the higher £30 contactless payment limit to reductions in the number of free cashpoints.

For banks and retailers, cash is expensive and time-consuming to handle, a security risk and non-traceable – in an age of big data, electronic transactions provide an important link to the consumer that can be mined for competitive advantage.

A cashless society is attractive to Governments, too, with the traceability of electronic transactions potentially leading to increased tax revenues, less criminality and a smaller black economy. In September, Andy Haldane, chief economist at the Bank of England, suggested that abolishing cash would give central banks more power to stimulate growth by charging negative interest rates. Without the option to convert bank deposits into cash, he argued, consumers would be forced to spend or see their savings shrink.

Many of cash's shortcomings apply equally to the documents that businesses rely on for trading purposes, notably invoices. Printing, posting and following up hard copy invoices is expensive and time-consuming; they can be lost in the mail or, more likely, in recipients' internal workflows; resolving disputes takes longer with paper invoices that need to be retrieved from filing cabinets and perhaps circulated to a number of individuals; and paper-based processes make it harder to track, trace, monitor and analyse invoices and payments.

Unlike Mr Haldane, businesses don't have to tolerate the inefficiencies of an analogue system. By adopting e-invoicing, they can replace printed invoices with electronic ones that lead to faster payment, fewer disputes and reduced processing costs.

Consumers might still use cash and, no doubt, it will be many years before a contactless payment card is stirred into the Christmas pudding on Stir-Up Sunday. But for businesses, there is no advantage in persisting with out-moded systems just for the sake of tradition.

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