The increasing competition between payment systems had in 2020, the year of Covid-19, a loser, cash, and several winners, such as ‘contactless’ technology, or contactless. This is the main conclusion of the tenth edition of the 10th Report on Trends in Payment Methods, prepared by Minsait Payments, an Indra subsidiary. The study combines the opinions of more than eighty executives of the banking sector, with 4,400 surveys carried out to users, from southern Europe – Spain, Portugal and Italy-, the United Kingdom and Latin America.
This report, prepared in collaboration with Analistas Financieros Internacionales (AFI) and downloadable at this link, points out that 70% of Spaniards have decreased, or even abandoned, their use of cash as a result of the pandemic. Regarding the opinion of banking professionals, more people think that cash will disappear around 2040 (36%), than those who think they will not see that moment (33%)
Banknotes and coins suffered some stigmatization as a result of the pandemic, especially in its first months, when more attention was paid than now to contagion by physical contact with the virus and less to aerosols. 60% of Spaniards state that they have felt aversion to touching cash, a sensation that can also be extended to the use of the dataphone.
The other side of the coin is the increased use of ‘contactless’ payment alternatives; 78% of the population already uses contactless technology for payments at point of sale terminals, known in industry jargon as POS (for ‘point of sale’). It was one of three trends highlighted in the report, during its presentation, by Borja Ochoa, general director and global head of Financial Services at Minsait, together with the increase in transactions in e-commerce and the increase in the number of cards. “We are going to invest heavily in technology, betting on the ‘cloud’,” Ochoa announced in the face of the unstoppable global increase in financial transactions.
“Obviously, the protagonist of the year is Covid,” said Fernando Abril-Martorell, president of Indra, “which has accelerated trends that were already there. Very significant steps are being taken towards a cashless society ”.
The increase in electronic commerce is also pushing in this direction. 42% of Spaniards declare to buy online more frequently now, a significant percentage, but below the United Kingdom (44%), Italy (46%) and Portugal (47%). In Latin America this increase is more noticeable, with percentages ranging between 50% and 63%. The card continues to be the most common means of payment in online purchases – it is used by 85% of Spaniards -, followed by other options such as virtual prepaid cards, payments from accounts and P2P apps such as Bizum. Miguel Ángel Prieto, Director of Payment Solutions at Minsait Payments, highlighted how the average ticket for electronic payment has dropped, since “it is no longer ashamed not to resort to cash for small amounts, such as newspapers or bread.”
The presentation of the report tried to go beyond the analysis of what happened in 2020, which, in practice, means looking away from the effects of Covid. In a virtual round table, the trends that are already underway were analyzed, such as competition from large technology companies, collaboration with so-called ‘fintech’ and ‘neobanks’ or the progressive generalization of biometrics as an authentication method for the payments.
One of the aspects in which the speakers most influenced was the importance of the customer experience. “It is one of the lessons of these months from Covid, particularly with the ‘contactless’ technology: if you offer something new with better service and customer experience, it will end up being used,” said Enrique Álvarez, sales manager for Europe at Minsait Payments .
Lucyna Janas, Head of Alliances for Europe, Middle East and Asia at Google Play, also highlighted the importance of winning over the end user. “We have the experience, in all our products, that a technology is used if it makes life easier. Our goal in payments is the same as in any other activity: to find simple and effective solutions ”, he stated.
The panorama is becoming more sophisticated, in commercial and technological alternatives – for example, 42% of experts consider that blockchain will partially replace current payment methods – and also in competitors, with the arrival of large technology companies, such as Google itself , and the ‘fintech’. The key, they said at the table, lies in the collaboration of all stakeholders, given the difficulty of combining technological excellence with the strong regulatory requirements of the financial sector. And also the public administration can participate in this new collaborative environment in payments, as highlighted by Carmen Alonso, director of Visa Business Development for southern Europe.
It is not an easy task, but, from a business point of view, there are still niches to be exploited, such as those payments that, at least until before the pandemic, were considered almost exclusively the domain of cash. Using the card at the bakery or paying for the bus with your mobile is no longer an eccentricity, in the same way that we have become accustomed to masks or hydroalcoholic gel. Some day they will disappear from the day to day, but the changes in payments that the pandemic has accelerated do not seem to be reversing.
The digitization of financial activity opens up opportunities for long-time banks, but it also means competing in a more open field and in which not all the keys dominate. In payments, this new paradigm is already a commercial reality. “There are many changes taking place, very fast and profound,” José Maldonado Escudero, Santander Spain Merchant Services commercial and business development director, said at the round table, “and in the field of payments we must have a broader view. We cannot limit ourselves to managing payments with our clients’ cards, ”he said. Alternatives to traditional entities grow and grow, but, according to Verónica López Sabater, director of the AFI Foundation, the pandemic has slowed the process of multi-banking. The number of Spaniards who are clients of two or more banks fell three percentage points in 2020, to 45%. And the relationship with its main entity is stable: the average seniority is fourteen years.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.