With recent news about the collaborative engagement of two giants within the payment industry, PayPal and Visa, made big news in July 2016. The news was perceived as ground breaking, bringing the focus of payments to a more seamless and digital process. On the one hand, PayPal is trying to tap itself into the lives of its customers, and the normal people around the world. According to PayPal CEO Dan Schulman, he is aiming to be closer with the customers, and make PayPal not just a tool for online shopping, but a payment system for their daily lives, potentially serving between 2 and 3 billion people outside the normal banking system (http://www.cnet.com/au/news/why-paypal-ceo-dan-schulman-sees-itself-as-the-future-of-payments/).
Although this sounds very ambitious and somewhat as an overstatement, one has to consider that PayPal’s competition is growing ruthlessly. With the more recent developments in smartphone technology, including NFC, as well as mobile wallets and contactless payment methods, PayPal needs to advance its business in order to keep up with the fast changing environment within the payment industry. Companies like Apple, Samsung and others, creating new ways for customers to pay, making not only the lives of traditional banks more complicated. However, traditional banks are not ignoring the evolving trend of digital payment methods. In 2015, some of the major banks, about 55 worldwide, started supporting mobile device payment methods, pushing the paradigm shift within the payment industry even further (http://www.forbes.com/sites/kevinanderton/2016/04/29/mobile-payment-and-the-future-of-money-infographic/#2a0e9d8a1e30).
As smartphones become more spread around the globe, especially emerging economies developing rapidly in terms of smartphone owners, new digital payment methods via smartphone become more commend and interesting to invest in.
What does those trends imply for us the common customer? Will cash suddenly disappear? Most certainly not, as it is still a secure way to pay and still common in many countries within the EU. However, innovations in technology and also the payment industry itself pushing the issue, also supported by governments. Looking to our European neighbors Sweden, Denmark and Norway, one can see how far the digital payment has already come. As a leading example, Sweden marches on towards a cashless society, reducing its outstanding Swedish krona from just over 106bn to 80bn in just 5 years from 2009 to 2015 (https://www.theguardian.com/business/2016/jun/04/sweden-cashless-society-cards-phone-apps-leading-europe). Even more impressing, cash transactions only make about 2% of transferred value. Banks no longer accept cash deposits or even have cash within their local branches.
All in all, these trends are showing us what our future will look like. Will it be completely cashless soon? This is somewhat to be unlikely. Nevertheless, cooperation’s within the payment industry, advancing technology, and non-traditional banking and payment companies starting to tap into the process of paying your goods, not just online, will push the traditional payment industry as we know it now and will reshape it and our way of paying in the future.
References:
http://www.businessinsider.com/payments-ecosystem-report-future-opportunities-2016-3
http://www.cnet.com/au/news/why-paypal-ceo-dan-schulman-sees-itself-as-the-future-of-payments/
Hi Moritz, thanks for sharing this topic. In my opinion, as the technology continues to advance, a cashless society will finally become the reality, but not soon. For now, it’s still difficult to persuade Dutch or German people to use credit payment in their daily lives because they still think cash/debit card is the most reliable payment method. Thus it’s a bigger challenge to convince them that cash isn’t worth holding. The digital payment system, without doubt, would make money flow much easier faster and cheaper, and that’s why companies like Apple are keen on creating mobile payment system.
Also, banks have to keep a cautious eye on the evolution of the digital payment. ING launched BLIK in Poland which enable users to pay in shops or withdraw cash from ATMs without a bank card (https://www.ing.com/Newsroom/All-news/No-card-No-cash-No-problem-Lets-pay-lets-BLIK.htm).
Due to the proliferation of mobile payment applications like Alipay or Wechat Payment, Chinese people can leave their house without wallet. They can almost make all transactions through mobile in their daily life, such as hail a taxi, buy street snacks, go shopping, pay utility bills. A huge number of businesses in various industries accept the digital payment method. Although cash is still used heavily, more and more people are pleased with the cashless and cardless life. It may already partially show how our future will look like.
References:
https://www.cryptocoinsnews.com/future-look-like-without-cash/
http://www.bbc.com/future/story/20150724-the-truth-about-the-death-of-cash
http://www.chinadaily.com.cn/business/2016hangzhoug20/2016-09/01/content_26665879.htm
Paypal is trying to catch up but they kinda lost already. They’re too expensive (3,4% + €0,35 for business users) and too untrustworthy to be a real competitor, because Paypal payments are revokable (http://nypost.com/2016/06/13/be-careful-of-this-paypal-scam/). Next to that Paypal tries to scam you by using purposely wrong exchange rates when paying in other currencies than your balance: http://lifehacker.com/5957808/avoid-paypals-high-international-currency-exchange-rates-by-switching-one-little-option.
Internet killed the middle man. Paypal is that middle man in between you, your money, and the seller. They served a purpose in the past, but are now becoming more and more irrelevant, due to websites introducing their own payment platform such as Alipay at which you can even pay with iDEAL.