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Cash has tumbled from its traditional spot as consumers’ top-of-wallet payment choice at the retail point of sale, overtaken by traditional debit and credit cards, according to a recently-released study that underscores for merchants and service providers the importance of being able to accept credit cards and other forms of electronic payments.
The latest report by Javelin Strategy & Research crams its most salient points into its title: “2012-2017: Retail Point of Sale Forecast: Cash is No Longer King; Cards and Mobile Payments Likely to Rise.” The report is based on an online survey of more than 3,200 consumers conducted in 2012.
It concludes that while cash remains the most widely used payment method, debit cards have garnered the largest share of the retail point of sale (POS) market by purchase volume, followed with a fractionally lower share by credit cards. However, the report speculates that the improving economy will continue to drive a revival in credit card use that will drive the retail POS share of credit cards to match the market share of debit cards by 2017.Furthermore, Javelin predicts that debit and credit cards will continue to dominate market share, pulling even more dollar volume from traditional paper-based payment options (namely cash and paper checks).
It adds that the shift in consumer use of credit cards, debit cards, cash, paper checks, prepaid cards, gift cards and mobile phone payments will continue through 2017, with mobile and prepaid cards emerging as two of the fastest growing payments options.
Prepaid cards in particular are becoming a hot commodity, especially among the underbanked and young consumers. “Financial institutions are investing in prepaid cards, which are becoming a more attractive option to consumers,” explains Javelin’s Director of Payments Research Beth Robertson in a prepared statement. “Unlike gift cards, prepaid card features and functionality have evolved to be comparable to traditional demand deposit accounts, providing consumers with more choices and greater flexibility.”
As for mobile payments, Javelin President Jim Van Dyke predicts they will remain in their infancy stage for at least five more years before their growth is propelled by industry-wide investments and the rising adoption of mobile phones and tablets by consumers. “Mobile payments could be a future game changer for the retail POS market,” he says in the statement, adding that merchants and financial institutions must rise up to meet the challenges and leverage the opportunities that exist in the changing payments landscape.