In Europe, several companies are developing a strategy to integrate cash as a payment method for online transactions. A review of these solutions by Gabriel Lucas, Associate Director at Redbridge.
Despite multiple payment innovations, the majority of transactions in Europe continue to be settled, for the most part, in cash, and mainly for low-amount purchases. At the end of 2017, the Eurosystem published a report entitled “Study on the Use of Cash by Households in the euro area”. It showed that cash was the most widely used payment instrument by individuals in the region, accounting for 79% of purchases made in-store and 54% of total payments. Bank cards were used in 19% of transactions, and accounted for 39% of the total value of payments.
Germans are among the most attached to using cash in Europe, with about 70% of their transactions settled using that means. At the other end of the spectrum, the Nordic countries have been seeing a trend toward a cashless society for several years. France has around 68% of transactions using cash, and has experienced a 5% decrease in the use of bank notes over the past five years.
Use of cash
Among the reasons behind the use of notes are the instantaneousness of the transaction, the absence of intermediaries, the notion of anonymity and the possibility for the most vulnerable among us to access means of payment.
In terms of the average shopping cart, the use of cash is being increasingly pigeonholed for very small payments following the arrival of contactless card payments and e-wallets such as Apple Pay and Google Pay, which make low-amount payments very easy.
Sweden has just passed a law, which will come into force in 2021, to preserve cash as a means of payment. Banks with deposits of more than SEK 70 billion will be obliged to offer cash withdrawal services to consumers, and withdrawal and deposit services to businesses. Penalties will be applied for non-compliance with this rule.
The United Kingdom is also planning a law (with no specific date for it to come into force) to regulate the availability of cash. Away from Europe, New York has just banned retailers from refusing cash payments.
France is particularly demanding in relation to the acceptance of cash. It requires retailers to accept cash payments, which is the only mandatory payment method. The French insists that “refusing cash payments represents discrimination that deprives many people of access to essential products: these people include protected adults, people in a situation of economic vulnerability, such as the elderly, people who receive minimum social benefits, homeless people, or unaccompanied minors and asylum seekers without payment cards”.
Cash in online transactions
According to a poll, 96% of French people have made at least one purchase on the Internet. In addition, even if cards remain the preferred payment method, more than half of French people confirm that they would be interested in the possibility of paying for their online purchases in cash if this option was offered to them.
Spain and Italy are also very much in favor of this practice: 78% of Spaniards and 74% of Italians surveyed said they would like to use cash payments when making online purchases if the option was offered. Another sign of conviction with regard to payment in proximity is that 60% of Italians and 54% of Spaniards surveyed would be willing to pay their regular bills in cash at a local business near to their home or workplace. These figures compare with 42% in the UK and 36% in France.
78% of Spaniards and 74% of Italians surveyed said they would like to use cash payments when making online purchases if the option was offered. Another sign of conviction with regard to payment in proximity is that 60% of Italians and 54% of Spaniards surveyed would be willing to pay their regular bills in cash at a local business near to their home or workplace.
One of the main reasons for using cash for transactions triggered online is the risk of fraud (50%) and having a payment by credit card refused (24%, of which 70% confirm that they have abandoned an online purchase due to a payment being refused). In addition, the current pandemic has significantly increased e-commerce figures for essential supplies. Purchases of such goods have increased by 48% since the start of the crisis, and this figure remained stable even after lockdown measures were eased (Source: Signifyd).
Although the practice is still relatively unknown in Europe, “phygital” payment is a very common practice in other regions, particularly in Africa and Latin America. In these regions, the low rates of use of the banking system, a historical attachment to cash and the many transactions made from abroad (payment of bills and money transfer in particular) make this payment method a must-have for online transactions.
In Europe, several companies have already developed a strategy to integrate cash as a means of payment for transactions initiated online.
This is particularly the case with Amazon, one of the first companies to take into account its customers’ desire to use cash. In 2017, Amazon launched “Amazon Cash” in Europe. This service enables Amazon users to credit their cash account at a nearby point of sale. All users have to do is go to a partner point of sale and either have the retailer scan a barcode, or request a recharge code that is printed on a receipt and can be manually added to the Amazon account. Once the payment has been validated, the Amazon account is credited in real time, free of charge. The amount to be credited can be between €5–500 per recharge.
Uber has also just started offering two ways to pay in cash. The first is simply to offer consumers the opportunity to pay for their journey in cash in the car, as with traditional taxis. To do so, they need to select this payment method before booking the taxi as this service is only offered in certain cities and by certain drivers. The second option is to pay using the Uber Cash service. This service enables users to add funds to their Uber account before the journey. Among the main benefits of the latter approach, Uber highlights the fact that users are able to plan their expenses and be sure that they are able to pay at any time in the Uber ecosystem, without having to worry about problems such as expired cards, overspending on an authorized overdraft, or having insufficient funds.
Neobanks are among those that want to integrate proximity in the digital world. For example, N26 has launched an online-only service and now offers its customers the opportunity to recharge their current account in cash at local points.
A use case that enables most merchants to optimize the online sales journey, and thus generate additional income, consists of proposing proximity payment following the failure of a bank card payment. According to IFOP polling institute and numerous studies conducted by various PSPs and other experts in this field, more than one in two customers who encounter a payment failure during an online purchase do not renew the transaction and choose a competitor instead. With proximity payment as an alternative if unsuccessful, merchants can give customers another chance to pay in-store in cash or even by bank card. Moreover, this payment is guaranteed for the merchant because it is non-repudiable.
Billing services companies also have a strong interest in integrating cash into their strategy, regardless of the type of activity, such as energy providers, housing companies, public administration or telecommunications. Using a barcode or QR code on the invoice, customers can go directly to the point of sale and pay in cash or with any other payment method accepted by the merchant (such as a bank card). In this way, invoice clerks can significantly reduce the workload of their customer services department while improving the customer experience, especially given the number of points of sale available and their opening hours.
Finally, proximity payment increases the chance of obtaining payment from a customer. Indeed, offering proximity payment enables customers to pay even if they do not have money in their account or if they do not wish to use their bank card on the Internet. This can help not only to optimize recovery, but also to reduce the number of payments made by, for example, telephone, or sending a check.
Read our new Payments Report – Shifting to faster payments
Redbridge’s 2020 Payment Report is a source for trends and insights into today’s dynamic payments environment. This second edition presents how various stakeholders position themselves in the payments industry and explores topics related to innovative payments, instant payments, e-commerce and fraud mitigation.
Contributions from treasury practitioners, bankers, payment service providers and vendors are coupled with in-depth analysis from our treasury consultants.
Included in our review:
- Analysis: An overview on the future of payment
- Analysis: E-commerce, a strategy to maximize sales while limiting fraud
- Instant payment survey with banks, vendors and PSPs
As well as our interviews with:
- Michel Yvon, Decathlon
- Charles Lutran, Criteo
- Isabelle Olivier, SWIFT