CX Spotlight by Fifth Quadrant

Cash is (almost) dead. Long live mobile payments.

CAsh is dead - long live mobile payments!

The origin of cash can be traced back to the eighth century, when citizens of China's Tang Dynasty began to use what they called "flying money"(飛錢), due to its likelihood of being swept away in a breeze. 

Fast forward to today, and cash is facing a new challenge more fatal than wind: digital and mobile payments. In 2016, third-party payment services led by Alibaba (39% of the market) and Tencent (27%) grew to around USD$5 trillion in China, which is almost half of the country's GDP.  

From a customer experience (CX) perspective, the main advantage of going cashless is speed of transaction. The ability to pay for something with the tap of a card or a phone is a much more seamless experience. A recent study by Oracle asked over 15,000 consumers worldwide about their use of cash and other payment methods in restaurants and other food service outlets. According to the study, 84% of consumers say that fast, efficient service is the single most important factor when they visit a hospitality provider.  

“It is a fast-changing business world as mobile phones begin to dominate people’s life.”

“Cash is no longer needed in running the restaurant,” Lin Nianbao, a business owner told the South China Morning Post“It is a fast-changing business world as mobile phones begin to dominate people’s life.” 

On the business side, the benefits of higher customer satisfaction and faster turnover are clear. For Nianbao, who runs a restaurant with low-cost meals and high turnover of customers, time is money. He noted that switching exclusively to digital payments had improved his restaurant's revenue by 10%.  

Another aspect of CX enhanced by digital payments is personalisationDigital payments offer the opportunity for companies to harvest data on consumer preferencesThe apps collected a big amount of data through the payments and they know exactly who our customers are and what they want,” Nianbao said. 

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Although China is leading the way, the trend towards a cashless hospitality industry is prevalent across the world and particularly among people aged under 35 in the Japan and Asia-Pacific (JAPAC) region. 

In the same Oracle study, only a third of global consumers said that cash will definitely still be used in hospitality by 2022. Meanwhile, just over a third said that cash would disappear completely and just under a third were neutral. Over half of the respondents (54%) reported that they plan to use cash less in the next five years and just under half (47%) expect to use mobile payment and digital wallets more.  

One of the assumptions about switching to digital payments is that age is a major factor. People assume that digital payment is something for Gen Zers or Millennials and that Gen Xers or Baby Boomers will be less likely to relinquish the use of cash. However, the Oracle study found that there was minimal age variation for digital payments. Across the board, around half of respondents said they'd use cash less, with 49% of Baby Boomers (aged 55 and over) and 53% of Gen Zers (aged 18-24) both expressing a preference towards digital. 

A greater variation was seen by region. The study grouped results into four main regions: Latin America, EMEA (Europe, Middle East and Africa), JAPAC and North America. JAPAC led with 60% of respondents saying they are planning to use mobile payments more often, followed by Latin America (57%), EMEA (41%) and North America (38%). It seems that while cash is losing ground worldwide, it is indeed still king in the United States. According to recent research by Global Cash Index, cash usage has remained relatively steady in the U.S since 2003, and continues to maintain a strong foothold despite innovations in the digital payments industry. “We are seeing a gradual increase in consumer awareness of mobile phone payments options. However, adoption has remained flat over the past few years,” said Robert Flynn, Managing Director of Accenture Payments in North America, commenting on 2016 payment research. “Consumers are content to use cash and plastic for everyday transactions and, while the use of cash is declining overall, it is the most commonly used form of payment — and consumers expect it to remain so in 2020.” 

With company's such as Apple legitimising the industry and awareness at all-time highs, North America and other regions are poised for growth in mobile payments. Oracle found that only 27% of global consumers usually opt for mobile payment in quick service food scenarios with a marked disparity between Baby Boomers (13%) and Millennials (36%). These results suggest that while Baby Boomers are willing to use digital payments, they may be more resistant to the use of mobile payments. By region, the results were similar to digital payments with JAPAC again leading for the use of mobile payments (43%), followed by Latin America (33%), EMEA (21%) and North America (19%). Similar results were also recorded regarding mobile payments in hotels, with Millennials and JAPAC leading and Baby Boomers and North Americans lagging behind. 

Here in Australia, there has been a lot of talk about the death of cash recently. In October, global data from Capgemini showed that non-cash payments in Australia grew by 9.9% in 2015, well ahead of the 6.8% rise across developed countries. "Globally, we are not seeing a reduction in cash, but the growth is going to electronic. In Australia, we are cannibalising cash," Phil Gomm, Capgemini's Director of Banking and Capital Markets for Australia told The Sydney Morning Herald. "It's all happening faster than we think, and consequently we will see that flat-lining in the number of notes in circulation.The decline in cash use has been noticed by the Reserve Bank of Australia (RBA), which announced in December that it expects banks and other institutions to start removing or merging under-used ATMs. 

With a major economy such as North America lagging behind and Baby Boomers showing slower adoption of mobile payments, it may be premature to herald the death of cash in five years. However, it is safe to say that digital and mobile payments are on the rise in the hospitality industry, particularly in the JAPAC region and amongst Millennials and Gen Zers. To paraphrase the prog rocker Frank Zappa, cash may not be dead, but it does smell funny. 

Click here to get a copy of the Oracle Report: Is Cash Dead in the Hospitality Sector?

Stefan Kostarelis

Written by Stefan Kostarelis

Stefan is the Content Manager at a Sydney-based investor relations firm, and a freelance writer whose work has appeared in Techly, Paste Magazine, Lost at E Minor and Tech Invest.

Topics: Customer experience CX Articles & Insights consumer research

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