As relevance of cash continues to wane, mobile and plastic payments fill the gap
April 05, 2013

Cash seems to be a dying payment type, with new research from Javelin suggesting that mobile payments and cards will fill the void left by paper currency. The report, culled from consumer payment information at the point of sale and U.S. Census Bureau data, identifies trends in payments and contains forecasts through 2018.

Mobile payments are expected to show tremendous growth in the next five years, although much of that can be attributed to the fact that it's a relatively new payment type. In 2012, mobile payments accounted for only .01 percent of the $3.98 trillion spent at retail locations. By 2018, however, that number is expected to crest the $5 billion mark.

Brands can either use a mobile point-of-sale system that attaches to smartphones and allows businesses to accept credit card payments and debit card payments, or leverage a near field communication-based contactless solution for payment processing. These are the two leading approaches to mobile payments.

"We're seeing a big push for mobile payments. Networks and banks are pursuing mobile opportunities and merchants are more actively involved. You can look at some of the big merchants who have seen success with loyalty programs that involve mobile, such as Starbucks," said Aleia Van Dayke,  payments analyst for Javelin and the author of the report, as quoted by BankTech.

Eliminating the need for cash
For many consumers, mobile payments are just more convenient. They don't need to carry large amounts of cash and the checkout process can be greatly expedited because they don't need to count out coins and bills at the point of sale. Whether merchants use contactless solutions or mobile payments hardware, they are eliminating the need for cash.

In just two years, the number of consumers carrying cash in their pockets has dropped from 83 percent to 81 percent. Meanwhile, mobile payments and credit card usage are on the upswing, with consumers expected to increasingly rely on these two payment processing methods. Combined, credit and debit cards were used in 62 percent of all retail purchases. Javelin believes that number will hit 67 percent through 2018.

Companies can make a significant profit by accepting credit and debit card payments, with several studies suggesting that customers spend more money with debit. Solutions such as Sage Mobile Payments allow retailers to accept these payments with little hassle.

Nexus: G-WEBCD6