May 24, 2017

Who’s your fiercest competitor?

A panel debate at a recent industry conference turned to competitors. “Who is the fiercest competitor in your channel?” the moderator asked.

Panelists named card schemes, mega platforms such as Alibaba and WeChat, and Big Tech as their fiercest competitors. And it’s true. Global consumer companies that capture attention are a force to be reckoned. The future of consumer marketing could well belong to those with the biggest brands.

Another panelist named his fiercest competitor as the regulator. Local regulations and requirements were taking away from the time and effort that would otherwise be put behind innovation, he argued. And it’s true. The amount of disparate, local regulation an international payments business has to incorporate is ever-increasing.

Cash is fierce
But for me, the panelist who really nailed the answer spoke quickly and decisively. “It’s cash.”

As payment industry professionals, it’s very easy to get caught up with look-alike competitors, new entrants or technology disruptors. But what about the familiar, analogue competitors that are still around and have no intention of going away?

Despite all the marketing money spent on promoting electronic payments over many decades, cash still accounts for around 80 percent of consumer payments worldwide. Cash will account for $2.2 trillion in spend across 15 western European countries by 2020, a Cardtronics survey last year found.

It typically accounts for 29 percent of all transactions in Spain. In Italy, it’s 22.3 percent, Portugal 21.6 percent and Germany 21.4 percent. As ever, the headline statistics hide dramatic differences between countries. Belgium, Italy, Malta and Portugal are expected to see double-digit cash growth out to 2020, whereas Iceland will see negative growth of 35.3 percent.

Cash is cultural
Cash continues to be attractive because many of its properties are still required. Which is an important take-away for product developers, marketers, and technologists.

It’s is a two-party transaction with no intermediaries, witnesses, transaction fees or chargebacks. Cash is familiar, tangible, simple and irrevocable. It meets people’s needs and fits their beliefs.

One of the major challenges is undoubtedly overturning habit and deeply ingrained behaviour about how people access and use cash. That being said, cash is not convenient in every situation. For example for remote payments (P2P, e-commerce, mail order and telephone order), high-value or cross-border payments.

The success of cashless niches, such as mass transit, proves the case for specialisation and achieving scale by exploiting these niches. Perhaps we as an industry need to move away from the idea of universal usage and acceptance. And towards specific cashless use cases and good enough acceptance.

Cash has existed as a medium of exchange, store of value and unit of account for nearly 3,000 years. It is by any account a fierce competitor. So the argument is one of displacement rather than replacement. Credible electronic alternatives have to offer something extra in terms of speed, convenience, value or choice.

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