By : Andy Brown
September 06, 2016 08:00 AM
Banks today are operating at a time of great change for the financial services industry, including the payments sector.
Change is being driven by rapid advances in technology and evolution in consumer habits and expectations, but, as research has shown, that doesn't necessarily mean traditional payment methods like cash are on the way out.
Is there a 'war on cash'?
The concept of a 'war on cash' was highlighted by professional services firm McKinsey in its latest Global Payments study.
In the report, the consulting giant noted that increases in global payments revenues have exceeded expectations. Asia - and particularly China - has been the primary growth engine for the sector, but all regions have contributed to the recent expansion.
The company described payments growth as a "truly global phenomenon".
Looking at specific trends, McKinsey predicted that the ongoing digitization of consumer behavior and competition between payment providers will "likely revive the war on cash" and bolster transaction-related revenues.
As cashless transactions become more and more common, domestic and cross-border revenues are expected to grow by approximately seven percent per year.
Cards on the rise, but cash still top in the UK
Despite the ongoing growth of cards, cash continues to hold a prominent position in the UK payments market.
The latest figures from industry association Payments UK and Link show that cash was the most commonly used payment method last year, even though, for the second year running, it accounted for less than half of all transactions.
More than 17 billion payments were made in cash over the course of 2015, marking a decline of six percent from the 18 billion cash transactions completed in the previous year.
One of the key factors in the year-on-year decrease in cash transactions was the growth of contactless cards – which are increasingly being used for smaller value transactions. According to the UK Cards Association , 18 percent of all card purchases in May 2016 were contactless, compared to seven percent in May 2015.
Cash purchases may have fallen from the previous year, but the 2015 figure remained 70 percent higher than the 10.1 billion transactions made on debit cards, the second-biggest payment method.
The industry figures also showed that the number of ATMs in the UK exceeded 70,000 for the first time in 2015, with some 48 million people using the machines.
While these are positive trends as far is cash is concerned, they don't negate the fact that cash payments have dropped by 28 percent in the last ten years and are expected to fall further.
How can banks keep up and stay relevant?
With so many changes and rapidly evolving trends shaking up the payments industry, it's critical for financial institutions to adapt and provide the flexibility their customers want.
In a market that has become so heavily dependent on technology, banks can ensure they stay relevant by keeping up with the latest innovations and adopting the right solutions for their business.
Transaction processing systems , for example, can enable banks to deliver the sort of adaptability and agility that has become so important in today's dynamic, ever-changing payments industry.
One of the most crucial objectives of all for banks is to stay in tune with the things that matter most to their customers, and to tailor their products and services with these priorities in mind. With the right solutions behind the scenes, this should be easy to do.