The last 16 months have seen huge changes in the way consumers shop and how they like to pay. There’s been a substantial increase in online payments, Click & Collect has really taken off and subscription services are booming. So much so that in January 2021 online sales accounted for 35.2% of all retail spend – a record high.1 And while some of that could be due to businesses investing more in digital solutions to accommodate demand, it could also be signalling that a cashless society is on the horizon. 

Richard Brassey, Head of Business Partnerships, Barclays Partner Finance, and Marc Pettican, President, Barclays Payments, give their thoughts on the direction retail payments are headed and how close we really are to being a cashless society.

What sparked the rise of cashless shopping?

The pandemic has been the facilitator for change over the past year, in particular the way we shop and the way we pay. Supermarkets saw online payments surge by 89.4% YoY during lockdown, as many businesses bolstered their digital solutions to include new – and frictionless – ways to shop and pay.2

In-store, some retailers opted for a card-only or card-first approach. “One of the big winners that drove most cashless activity in 2020 was contactless, which now accounts for 9 in 10 of all eligible card transactions3. We’re proud to have been one of the first payment providers to work with retailers when the limit was increased to £45”, reflects Marc Pettican. Later this month, the limit is set to increase to £100, as agreed in the March Budget.

Another contributing factor could be an increasing uptake of retail finance including Buy Now Pay Later (BNPL) and interest-free credit, which Richard Brassey believes has “become much more acceptable, socially, simply because people have a view on how much they can afford to pay back each month. It’s now normal across most age brackets to have a certain amount going out each month in instalments or loan payments.”

But even before the pandemic, cashless was a hot topic. Invisible payments, for example, were already gaining traction. They were designed to help reduce queues and meet the needs of their increasingly time-poor customers by not requiring them to be present at the physical checkout – think app- based payments for taxis and ‘walk out’ supermarkets.

It's not just convenience – our perspective is changing too

While we can attribute some of the drive towards cashless payments to the pandemic, we’ve got to bear in mind that customer perspectives are changing too. Our recent survey found that 57% of consumers were comfortable making high value (£500+) purchases online compared to 46%, pre-pandemic,4 and the demand for online services, including subscriptions, appears to be here to stay.

More and more consumers are opting for subscription models5, with spending for these services rising 58% in May this year, compared to May 20196. Mobile phones are a great example of the successful use of subscription services where customers pay a monthly fee for a fixed number of months, but can also upgrade online, and can select to pick up in-store.

Although this indicates a change in how customers like to pay, it also suggests they’re changing the way they look at ‘ownership’. By thinking they don’t need to own an item, customers can move away from paying in full towards monthly payment models. This model is used successfully by one of Barclay Partner Finances consumer electronics partners; allowing their customers to pay monthly at 0% interest to purchase a mobile phone, and then adding a SIM only contract. The furniture industry is also another industry cashing in on this growing trend, with some retailers offering upgrade and recycle options, and even furniture rental. 

In other sectors, 1 in 10 launched their first sign-up service during lockdown, with a fifth still planning to push forward with developing their subscriptions.7

How are retailers responding?

Over the past year, payment providers have had a huge role in helping retailers adapt to an evolving marketplace and shift to online payment solutions to meet customer needs. Richard Brassey believes that the ‘new retail landscape’ is here to stay: “there’s no doubt that we’ll drift back into some form of normality over time when it comes to how people shop, but I think that’ll take a while, and we’ll never go back to what we’ve seen pre-COVID.”

He’s also clear that the winners amongst the businesses he’s spoken to are the ones who’ve embraced the situation they found themselves in. “Those partners who had a clear ecommerce strategy with a maniacal focus on customer experience were the ones who prospered – in fact, they probably did better during the crisis than they did outside.”

Marc thinks new ways of working are not just temporary measures. Home delivery, for example, “is a behavioural change that is here to stay. And 90% of consumers who use Click & Collect have said they’ll continue to do so once the threat from COVID-19 has passed8.”

The need to go cashless has led to more agile thinking around payments, as Marc attests: “the great benefit of a cashless society is that you can innovate to a much greater degree and create streamlined user journeys, which benefits everybody, retailer and consumer included.”

The other side of cashless payments

Cash usage declined with the rise of online solutions, but many retailers have switched to a card-only or card-first approach too. Although taking card payments has advantages for businesses such as making reporting and accounting easier, some customers will still want to use cash.

Richard Brassey and Marc Pettican also believe that cash still has an important role to play in today’s economy. There are 1.2m people who do not have a current account or an e-money account in the UK according to the Financial Inclusion Committee– and there’s a societal responsibility to ensure that they can carry out their business.9

Richard comments “it’s in the best interests of both the consumer and retailers to cater to the needs of today’s consumers, which means giving them choice when it comes to how they pay. There are positives and negatives to going cashless, and the recent Woolard review by the FCA10 highlighted the need to consider a customer’s affordability when taking out any finance agreement.”

“At Barclays Partner Finance, we encourage customers to make the right choice when it comes to finance by including points of ‘positive friction’ within the finance application journey. These friction points slow the customer down at the right moments, helping them understand, feel in control and fully understand the loan agreement they are taking out. So, whether a customer is paying by retail finance, card or simply by cash we need to ensure that we make things as simple as possible for them and that retailers adapt to an evolving payment landscape.”

So, are businesses finally moving away from cash?

We may have seen a decline in the use of cash over the past year, but it appears it still has a place in today’s retail environment and plays an important role in society.

“As the landscape has evolved many retailers have reduced their cash takings and moved to card only payments – in particular in the hospitality and leisure industries. However, there are still some consumers who prefer to use cash, and for some cash is their lifeline. As a business we need to support these consumers and not isolate them, and giving them options is the way forward.” Marc comments.

Richard advises, “One thing we have taken from the pandemic: consumers want choice in how they pay and transact. To meet the needs of today’s consumers and remain competitive, offering a choice of payments at the point of purchase will be a key differentiator for many businesses. We’ve evolved and seen the emergence of more digital payment solutions, but I feel if cash were to ever disappear, it would take some time, if ever. What I will say is that COVID has shown us that anything is possible – human beings are resilient and will adapt to change.”

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2 Data from ‘Barclays Consumer Spending Report’ Feb 21 https://www.barclays.co.uk/content/dam/documents/business/manage-your-business/UK_Consumer_Spending_Report_Feb_2021.pdf

3 Data taken from internal Barclaycard data between 24th July to 20th August 2021 vs 27th July 2019 to 23rd August 2019.The Barclaycard report combines hundreds of millions of customer transactions with consumer research to provide an in-depth view of UK spending

4 Barclays Partner Finance Barclays consumer research based on the responses of 1,006 UK consumers, conducted by CrowdTech, June 2021

5 https://thefintechtimes.com/how-the-rise-of-subscription-services-is-powering-new-partnerships-for-businesses/

6 Data from ‘Barclays Consumer Spending Report May 21 https://home.barclaycard/press-releases/2021/06/consumer-spending-grew-7-6-per-cent-in-may/

7 Retailer figures are taken from a survey conducted in 5th  - 13th July 2021 by Opinium on behalf of Barclaycard Payments, of over 400 senior decision-makers (director level and above) in retail businesses.https://home.barclaycard/insights/2020/09/The-UK-is-now-a-nation-of-super-subscribers/

8 Consumer research in this press release was carried out between 5th and 9th March 2021 by Opinium Research on behalf of Barclaycard Payments. There were 2,000 respondents, providing a representative sample of UK consumers by age, gender, and region. - https://home.barclaycard/press-releases/2021/03/Lockdown-legacies/

9 FCA, Financial Lives 2020 Survey, Feb 2021 https://www.fca.org.uk/publication/research/financial-lives-survey-2020.pdf

10 fca.org.uk/about/woolard-review-unsecured-credit