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The following guest post is courtesy of HiWayFX.
On analysing the trends in consumer payments it can be seen that there has been a steady momentum built towards usage of card-based payment and usage of electronic modes of payments. It is worth highlighting that there have been on average more than 2.2 billion cards added on annual basis in global circulation since the start of this decade.
The result is that current market size of the electronic payments stands at a whopping USD 5.5 trillion. Further, the share of cash payments by consumers has reduced to less than a half of the total consumer payments made in the last calendar year. This trend of decline in cash transactions is likely to further increase in the due course of time.
There can be a number of factors which can be identified for such a change in the consumer behaviour. One of the main factors driving the change is that the value of money has got eroded with time. This factor is especially relevant form aspect of emerging economies where the demand–supply gap for the limited resources together with rising per capita income of the natives has led to sustained inflationary trends over the last 2 decades. With a similar trend to follow in near future, the eastern European nations together with the south Asian nations are expected to grow their consumer electronic payment market size by more than 15% on yearly basis. With the increase in bankable population across the geographies especially in the emerging economies, the usage of electronic modes of consumer payments has further increased and likely to add to the momentum.
Another factor which has greatly increased the usage of electronic mode of payment is the increase in online retail channels and growing usage of smartphones. Within the cashless transactions also, the card based consumer transactions are likely to be superseded by electronic platforms due to the cost benefit for both the buyers and the sellers. With the value of online retail expected to increase by more than 50% in next 5 years; it can be expected that the increase in online consumer payments is likely to increase multifold over the next 5 years.
Needless to say, there have been focused efforts by the industry owners who have incorporated increasingly better security measures to enable carefree transactions and also all-purpose usage options on their platforms. The marketing initiatives which tend to ‘hook’ the users through their coveted ‘loyalty platforms’ have also added to the decline in usage of paper currency for today’s time-sensitive consumers.
The state bodies are also enabling the change in consumer payment medium towards cashless transactions by developing nation card payment networks, reducing transaction costs for card payments, etc.
As long as sustained efforts to develop new modes of payment security are made coupled with the increasingly share of the online retailing amongst the global markets and the card networks provide added value to their users; the growth in card-based payments and electronic payments shall continue with increasing pace. It can, therefore, be said that the cashless medium of consumer payments is steadily going to make cash transactions a phenomenon of past.
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