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The state of contactless payments in the UK

contactless payment

Elliott Goldenberg, head of digital payments at MasterCard UK & Ireland, looks at the state of contactless payments in the UK.

Will cash have disappeared in 20 years’ time? Most people in this country believe so according to some research released by London & Partners.

Our own data at MasterCard reflects that the UK is already moving towards a more cashless society.

According to our latest spending figures, contactless spending has increased by 326% year-on-year in the UK.

In the last 12 months, the amount of contactless cards or contactless-enabled devices has grown by 41%, and the number of locations that accept these payments has increased 79%.

By 2020, anywhere that accepts card will have to accept contactless and we’re already seeing new micro-businesses emerging that don’t take cash at all.

This incredible rate of change offers a clue as to why there is so much FinTech investment and innovation taking place right here in London and in the rest of the country.

We are seeing more change now in the way we pay for goods than we’ve seen in last 50 years, since the credit card was born in the US and this year, card and digital payments outstripped cash payments in the UK for the first time ever.

‘A cashless society is a reality’

Tech-savvy consumers are embracing new payment methods and with the arrival of the mobile payment schemes from the digital giants, the UK is in pole position for payments right now.

No other market in the world combines the expertise, the captive audience and regulatory infrastructure that the UK does.

Our booming financial technology sector is also driving an increase in the adoption of FinTech products.

In turn, the frantic rate of innovation is leading Londoners and British consumers to be more expectant, and more demanding.

It has created a virtuous circle of creation and adoption in FinTech where consumers and entrepreneurs are feeding from each other.

There is such incredible movement in the industry thanks to a few things.

Firstly changing EU regulation will result in more competition in payments. This regulation known as PSD2 allows for third party payment providers to have access to consumer bank accounts in order to provide payment services.

This opens a lot of doors for new entrants to compete alongside the banks.

The second factor is the entry of Apple, Google and others into the payments market. They are bringing excellent propositions that ride on top of the existing card payments infrastructure.

Thirdly, is the proliferation of large and small payments innovators. Some bring their own solutions to the market, and some aid banks in bringing their solutions to market. Some use existing platforms and schemes, and others are creating brand new ways to go head-to-head with existing models.

Finally, the evolution of card payments in the digital world, with new technologies such as host card emulation, tokenisation and biometric authentication, is taking hold in Europe at great scale.

‘A comprehensive digital payments offering’

The banks realise that having a comprehensive digital payments offering is more important than ever before, because consumers use electronic payments every day. Those who get it right can be front and centre for their customers, playing a key role.

The advantage that banks have is their longstanding customer relationships and their data. Coupling these with a good digital user experience would go beyond what third party providers can offer.

That is why nobody is standing still. We have seen more than 100 digital payment wallets enter the market in Europe in the last few years.

The rapidly growing capabilities of smartphones and other mobile devices has also been a major factor in the escalation of interest in the payments sector.

Without smartphones, and the NFC components that they now come with, many of the innovations we’re starting to see today would not be possible.

MasterCard sees the smartphone as the consumers’ ‘remote control’ for their financial life.  It will be essential for authenticating transactions, controlling your account, managing payment card functions and more.  It is an incredibly powerful and practical tool for payments.

The UK is set to play a major role in the development of this technology, and its adoption. If the public believes a cashless society is likely to occur in the next 20 years, they could well be right.

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