Paying in the Future

286 is the number of times each year that the average British person makes a non-cash purchase. In the United States, the number is even higher at 376 and in Finland, it is a whopping 448.

No financial product is used as frequently or as widely as those facilitating payment — but how exactly are these purchases being paid for? Gone are the days when customers need to carry around bags of cash, limiting their purchasing power at a given moment, and creating serious risks of theft.

Waves of innovation from merchant charge cards, to the modern credit card, and now mobile payment solutions like ApplePay have made the act of paying seamless and secure for customers.

Today there is a revolution in financial technology underway with over $12.2 billion invested in “financial tech” companies in 2014, triple the $4 billion invested in 2013. So, with a significant share of these funds being invested in finding new and better ways to pay:

What can we expect from the future?

About 45% of American consumers believe that their children, or future generations, will be paying for things in the future with virtual currency, according to a poll of 875 participants.

Cash, unsurprisingly, was an equally unpopular choice, with approximately 11% of respondents choosing that option. In fact, more consumers were sure that future users will be transacting with a form of payment that hasn’t been invented yet, more than using cash.

Data as the new currency

Data is now considered one of the most important commodities. An explosion of consumer data has enabled companies and brands to more easily forge one-to-one relationships with end-consumers by offering tailored experiences and recommendations. Cultivating the “story of one” will be the cost of entry for brands in the future, with technology serving as the enabler in terms of gathering and analyzing data and disseminating new consumer learnings.

As of May 2018, companies could face massive fines in 25 European Union countries if they mishandle citizens’ personal data. A previous data misstep that might have cost a company thousands of euros now could amount to millions for global giants. Under the new General Data Protection Regulation (GDPR), data protection authorities will be able to impose fines of up to 4% of a company’s global revenue. The new rule will also enable EU citizens to request that companies delete their data.

China’s cashless revolution

Although China still has some way to go before it catches up with countries such as the US and Sweden, the speed at which China has made the shift from cash towards cashless has surprised many.

Non-cash payments have been growing by around 40 per cent a year and last year China moved into 4th place in the world for non-cash payments after the US, Europe and Brazil.

There are many reasons for China’s rapid transition away from cash. One is urbanisation, as non-cash payments are becoming both easy and popular. This is especially the case in top-tier cities such as Shanghai, Shenzhen and Beijing where it is both trendy and convenient to pay without using cash.

There is a huge variety of choices when it comes to making cashless payments and China UnionPay has definitely helped to encourage this, particularly in the case of debit cards, which outnumber credit cards in China by 10 to one. China has more than 4 billion cards on the issue — almost enough for each adult to have about three each.

Mobile payments have also taken off in China — it has the largest proportion of people in the world using their mobile phones to make payments, online and physically.

Bluetooth driven payments

Another futuristic option being mooted is Bluetooth low energy (BLE). Already tested in the marketing arena, the technology allows the transmission of messages directly to a nearby smartphone.

Yet, lately it is also being used in payments — PayPal has recently introduced Beacon, a BLE hardware device that allows buyers to conduct hands-free transactions without checking-in. The idea behind it is that upon entering a store, the PayPal app on your smartphone seamlessly connects with the PayPal Beacon. A vibration or sound lets you know that you’re checked in while paying for goods doesn’t require any cash or cards — all you need to do is verify the purchase using voice recognition.

Chipping

If this all sounds too futuristic for you, how would you feel if you just used your veins to pay for goods? After being used to verify the IDs of smartphone and computer users, as well as in airports and government buildings, biometric systems have also started entering the fast-moving world of payments.

A tiny microchip inserted under the skin can replace the need to carry keys, credit cards and train tickets.

That might sound like an Orwellian nightmare to some but in Sweden, it is a welcome reality for a growing number who favour convenience over concerns of potential personal data violations.

The small implants were first used in 2015 in Sweden — initially confidentially — and several other countries.

Swedes have gone on to be very active in microchipping, with scant debate about issues surrounding its use, in a country keen on new technology and where the sharing of personal information is held up as a sign of a transparent society.

About 3,000 people in Sweden have inserted a microchip — which is as tiny as a grain of rice — under their skin over the past three years, Agence France-Presse reported. The technology was first used in the country in 2015.

The implants have already helped replace the need for a host of daily necessities. Ulrika Celsing’s microchip, which is in her hand, has replaced her gym card and office key card. When she enters her workplace, the 28-year-old simply waves her hand near a small box and types in a code before the doors open.