Despite the recent release of the new £1 coin, it seems the UK’s transfer to a cashless society is not slowing down. A telegraph research published in 2017, revealed that the UK ranks third on the most cashless countries in the world index. The top two countries are Canada and Sweden, while the other European countries that made into the top 10 are France and Germany. This stat shows that consumers in the UK are increasingly embracing alternative tools as their primary method of payment instead of the traditional use of fiat currency or cash. Fiat currency is a legal tender whose value is sponsored by the government that issued it. For example; the British pound sterling is fiat money backed by the British government and constitution, as is the U.S. dollar, the euro and many other international currencies backed by their respective government. The British pound sterling is the world’s oldest currency still in use, and has been in unremitting use since its initiation. However, 2015 marked the year that credit and debit card transactions accounted for over 50% of total retail payments in the UK. Various media sources are debating this as the early indicators of the end of cash payments in the UK retail society, because for the first time in history, notes and coins have been displaced from their position as the UK’s number one payment method.
This new era presents an exciting opportunity for e-commerce retailers, due to the ever-increasing use of cards and other digital payment methods available for online sales. Online retail sector in the UK, hit a records sale of over 130 billion pounds in 2017, which was a 16% increase from the previous year. Mobile payments are the latest consumer trend to emerge from the UK retail market, and is quickly becoming a preferred means of payments for consumers. This is especially evident amongst younger consumers, who are mostly referred to as millennials and gen Z. In early last year, mobile payments tripled from the previous year, and research shows that it is the younger consumers in London who are the ones leading this new trend.
Data from payment processing company, Worldpay, shows that the UK e-commerce market will experience a growing rate of around 10% over the next five years, which is set to make it the third largest market in the world by 2021, behind China and U.S.A. UK consumers are dubbed as one of the world’s earliest adopters of innovative technologies, including payment solutions and financial service delivery, so retailers and other related companies need to remain updated on technological and regulatory developments. Likewise, it is important for merchants to understand the behaviours and habits of their online consumers, so they can better target and serve them efficiently. Unsurprisingly, it is the millennials and gen Z consumers that often occupy this setting, because of their preference on use technological advancement in seeking ease, convenient and value during consumption. An example of this is the growing sales completed through social media platforms, where consumer spending behaviour is influenced by advertising and recommendations on the platform.
Opportunities for Retail FinTech
Consumers are not the only market players moving away from the traditional method of payment – more and more UK businesses have started adopting the cashless trend. For example; British Airways announced last year that they will no longer be accepting cash payments at a number of major airports, including London Heathrow. Business travellers boarding at London Heathrow will have to use their card if they want to pay for an extra bag, seat upgrade, or ticket detail change. British Airways have adopted Apple Pay as an alternative payment method in their business model. Likewise, other digital payment method such as Android Pay has seen an increase in payments made through the system. However, it is not just fiat currency which are being used less, the use of ATM’s in the UK has also dropped. This drift has prompted the introduction of smart ATMs, which utilises digital technology in providing financial services. But, ATMs in the UK, is another story on its own (which we will not cover today).
The above rendition only provides a snippet about the acceptance and utilisation of financial technology in the UK. This is an industry that cannot be considered as an emerging market anymore, boasting various financial sectors such as remittance, investment, business banking and loans and credits. FinTech has arguably left the realm of being called a consumer trend, and has solidified itself as a market evolution that is here to stay and be further developed in the future. The current market is ripe for FinTech companies, due to the high technology acceptance levels of consumers in the market. This new era comes with its own issues and obstacle, where consumer acceptance also brings rise the market volatility and competitive rivalry. The FinTech industry is very accommodating, but navigating various aspects such as customer engagement, digital marketing, cyber security, growth strategies and talent acquisition are vital to achieve success and competitive advantage. Get in touch with us at Forbes & Henry Consultancy, if you would like to know more.