The financial sector is among the industries most affected by developments in big data. A study by Allied Market Research has found that the market for financial analytics services will be worth nearly $20 billion by 2030.
This market doesn’t seem to even include a number of new services financial institutions use that rely on big data. Nor does it seem to cover some of the ways independent businesses are using big data to improve their financial management services.
One of the biggest changes brought on by big data is that it is helping companies accept and process financial transactions more easily.
Big Data Change the Future of Payment Processing for Small Businesses
The proportion of payments being made by contactless “tap and go” technology has rocketed in the UK during the last few years. Big data technology has made it possible for companies to offer these services.
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In 2016, just 7% of payments were made by a debit or credit card. That rose to 19% by 2018.
By 2020, half of all payments in the UK were made by card, more than a quarter (27%) using contactless. By the end of 2021, 70% of card payments were contactless. In the last two years the trend towards contactless payments has definitely been accelerated by Covid-19.
It’s clear from the stats that it’s nearly a decade long trend towards contactless payments that has simply accelerated. Big data is at the heart of this change. Big data has helped make this possible. One of the biggest benefits of data technology is that it has helped fight credit card fraud.
And the trend continues to evolve.
Apple Pay, Samsung Pay, other eWallets and digital payments have continually grown in popularity in the last few years (again, especially during the Covid-19 pandemic) and this has pushed older payment methods like cash further down the pecking order. They are all using new big data algorithms to streamline their transactions.
With contactless payments becoming so popular, businesses now more than ever need to invest in new technology whether it’s contactless card machines, online payments or even Pay by Link so they can sell directly through emails and social media.
Whenever anyone talks about the future of payments, cash is always an afterthought.
Who carries cash anyway, right?
But it’s not the case that cash will disappear from business and there are still plenty of shoppers and consumers who rely on it.
In fact, the UK Government is actively looking into how to protect cash and ensure it continues to be readily available for those consumers who still use it.
The fact is, it’s highly unlikely that the UK will become a ‘cashless society’ – here’s why.
Will big data create a cashless society and what would it actually look like?
Big data is creating a real possibility of cashless society, but many people still wonder what that would really mean. While there’s little chance of going fully cashless, there are actually several benefits for businesses to at least consider it.
One, businesses don’t have to worry about dealing with notes and cash or storing cash in store overnight (which could make them a target for criminals). Big data could actually help make them far less vulnerable to criminals.
Even for customers it removes the limits to only spending what you have in your pockets at a given time (an annoying issue we’ve all experienced at some point when we’ve been a few pounds short)
It makes payments a lot quicker too because you only have to tap your payment card or smart device, rather than handing over cash and waiting for change.
For businesses and customers, removing cash also reduces the risk of payment fraud from counterfeit notes (which are a bigger issue than card payment fraud). When you combine this with the other fraud fighting initiatives brought on by big data, the risk of theft seems much lower.
Cashless payments also provide a clear audit trail for business owners so they can see every card and digital payment that has been made to their business on a given day (including the details of the payee and the date and time the payment was made)
But that’s not to say there aren’t benefits to keeping cash, here’s just a few reasons.
Why you wouldn’t want a cashless society
There are plenty of positives to moving towards a cashless society. But there are lots of reasons why the future of payments will include cash. The harsh reality is that not all changes brought on by big data are beneficial.
For a start, there is still a large percentage of the population that is still reliant on using cash – particularly older consumers. This was highlighted in a Government report compiled as part of a consultation about the future of cash in the economy. It found that – despite all the talk that cash is obsolete – that cash payments still made up a fifth of all payments made by the end of 2021. So cash is still the second most popular form of payment in the UK. Perhaps it’s not time to count it out just yet.
Making concessions for those without a bank account
Another sign that cash still has a role to play in the future of payments, is that 1.2 million people in the UK don’t have a bank account or access to a bank card or a digital wallet.
These consumers don’t have a bank card that they can sync to a digital wallet, so they can’t make card or contactless payments. According to the Government’s report which highlighted the stats, the majority of these “unbanked” customers are younger people aged 18-24 and unemployed people. Some of these people don’t trust banks and don’t want to take the risk of having their financial data exposed.
Many older customers also prefer to use cash, even if they have access to a bank account and bank card.
So even when consumers do have access to the tools for contactless cards, they still prefer cash so you should accommodate them.
Cash has a place, but the future of payments is dictated by big data technology
Big data has brought many changes to the future of finance. One of the biggest is a shift towards a cashless society. This is a trend we discussed in one of our blog posts 10 years ago based on a Gartner report.
Cash will likely never leave the economy fully (at least not any time soon) as a lot of customers are still reliant on it. But it’s clear that the future of payments is based on better technology like contactless “tap and go” payments.
Customers have become accustomed to using their debits, credit cards and other contactless methods.
Businesses should also recognise favoured payment methods and make them available for customers.
This includes contactless card readers that accept both card and digital payments.