As far as the old saying is concerned, cash may no longer be king in the payments industry. This was one of the key messages at this week’s AltFi conference, which highlighted a swathe of opportunities as a result of our move away from cash.
Although banknote usage was already in decline having more than halved in the span of a decade, Covid-19 seems to have further accelerated its “fall from grace”.
The risks associated with handling cash, although reportedly low, have prompted many to resort to contactless payments.
A Bank of England survey reports that 71% of respondents decreased their use of cash compared to pre-pandemic levels1 while official data from 2020 shows that 7.4 million people in the UK lead an “almost cashless life”.2
Yet this shift in buyer behaviour has intensified previously present trends and paved the way for exciting changes in the payments ecosystem – meaning interesting times for shrewd investors looking for early-stage FinTech opportunities.
Perhaps the most impactful of such trends has been the accelerated move away from physical to digital banking. The number of physical bank branches decreased while contactless spending limits increased, along with more banking services being handled via online chats and virtual appointments.
Inevitably, being able to pay for something through a double click or a Face Scan does not sit well with tardy transfer times. Consumers started placing more value on speed, user-experience and various other in-app tools for budgeting, savings, and expenditure monitoring.
It comes as no surprise, therefore, that up and coming FinTech stars with instant payment infrastructures such as Revolut, Monzo and Venmo have become consumer favourites.
Reportedly, the number of Revolut users alone doubled from 2019 to 2020, going from 6 to 12 million3, respectively. The value of transactions processed by the Faster Payments service also registered a 10% increase from 2019 Q4 to the end of March 20204.
ESG (find out more about it here) driven trends have had their say in the payments industry too. In early spring, Starling Bank launched the first-ever recycled UK Mastercard debit cards. Made from recycled plastic, the debit cards reinforce the bank’s position within the TechZero group – a community of high growth tech companies which helps address climate change.
All in all, the changes brought about by the pandemic offer a promising outlook for investors. With digital payment services on the rise and FinTech companies making bolder, ‘greener’ moves, investors have a lot of trends to watch out for.
4 The 2020 McKinsey Global Payments Report