Writing for Payment Expert, CEO of Brite Payments Lena Hackelöer explores a cardless future as adoption of the new payment tech continues to grow across Europe. 

A growing number of countries are making the transition to near cashless economies. Even Europe’s most cash-loving holdouts, including Germany, are approaching an inflection point.

In the UK, more than 23 million people reported using virtually no cash in 2022, up from 13.7 million the previous year, with UK Finance predicting that within the next decade, notes and coins will account for only 6% of payments. It’s a similar picture in increasingly cashless Denmark, which did not record a single bank robbery last year.

The idea of a cashless society is not without its detractors though, and there are vocal ‘access to cash’ movements in many countries. In fact, the European Union is committed to guaranteeing freedom of payment choice, which includes the right to pay in cash across the Euro area. However, few can deny the benefits of switching to cashless payments in terms of enhanced convenience, reducing certain financial crimes, and greater financial stability. 

Only a few years ago, when the primary alternative to cash was physical cards (credit and debit), the case for cashlessness was  less solid. But the rise of mobile payments, biometric authentication, and account-to-account (A2A) bank payments has been a further catalyst for the shift away from cash.

The charge for innovation

Consumers are now conditioned to expect seamless, intuitive experiences when they interact with technology – and these expectations now extend to banking and payments. Whether it’s the rapid growth of smartwatch payments in the Netherlands, or the growing ubiquity of Apple Pay, the future of payments in Europe may be defined by a lack of physical cards as much as a scarcity of cash.

Take, for example, the UK, which is one of the countries in Europe furthest along its cashless journey. In 2020, nearly a third (32%) of adult consumers in the UK registered to use their smartphone or wearable device for mobile payments in stores, an increase of more than seven million over the previous year. Rates of consumer credit card usage, especially among young people, are also declining in the UK, with a report from 2021 finding that borrowing was down 14.5% to a record low. 

Getting to grips with contactless

Modern payment methods, such as A2A transactions that run on open banking infrastructure, as well as a range of mobile solutions, offer an alternative to cashless payments that rely upon the traditional debit and credit card rails. They have opened the door for new,  convenient, and secure ways for consumers to pay for goods and services, and – importantly – a more cost-effective way for merchants to accept payments. 

From the perspective of businesses, cardless digital payments (i.e. A2A payments) offer improved operational efficiency, enhanced security measures, and elimination of costs associated with fraudulent chargebacks. When providers, such as Brite, leverage open banking infrastructure to deliver instant A2A payments, there is the additional benefit of immediate payment and settlement, and improved customer experiences that can engender greater customer loyalty

From cashless to cardless

While significant strides have been made towards a cashless (or at least ‘less cash’) society, a cardless future is still very much under construction. Simply put, card payments are deeply entrenched in the merchant payment ecosystem, and it will take some time for open banking-based payments to build critical mass. 

Today, consumers are comfortable with a ‘pick-and-mix’ approach to payments, combining mobile banking, (cardless) mobile, and card payments. We are currently living through a transitionary period, but one where new ways to pay have the opportunity to rise and challenge the incumbents.

Security, speed and simplicity: A2A steps forward 

Given the transitory period the industry is currently going through,  it is an opportune moment to reflect, and to adapt to ensure we’re championing the most effective forms of mobile and contactless payments.

Which brings us to the instant A2A payments category, which may ultimately be the ‘gold standard’ of cardless payments. In terms of security, A2A payments benefit from the security layer of the bank account itself, as well as giving merchants greater cash flow predictability and delivering operational efficiencies. 

When it comes to speed, in some markets A2A payments are already executed instantly, though this is dependent on the underlying infrastructure. Instant processing of A2A payments means the process of waiting to get paid, or to claim refunds, is greatly reduced. Both sides of the till benefit from faster processing, and can have greater control of their cash flow.

Additionally,  A2A payments are designed to be incredibly simple in terms of implementation. This reduces barriers to entry for accepting payments, thus aiding the transition to a cardless future.

The future is near

The onus is on merchants, payment providers and financial institutions to listen to the concerns of consumers, and to promote solutions that address these challenges head on. While still somewhat nascent, A2A payment solutions stand out in this respect, and are perfectly suited to the demands of a changing world.

At Brite Payments, we believe in the importance of developing faster, smarter and more secure payment methods, and are committed to bringing the benefits of instant A2A payments to consumers, merchants, and the broader economy.