THE FUTURE OF CASH AND PAYMENTS

Transcription

1 THE FUTURE OF CASH AND PAYMENTS Retail Banking Research January 2010

2 CONFIDENTIALITY AND COPYRIGHT This report is published by Retail Banking Research Ltd (RBR). The information and data within this report are strictly confidential to those organisations which have purchased it. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted by any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. DISCLAIMER The information and opinions contained in this document have been compiled to the best of our knowledge and with reasonable care and attention, but neither RBR nor any of its Directors accepts liability for any loss arising from the use hereof or make any representations as to its accuracy and completeness. Any opinions, forecasts or estimates herein constitute a judgement as at the date of this document. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. Retail Banking Research, 2010

3 TABLE OF CONTENTS EXECUTIVE SUMMARY 1 1. INTRODUCTION Why is the future of cash and payments important? Report structure Style and currencies INFRASTRUCTURES AND PAYMENT METHODS Introduction Geographic scope Data availability Snapshots and country profiles Infrastructure Branch densities Deposit accounts POS terminal densities Payment cards ATM densities and functionality Internet and e-commerce users Shadow economies Retail payment methods Cash payments Cashless retail payments Payment card purchases Electronic payments Cheques PAYMENT TRENDS AND ANALYSES Introduction Cashless payments Steady growth in retail cashless payments Payment card purchases drive growth Growth in electronic payments Cheques in long-term decline Changes to retail cashless payments mix Credit transfers represented majority of cashless payment values Cashless payment values grew versus GDP Increases in cashless payment values per capita No correlation between cash in circulation and cashless payments Cashless payments rise as GDP increases Cash payments Infrastructure and other comparisons Branch density does not directly affect cashless payments Bank account holding influences cashless payments 53 Page Retail Banking Research, 2010 Contents: Page i

4 3.4.3 Internet and e-commerce penetrations indicate cashless payments POS terminals encourage payment card transactions Payment card issuance drives payment card transactions Payment card purchase values are falling Test of Bank of Finland s theory produces mixed results ATMs do not correlate with cash usage Shadow economies drive cash usage THE ECONOMICS OF CASH SUBSTITUTION Introduction European central bank studies Belgium Netherlands Norway Portugal Sweden Other studies Australia Switzerland United Kingdom (British Retail Consortium) United Kingdom (Visa UK and CRR) MasterCard Europe McKinsey & Company European Commission The business case for cash substitution Apparent consensus hides disparities Need for business cases Business case for central banks Business case for banks Business case for retailers Business case for consumers Business cases for other participants Other major drivers Payment Services Directive Regulations 2560/2001 and 924/ SEPA Merchant Service Charges Interchange fees Price discrimination Annual card fees Charging for ATM cash withdrawals OTHER KEY DRIVERS Introduction Socio-demographics Dutch working paper Portuguese consumer survey Annual British reports 172 Contents: Page ii Retail Banking Research, 2010

5 5.2.4 RBA discussion paper Deutsche Bundesbank report Transaction size and retailer type Increased debit card use Purchase with cashback National e-purse schemes Financial crisis and recession Pricing signals The current situation in Europe Pricing signals in different countries Cash substitution by debit cards Impact of pricing signals Contactless payments M-commerce Contactless card payments STRATEGIC FORECASTS Introduction Global drivers and country characteristics Moderate scenario forecasts Cash to remain main retail payment method Cashless payments will increase by three-quarters Changes in payments mix Accelerated scenario forecasts Substantial cash substitution Major economies benefit most from cash substitution Cash remains main payment method Per capita usage of cash would decline Payment cards would be main cash substitute Is there a minimum level of cash usage? STAKEHOLDER IMPLICATIONS AND ACTIONS Introduction Regulators, governments and public institutions Central banks Payment card organisations Retail banks Acquirers Retailers Consumers Others Banking associations ATM deployers CIT companies 233 Retail Banking Research, 2010 Contents: Page iii

6 APPENDIX A: MAIN SOURCES OF INFORMATION 234 APPENDIX B: GLOSSARY OF TERMS 240 APPENDIX C: COUNTRY PROFILES, WESTERN EUROPE 249 Introduction 250 C.1 Austria 251 C.2 Belgium 254 C.3 Denmark 258 C.4 Finland 262 C.5 France 265 C.6 Germany 269 C.7 Greece 277 C.8 Ireland 281 C.9 Italy 286 C.10 Luxembourg 291 C.11 Netherlands 293 C.12 Norway 297 C.13 Portugal 302 C.14 Spain 306 C.15 Sweden 311 C.16 Switzerland 316 C.17 United Kingdom 320 APPENDIX D: COUNTRY PROFILES, CENTRAL & EASTERN EUROPE 329 Introduction 330 D.1 Bulgaria 331 D.2 Czech Republic 334 D.3 Estonia 337 D.4 Hungary 341 D.5 Latvia 345 D.6 Lithuania 348 D.7 Poland 351 D.8 Romania 355 D.9 Russia 359 D.10 Slovakia 363 D.11 Slovenia 366 APPENDIX E: COUNTRY PROFILES, AUSTRALIA AND USA 371 E.1 Introduction 372 E.2 Australia 372 E.3 United States of America 376 APPENDIX F: BANK BUSINESS CASE COSTS AND REVENUES 382 F.1 Introduction 383 F.2 Terminology 385 F.3 Notes 385 Contents: Page iv Retail Banking Research, 2010

7 APPENDIX G: RETAILER BUSINESS CASE COSTS AND REVENUES 399 G.1 Introduction 400 G.2 Terminology 401 G.3 Notes 402 APPENDIX H: CONSUMER BUSINESS CASE COSTS AND REVENUES 410 H.1 Introduction 411 H.2 Terminology 412 H.3 Notes 412 Retail Banking Research, 2010 Contents: Page v

8 FIGURES AND TABLES Page Figure 1: Growth of euro cash in circulation, billions, Figure 2: Growth rates of other currencies cash in circulation to end Figure 3: Retail payment costs in Europe, 2008 ( billions) Figure 4: Cash as % of retail payment volumes in western Europe, Figure 5: Cash as % of retail payment volumes in central and eastern Europe, Figure 6: Bank/PO branches per million people in Europe, Figure 7: Deposit accounts per person in Europe, Figure 8: POS terminals per million people in Europe, Figure 9: Payment cards per person in Europe, Figure 10: ATMs per million people in Europe, Figure 11: Internet users in Europe, June Figure 12: E-commerce users in the EU27, year to February Figure 13: Shadow economies in selected countries, 1999/2000 and 2002/ Figure 14: Use of different retail payment methods in Europe, Figure 15: Cash payments per capita in Europe, Figure 16: Cashless payments per capita in Europe, Figure 17: Payment card purchases per capita in Europe, Figure 18: Credit transfers and direct debits per person in Europe, Table 1: Cheques as a proportion of retail cashless payments in Europe, Figure 19: Retail cashless payments per person in western Europe, Figure 20: Retail cashless payments per person in central and eastern Europe, Figure 21: Payment card purchases per person in western Europe, Figure 22: Payment card purchases per person in central and eastern Europe, Figure 23: Electronic payments per person in western Europe, Figure 24: Electronic payments per person in central and eastern Europe, Figure 25: Cheques per person in Europe, Figure 26: Cashless payment volumes by method in Europe, Figure 27: Cashless payment volumes by method in central and eastern Europe, Figure 28: Cashless payment values vs. GDP in western Europe, Figure 29: Cashless payment values vs. GDP in central and eastern Europe, Figure 30: Cashless payment values per capita in western Europe, Figure 31: Cashless payment values per capita in central and eastern Europe, Figure 32: Per capita cashless payment volumes vs. GDP PPP, Europe Figure 33: Cashless payments share vs. GDP PPP per capita, Europe Figure 34: Branch densities vs. cashless payments per capita, Europe Figure 35: Per capita deposit accounts vs. cashless payments, Europe Figure 36: Internet penetration vs. cashless payments per capita, Figure 37a: E-commerce usage vs. cashless payments per capita, 2008/ Figure 37b: E-commerce usage vs. cashless payments share, 2008/ Figure 38: Growth of payment card purchases per POS terminal in Europe, Figure 39: Number of payment card purchases per POS terminal in Europe, Figure 40: Growth of payment card purchases per payment card in Europe, Figure 41: Number of payment card purchases per payment card in Europe, Figure 42: Change in real payment card purchase ATVs per year, Figure 43: ATM cash withdrawals vs. cash as proportion of retail payments, Contents: Page vi Retail Banking Research, 2010

9 Figure 44: ATM density vs. cash as proportion of retail payments, Figure 45: Cash as proportion of retail payments vs. size of shadow economy Table 2: Costs of different payment methods in Belgium, Table 3: Costs of different payment methods in the Netherlands, Table 4: Social costs for selected payment services in Norway, Table 5: Payments at Norwegian retailers points of sale, Table 6: Norwegian banks costs of producing payment services, 2001 and Table 7: Portuguese banks costs and revenues per payment instrument, Figure 46: Payments at SME retailers in Portugal, Table 8: Swedish banks unit costs and fees for payment services, 2002 (SEK) Table 9: Social costs for cash and payment cards in Sweden, Table 10: Resource costs per transaction of payment methods in Australia, 2005/ Figure 47: Collection cost %s per payment method for UK retailers, Figure 48: Collection cost %s by type of cost for UK retailers, Table 11: BRC Cost of Collection Survey results, Table 12: UK retailers costs per payment method, 2006/ Table 13: Comparison of main study findings Table 14: Retailer business case example Table 15: SEPA countries national payment card scheme strategies, August Figure 49: % higher average MSCs paid by smaller retailers (2004) Table 16: Merchant Service Charges in Europe, Table 17: Lower interchange rates on consumer cards in Europe, August Table 18: Payment card fees in Europe, Table 19: Debit card ATM cash withdrawal fees in Europe, Figure 50: Use of different payment methods by type of purchase in Portugal, Figure 51: Use of different payment methods by type of purchase in Australia, Figure 52: Use of different payment methods by purchase amount in Germany, Figure 53: Changes in debit card market shares, western Europe, Figure 54: Changes in debit card market shares, central and eastern Europe, Figure 55: Changes in debit card ATVs in Europe, Figure 56: GDP growth/decline in western Europe, Figure 57: GDP growth/decline in central and eastern Europe, Table 20: Indicative cash-related pricing signals in selected countries Table 21: Main drivers used to forecast future payment volumes Figure 58: Cash payments per capita , top 14 countries, moderate scenario Figure 59: Cash payments per capita , bottom 14, moderate scenario Figure 60: Cash as % of retail payments in Europe , moderate scenario Figure 61: Cash as % of retail payments in CEE , moderate scenario Figure 62: Cashless payments per capita in western Europe , moderate Figure 63: Cashless payments per capita in CEE , moderate scenario Figure 64: Retail payments in Europe , moderate scenario Figure 65: Cashless payments by method in Europe in 2014, moderate scenario Figure 66: Cashless payments by method in western Europe in 2014, moderate scenario 214 Figure 67: Cashless payments by method in CEE in 2014, moderate scenario Figure 68: Extra cash substitution in accelerated scenario per region, Figure 69: Extra cash substitution per country, accelerated scenario, Figure 70: Cash as % of retail payments in Europe in 2014, accelerated scenario Figure 71: Additional falls in cash proportions in 2014, accelerated scenario Figure 72: Additional falls in per capita usage of cash in 2014, accelerated scenario Retail Banking Research, 2010 Contents: Page vii

10 Figure 73: Cashless payments by method in Europe in 2014, accelerated scenario Figure 74: Cashless payments by method in western Europe in 2014, accelerated Figure 75: Cashless payments by method in CEE in 2014, accelerated scenario Table C1: Infrastructural and ATM data for Austria, Table C2: Retail payment transactions in Austria, (millions) Figure C1: Retail payment volumes by payment type in Austria, Table C3: Infrastructural and ATM data for Belgium, Table C4: Retail payment transactions in Belgium, (millions) Figure C2: Retail payment volumes by payment type in Belgium, Table C5: Infrastructural and ATM data for Denmark, Table C6: Retail payment transactions in Denmark, (millions) Figure C3: Retail payment volumes by payment type in Denmark, Table C7: Infrastructural and ATM data for Finland, Table C8: Retail payment transactions in Finland, (millions) Figure C4: Retail payment volumes by payment type in Finland, Table C9: Infrastructural and ATM data for France, Table C10: Retail payment transactions in France, (millions) Figure C5: Retail payment volumes by payment type in France, Table C11: Infrastructural and ATM data for Germany, Figure C6: Use of different payment methods in German retailers, Figure C7: Use of different payment methods per German retail sector, Table C12: Retail payment transactions in Germany, (millions) Figure C8: Retail payment volumes by payment type in Germany, Table C13: Assessment of retail payment instruments in Germany Table C14: Infrastructural and ATM data for Greece, Table C15: Retail payment transactions in Greece, (millions) Figure C9: Retail payment volumes by payment type in Greece, Table C16: Infrastructural and ATM data for Ireland, Table C17: Retail payment transactions in Ireland, (millions) Figure C10: Retail payment volumes by payment type in Ireland, Table C18: Infrastructural and ATM data for Italy, Table C19: Retail payment transactions in Italy, (millions) Figure C11: Retail payment volumes by payment type in Italy, Table C20: Infrastructural and ATM data for Luxembourg, Table C21: Retail payment transactions in Luxembourg, (millions) Figure C12: Retail payment volumes by payment type in Luxembourg, Table C22: Infrastructural and ATM data for the Netherlands, Table C23: Retail payment transactions in the Netherlands, (millions) Figure C13: Retail payment volumes by payment type in the Netherlands, Table C24: Infrastructural and ATM data for Norway, Table C25: Retail payment transactions in Norway, (millions) Figure C14: Retail payment volumes by payment type in Norway, Table C26: Infrastructural and ATM data for Portugal, Table C27: Retail payment transactions in Portugal, (millions) Figure C15: Retail payment volumes by payment type in Portugal, Table C28: Infrastructural and ATM data for Spain, Table C29: Retail payment transactions in Spain, (millions) Figure C16: Retail payment volumes by payment type in Spain, Table C30: Infrastructural and ATM data for Sweden, Contents: Page viii Retail Banking Research, 2010

11 Figure C17: Cash as share of value of payments at Swedish points of sale, Table C31: Retail payment transactions in Sweden, (millions) Figure C18: Retail payment volumes by payment type in Sweden, Table C32: Infrastructural and ATM data for Switzerland, Table C33: Retail payment transactions in Switzerland, (millions) Figure C19: Retail payment volumes by payment type in Switzerland, Table C34: Infrastructural and ATM data for the UK, Table C35: Retail payment transactions in the UK, (millions) Figure C20: Retail payment volumes by payment type in the UK, Figure C21: Share of retail payment volumes in the UK made in cash, Figure C22: Payments at UK retailers, Figure C23: London bus/tube journeys using Oyster cards, Table D1: Infrastructural and ATM data for Bulgaria, Table D2: Retail payment transactions in Bulgaria, (millions) Figure D1: Retail payment volumes by payment type in Bulgaria, Table D3: Infrastructural and ATM data for the Czech Republic, Table D4: Retail payment transactions in the Czech Republic, (millions) Figure D2: Retail payment volumes by payment type in the Czech Republic, Table D5: Infrastructural and ATM data for Estonia, Table D6: Retail payment transactions in Estonia, (millions) Figure D3: Retail payment volumes by payment type in Estonia, Table D7: Infrastructural and ATM data for Hungary, Table D8: Retail payment transactions in Hungary, (millions) Figure D4: Retail payment volumes by payment type in Hungary, Table D9: Infrastructural and ATM data for Latvia, Table D10: Retail payment transactions in Latvia, (millions) Figure D5: Retail payment volumes by payment type in Latvia, Table D11: Infrastructural and ATM data for Lithuania, Table D12: Retail payment transactions in Lithuania, (millions) Figure D6: Retail payment volumes by payment type in Lithuania, Table D13: Infrastructural and ATM data for Poland, Table D14: Retail payment transactions in Poland, (millions) Figure D7: Retail payment volumes by payment type in Poland, Table D15: Infrastructural and ATM data for Romania, Table D16: Retail payment transactions in Romania, (millions) Figure D8: Retail payment volumes by payment type in Romania, Table D17: Infrastructural and ATM data for Russia, Table D18: Retail payment transactions in Russia, (millions) Figure D9: Retail payment volumes by payment type in Russia, Table D19: Infrastructural and ATM data for Slovakia, Table D20: Retail payment transactions in Slovakia, (millions) Figure D10: Retail payment volumes by payment type in Slovakia, Table D21: Infrastructural and ATM data for Slovenia, Table D22: Retail payment transactions in Slovenia, (millions) Figure D11: Retail payment volumes by payment type in Slovenia, Figure E1: Cashless payment volumes in Australia by payment type, year to June Figure E2: Cashless payment values in Australia by payment type, year to June Figure E3: Proportions of personal payments in Australia, Table E1: Infrastructural and ATM data for the USA, Retail Banking Research, 2010 Contents: Page ix

12 Table E2: Retail payment transactions in the USA, (millions) Figure E4: Retail payment volumes by payment type in the USA, Figure E5: Main payment methods used by US adults for everyday expenses Table F1: Banks major cost elements Table F2: Banks major revenue elements Table G1: Retailers major cost elements Table G2: Retailers major revenue elements Table H1: Consumers major costs Table H2: Consumers major revenues/benefits Contents: Page x Retail Banking Research, 2010