Let us take you way back before the time of ‘tap and go’, online banking, and cardholder-not-present payment for a moment.
The Chinese invented paper money an estimated 1000 years ago. Going back even further, merchants used to trade metals like gold and silver to pay for goods and service. Before that, various cultures traded shells, rice, and shekels as a representation of the value of barter.
The history of cash payments is long and surprisingly fascinating. Now, many believe we are at a dramatic turning point. Since the invention of the first credit card in 1950, we have seen payments undergoing something of a revolution. In particular, since the advent of online banking and more recently contactless payments, it seems reasonable to question whether we are witnessing the death of cash as we know it.
If recent figures from the British Retail Consortium are anything to go by, that prognosis isn’t too far-fetched. 2017 marks the first time that notes and coins have not been the UK’s number one payment method: cards now account for more than half of all retail purchases, and contactless cards account for one-third of all card purchases, the figures show.
The UK public was initially tepid in their willingness to embrace contactless when it was introduced in 2007, but now this ‘tap and go’ technology is leading the way forward when it comes to expediting in-store payments. There are currently 108 million contactless cards on issue in the UK, and this number is only expected to grow. Contactless has also opened the door to other payment possibilities, such as Uber’s ‘invisible payments systems’, scan and pay apps, and Apple Pay’s near-field-communication technology (NFC).
Moving away from these in-person payments, online banking and the rise of e-commerce have also driven a huge increase in card-not-present (CNP) payments. These remote purchases occur when the cardholder is not present at the point-of-sale, for instance during a mail order, telephone order, or in a purchase made over the Internet.
UK shoppers spent £130 billion online in 2016, 16% more than they did in 2015, figures from IMRG show. That figure is set to grow a further 14% in 2017—an arguably conservative estimate. This growth may have some High Street retailers shaking in their boots, but there are certainly many benefits to be gained from the rise of e-commerce. Shoppers can make purchases more easily and frequently, with access to a greater range of goods and services. Also, e-commerce merchants are able to deliver with greater efficiency for customer experiences, while keeping typical brick-and-mortar costs down.
There is also risk associated with the growth of CNP payments. Fraud losses on UK-issued payment cards totalled £568 million in 2015, and of this 70% was fraud in CNP payments, according to the UK Cards Association. As neither the card nor the cardholder is present when the transaction takes place, it becomes more difficult for merchants to check whether the physical card is valid or whether the customer is the genuine cardholder. As such, merchants are at increased risk of becoming victims of remote purchase CNP fraud, whereby the business loses both the goods and the purchase income—the hapless results of a chargeback.
Fortunately, there are tools businesses can use to help safeguard themselves against this kind of fraud and avoid costly chargebacks. Verifi’s award-winning Cardholder Dispute Resolution Network allows merchants and issuers alike to simplify and frequently prevent the chargeback process. The CDRN solution allows merchants to manage cardholder disputes quickly and directly with the issuer before a chargeback is issued. In addition, card issuers benefit from the reduction of chargeback management processes and the subsequent reduction in operational costs.
It is uncertain whether or not we will see the death of cash in the near future, but there is no arguing with the fact that contactless and CNP payments are on the rise. While these modern payment options offer various benefits, they also expose merchants to increased risk of CNP fraud and chargebacks. Fortunately, there are ways to protect your business. Contact us to learn more about how our solutions can help provide you with the right payment protection.