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Contactless, debit cards and the future of payments

European consumers are becoming increasingly comfortable using contactless technology for payments, but new research published this week suggests that the debit card will remain a key transaction method of the future.

Talk of the UK turning into a cashless society is wide of the mark, too, although a Payments Council report released on Monday predicted that the number of cash payments will total around 14 billion in 2022 – down from 21 billion in 2012 – as alternative transaction methods evolve further.

The UK Payment Markets 2013 study suggests that consumer card usage will rise by 75%, from nearly ten billion payments in 2012 to nearly 17 billion in 2022, driven primarily by increased use and acceptance of debit cards.

It also predicts that mobile payments and internet banking will help drive up consumer use of one-off payments from their accounts from 356 million payments in 2012 to around 1.5 billion in 2022, and as a nod to the evolving payments landscape the Payments Council is set to launch a new service next year to make secure account-to-account transfers using only a mobile phone number.

Adrian Kamellard, Payments Council CEO, commented: "It's fascinating to see how much of the groundwork we're laying down now will work out in 2022 – the next few years will be an exciting time for the payments industry.

"As an industry we need to make sure that we not only encourage and support on-going innovation, but also make sure that we don't lose sight of our tried and trusted payment methods."

This week also saw payment solutions provider Visa Europe release its own research, which showed that UK consumers have made 51 million contactless purchases in the 12 months since launching a major advertising campaign that raised public awareness of this emerging payment technology.

In the year since Visa rolled out its Flow Faster advertising campaign starring Jamaican sprint star Usain Bolt, some £338 million has been spent on contactless Visa cards, with an average purchase value of £6.65.

Merchants accepting contactless payment in the UK include Marks & Spencer, McDonalds, Pret A Manger, Boots, The Co-operative, WH Smith, Starbucks and Costcutter, but many other retailers are looking to introduce this facility.

In fact, fast, mobile payment options are widely considered as a major part of retailers' current business strategies.

But British Retail Consortium (BRC) Head of Payments Richard Braham has argued that the "understandable commercial rhetoric" deployed by payment solutions providers does not necessarily help retailers who are trying to find the right system to install in their stores.

He also told Essential Retail that there are a plethora of companies claiming they have the silver bullet that will transform the payments industry and help retailers' businesses grow, but this can cause confusion in retail.

"Retailers want to know if it's cost effective and if consumers will use it," he explained.

"Businesses operating in retail need an infrastructure that accepts all cards and forms of payments."

Recent research conducted by the BRC showed that cash – although reducing in popularity as a payment method – was still used in the vast majority of transactions, but Braham also suggested that the growth in self-service checkouts in retailers' stores across the UK has helped increase the number of debit card payments made in retail.

"People will always use cash and our survey shows that it still accounted for more than 50% of all transactions," Braham added.

"However, as the nature of shopping changes retailers respond to meet new consumer demands – and much of this is technology-led. There is certainly a lot of opportunity for payment providers, old or new."