Will we see a future that's not just cashless – but also cardless?

In the 1950s, the introduction of cards brought forth numerous advantages for users, simplifying transactions compared to counting coins or writing checks. They occupied minimal space, provided a line of credit not possible with cash, and enticed customers to participate in loyalty and reward programs.

Businesses thrived as studies revealed increased spending on cards compared to cash transactions. However, throughout the 2010s, these distinctive benefits have waned. Evolving needs and the emergence of superior payment methods have presented more effective solutions to the initial challenges posed by traditional cards.

In 2011, Google pioneered the launch of the first digital wallet, sparking a trend that saw numerous companies, including Apple Pay, Samsung Pay, Cash App, and PayPal, following suit. Digital wallets offer a software-based solution for managing multiple payment methods and websites, streamlining users' pockets by consolidating everything into a single device.

Leveraging advanced mobile technology, these wallets incorporate enhanced security features, with support for biometric authentication on many devices. Users can opt for unlocking their wallets using their fingerprint, face, or iris, adding an extra layer of protection.

Within a decade of their introduction, Capgemini determined that digital wallets have become the third most popular payment method globally, trailing only cards and internet banking. Remarkably, 35% of card owners have integrated their cards into a digital wallet.

While Europe and North America embraced digital wallets swiftly, there are regions where established card payment providers faced challenges. Mobile tech companies, offering more relevant solutions, outpaced traditional providers.

Notably, two million unbanked individuals globally, with 60% residing in Africa, lack access to conventional card payments but own a mobile phone.

Mobile innovation has stepped in to solve problems that cards were never equipped to handle – and M-PESA is perhaps the continent’s biggest fintech success. This company allows users to send cash and make payments using e-money, without requiring a bank account. It’s done through the M-PESA app, SMS messages, and a network of authorised agents (often corner stores) assisting with cash deposits and withdrawals around the continent. While Africa will remain dependent on cash for years to come, there’s a strong chance M-PESA has rendered card payments obsolete before they even got started.

For businesses, the rise in mobile payments has opened a narrow window of opportunity. The pandemic has pushed almost every business to move some – if not all – of their operations online, and rethink their strategy in terms of survival in a digital-first environment. Instead of relaxing into these changes, the smartest businesses will already be searching for opportunities to become early adopters of the next game-changing technologies.

It is anticipated that card transactions will represent less than 10% of overall transactions in the near future, with its primary current function being cash withdrawals from ATMs. Many expect to see the widespread adoption of secure and dependable solutions enabling ATM access through any electronic device. By 2025, the volume of transactions via mobile payments is projected to rival that of card payments, driven by the digitally savvy Gen Z and millennial generations actively steering the market towards online platforms.

The advent of open banking, facilitating collaboration between third-party developers and financial institutions, will usher in a new era of robust financial products. These offerings will seamlessly integrate digital wallets, virtual cards, payment solutions, and bank accounts, ultimately hastening the demise of physical cards in favour of digital alternatives.

Over the past decade, the payments technology landscape has witnessed a surge in innovative products. Businesses must position themselves to ride this wave, adapting to meet the evolving demands of future consumers.