72% of the Spanish population already pay contactless

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Digital means of payment continue to expand, consolidating new payment formulas in an environment of growth that has been maintained, albeit with certain restrictions, since its take-off in 2020 and, within which, the perception of sustainability is increasing. Although the majority of users still do not clearly identify the implications of choosing one means of payment over another, more than 60% of the banked population (61.8%) already associate cash as the means with the greatest environmental impact, far above other electronic alternatives.

Cash continues to lose presence

Cross-border payments and remittances What is demanded: immediacy, security and transparency

The context of digital payments and their social and environmental perspective is one of the trends analysed in depth in the 13th Minsait Payments Report on Trends in Means of Payment, which the payments technology company presents every year and which constitutes a point of reference for the payments industry. Prepared in collaboration with Analistas Financieros Internacionales (AFI), the report gathers the opinions of more than 4,800 banked internet users in Spain, Italy, Portugal, the United Kingdom and Latin America (Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and the Dominican Republic).

Cash continues to lose presence

In this edition, the report shows how the use of electronic payments is becoming more widespread in Latin America and is accelerating in Europe, where nearly a third of Europeans say they have gone digital in the last three years, in the face of the emergence of the COVID pandemic and coinciding with the rise of other alternative means of payment such as Bizum in Spain. Today, applications such as Bizum, or Pix in Brazil and MBWay in Portugal are gaining popularity for payments between individuals (P2P), to some extent displacing the use of physical money; 52% of Spaniards prefer it compared to 38% who continue to use cash.

In a market increasingly marked by security concerns, contactless payments with physical cards are more popular in Europe than in Latin America, and Spain leads this index, with 72% of the banked population opting for the digital option for their payments. Thus, the use of cash is losing momentum and among the most widely used means of payment, the debit card once again stands out in all the countries analysed. Today, more than 85% of the Spanish banked population has a debit card to make their payments, and 56% say they have a credit card, whose use is lower among users. A temporary decline in the use of credit cards can be linked to the current economic context, where inflation and high interest rates encourage a more cautious use of credit and advocate stability and debt reduction.

There is also an increase in the use of virtual cards, which until now were mainly associated with prepaid cards, and their use is being extended to credit and debit cards. A third of Spaniards (37%) have one and half of those under 35 years of age analysed already have a virtual debit card.

The preference for card use among the Spanish population also extends to other transactions such as online payments and shopping. 66% of the Spanish population continues to use cards, with debit cards being the most common. Moreover, the entry of new options is increasing their presence in the countries. In the Spanish market, digital wallets have an impact, used by 19% of Spaniards on a regular basis. Cryptocurrencies, on the other hand, or Buy Now, Pay Later -BNPL solutions, which allow purchases to be made and payments to be postponed, are used by only 1% and 8% of the population respectively.

Cash is also losing its impact in face-to-face points of sale and is being overtaken by cards in countries such as Spain, Brazil and Chile, following the trend set for years by other countries such as the United Kingdom. According to the Means of Payment Trends Report, for 53% of industry players, cash will be a complementary payment method to digital by 2030.

In this regard, and in order to respond to the demands of increasingly digital users, Minsait Payments also notes in its report the necessary digitisation of payments at the point of sale, whatever this may be, as a very clear growth vector in which numerous innovative proposals based on technology and advanced data processing concur. Cash is still used for small everyday purchases, but is declining in favour of electronic options.

Cross-border payments and remittances

Among the habits recorded, the advance of cross-border payments is particularly noteworthy, which, according to the study, is expected to reach 250 trillion dollars globally by 2027 (growing by 100 trillion dollars in just a decade). Despite their growth, this type of payment between countries continues to be slower, more costly and more opaque than domestic payments and suffers from certain frictions that have yet to be resolved, such as high costs, slowness and lack of transparency in the procedures.

Experts consulted by Minsait Payments estimate that remittances are the everyday payment flow with the greatest potential for improvement through digitisation. In 2021, of the total remittances sent globally, the countries in the Report accounted for 12.15%, mostly from the United Kingdom (4.31%, USD 33 billion), Spain (2.92%, USD 22 billion) and Italy (2.61%, USD 20 billion). Generally, as can be seen in the study, the more economically developed countries contribute more as net recipients of migrants. Even within the Latin American region, this pattern is evident: remittances sent from Mexico or Argentina are higher in value than those sent from Peru or Ecuador.

The Minsait Payments Report identifies other variables necessary for the progress and growth of the payments industry in the coming years. The immediacy of the most common digital transfers is an unavoidable premise for the sector and a public policy objective in practically all the countries analysed, laying the foundations for financial inclusion and the necessary efficiency in operations, another of the trends identified.

Security, ease of use, free of charge and speed, in that order, are the main factors that determine the choice of a means of payment, according to Minsait Payments, and the increase in risks and vulnerabilities is the biggest challenge facing the sector over the next five years, according to half of the agents consulted. The study therefore insists on the increase in values such as security and opens a window of opportunity for cloud services or the application of artificial intelligence in fraud prevention.

The report also notes the aspirations of regions such as Europe to digitise cash and encourage central bank digital currencies, which could modernise and eliminate many of the frictions and inefficiencies that still characterise cross-border payments today: expensive, opaque and slow compared to their domestic counterparts. The European continent expects to have its own digital euro by 2030 and although very few central banks have issued their own digital currencies (so-called CBDCs), and none of them European, 33% of the industry players participating in the report believe that CBDCs will play a complementary role to physical currencies over the next decade.

This is a scenario of opportunity in which trends such as Open Finance are advancing, but they do so conditioned by many of the limitations that are still present. According to the analysts consulted in the Minsait Payments Report, open finance will have to wait until 2030 to become a true standard in the financial market, both in Europe and Latin America. Today, multi-bank usage, as a preliminary step, is already higher in Latin America than in Europe, where the proportion of people with more than one bank account does not reach 50% in any case (35% in the case of Spain).