The research firm also foresees a coming backlash with respect to automatic, recurring subscription charges showing up on consumers’ credit and debit cards. “Too many B2C subscription companies rely on deceptive design practices and bad cancellation processes — at the vast cost of customer trust,” the firm said in the report. “Even the U.S. president is over it.”

As a result, consumers are canceling subscriptions and tension is rising between the card issuers and networks on one side of the equation, and subscription companies on the other side. The issuers and networks will increasingly help consumers manage and monitor their subscriptions and assist merchants in handling disputes. Forrester expects one-third of subscription-based companies will go out of business.

Forrester’s cash prediction builds on other reports indicating the U.S. still clings to its cash and check payments as other countries modernize their payment systems. According to a Federal Reserve annual cash use survey released this summer, consumers used cash for 16% of their transactions during the three-day period in October when the survey was taken — only 3% used checks. Meanwhile, a 2023 report from the Federal Reserve Bank of Atlanta found that the U.S. surpassed 19 other nations in their share of check usage for cashless payments.

In its report, Forrester highlighted Norway, Sweden and Finland as “nearly cashless” because of their high percentages of banked residents, and their governments’ investments in digital systems.  As of last year, about 6% of U.S. adults were unbanked, according to the Federal Reserve, which defines that term as people who don’t have access to a savings, checking or money market account.

“While the U.S. loses value by minting pennies and is cashless in pockets of the economy, its inability to displace cash in the un- and underbanked will hinder its progress,” the report said.

Forrester’s real-time payment predictions come as America’s financial institutions continue their adoption of the faster payment technology. In July, The Clearing House announced that its RTP Network processed more than $1 billion worth of transactions on June 28 — a single-day record for the network. The U.S. government’s competing real-time system, FedNow, has expanded its list of participating banks and credit unions to about 1,000.

The rise of such instant payments systems in other parts of the world, and account-to-account payments generally, is also driving the decrease in cash use. The prominent use of such systems in Brazil, India and China is spreading globally, Forrester said. Specifically, the firm cited the expansion of India’s Unified Payments Interface and Brazil’s Pix systems in driving down the use of cash.

Though payment acquisitions were expected to rise this year, the slump from last year continued in early 2024, but activity has grown in the second half of the year. That included payments software firm Flywire’s $55 million acquisition of Invoiced, a business-to-business finance company. The industry’s overall acquisition tally for this year is now expected to top last year’s count.

Forrester cited Coupa, Basware and Esker — software firms based in the U.S., Finland and France, respectively — as companies expanding their B2B payments operations and seeking to buy businesses. “Bigger companies should prioritize their search for acquisition targets to complement their B2B payment capabilities before others get ahead,” Forrester recommended. 

Finally, Forrester anticipates that geopolitical tension and wars, such as the Ukraine-Russia conflict, will increase use of alternative payment rails, including local and cryptocurrency options, as sanctioned countries in particular seek ways to continue their commerce. “Financial institutions and payment companies must bolster their policy teams and work with business divisions to measure the benefits, costs, and risks of these alternative payment systems,” the report said.

By Tatiana Walk-Morris and Lynne Marek on Nov 1, 2024
Original link