Question

This discussion exercise is based around the results of two Canadian market research surveys from mid-2012, conducted on behalf of PayPal, which highlights the willingness of their population to shift to a cashless society. This change in the global environment will have significant implications for the retailing sector. Your task here is to review the survey results and identify how retailers and financial and other intermediaries will be able to benefit from this emerging opportunity.

The Situation

The two surveys conducted on behalf of PayPal Canada found that:

71% of respondents were comfortable with not using cash to make a purchase

This particular finding represents an increase of 27% over the same survey from 2011

25% of respondents currently go more than a week without using cash

However, 43% of smartphone users don’t trust that their mobile phone applications and hardware will keep their personal details safe and secure, and

80% are concerned about financial privacy and sharing personal or credit card details when making mobile purchases and transactions

As you can see, while there are significant attitudinal shifts in the market’s willingness to embrace and adopt non-cash methods of payments, it is countered by substantial concerns, mainly in the area of security and privacy.

PayPal, the sponsor of the research study, is very positive about the results and believe that a cashless future will be a reality in Canada. According to Darrell MacMullin, managing director, PayPal Canada, “The growth we’re seeing in Canadians’ eagerness to go cashless is significant. In Canada, 2012 marks the year that we’ve moved well beyond the tipping point towards embracing a digital future. Canadians understand that a digital wallet can be a safer and smarter way to pay and get paid.”

As at mid-2012, more than four million Canadians already have PayPal accounts. PayPal has the functionality of paying or receiving money via a bank account or a credit card that can be monitored through a computer, smartphone or another Internet-connected device. Worldwide, there are more than 110 million active accounts in 190 markets.

Answer the following questions:

Which of the broad aspects of the macro-environment are affected by the changes identified above?

Given the results, how long do you think it will it take before Canada essentially becomes a cashless society?

As the survey was commissioned by PayPal; does this affect the way that we should interpret the results? Why?

As markets shift to a cashless society, how will this change in the environment affect the retail sector? Are online retailers more likely to benefit? Why?

Would financial intermediaries and mobile phone companies be supportive of this environmental change? If so, what broad steps should they take to support these changes?

Are there any industries, or types of firms, that will be negatively affected by the future environment?

Answer 1

1. By the changes identified above, from cash transaction to cashless transaction, the economy would be more organised and there would be a transformation from unorganized to organized business. Ther would be less cases of corruption as the payment would be completely digitalized and is linked through bank account.

2. As the case shows that it takes 8 years for a 27% increased inclination of the people towards cashless transaction. Thus it would take another 6-7 years for the rest of the people to adopt cashless transaction and to move the economy from cash payment towards cashless transaction.

3. As the survey was commissioned by PayPal, a digital payment gateway, so there must be some biasness in the survey involved due to the influence of the surveyor. PayPal might have influenced the respondents to respond in favour of the cashless transaction.

4. Cashless transaction would make the organised retailing flourish and there would be complete stoppage on unorganised retailing. Online retailers are more likely to benefit as the entire payment si through digital platform and thus the consumers would not find any difficulty in making the payment while purchasing through online platform.

5. Financial intermediaries and mobile phone companies would also be supportive of this environmental change as their work would be more convenient and smoother due to digital payment system. Financial intermediaries are bale to manage operations with minimum staff and the entire process would be hassle free and more technology oriented. Mobile phone companies business would enhance in case of digital payment system. They need to make the system automated and in order to maintain security and privacy information confidential, certain strict steps need to be taken. KYC details of the customers to be collected compulsorily.

6. Due to the future environment, unorganised retailing, note counting machines, cashier, note printing firms business would be negatively affected.