Coles shoppers are abandoning cash

Use of cash for payments at Coles stores has been falling at a compound rate of 11 per cent a year over the past few years and now accounts for just over half of all payments at the big retailer.

Head of payments at Coles Financial Services, Shane Harris, said the decline in the use of cash was being matched by the increase in the use of contactless cards and mobile devices.

Speaking at RFi's Payments Innovation Forum in Sydney yesterday, Harris said 80 per cent of payments made using the Coles MasterCard were contactless.

Harris said: "It saves cost and time. A contactless payment takes half the time of a chip and PIN payment. We are very pleased with the outcome."

RFI Group's managing director advisory, Alan Shields, said Coles' experience reflected the wider trend. According to RFi's research, consumers' preference for spending with cash has fallen from 76 per cent last year to 62 per cent today.

"Sixty per cent of consumers who use contactless cards say they prefer it, and two-thirds of those are using it every week," Shields said.

"The challenge is to get more people to use it. Australians report the highest use of contactless cards in the world but even here only 53 per cent of people with a contactless card have used it."

Shields said growth in use of contactless payments was linked to growth in the number of outlets where the technology could be used. The industry's job was to keep expanding the coverage of contactless payment terminals.

RFi's research indicates that the day of the digital wallet is still some way off. Awareness of mobile NFC technology is less than 20 per cent. Eleven per cent of Baby Boomers have used a digital wallet and 26 per cent of Gen Ys.

Among those who are regular users of digital wallets, two-thirds are using PayPal.

Shields said concerns about security, a lack of understanding of the technology and scepticism about the value of digital wallets were the main barriers to wider usage.

Harris said Coles was a supporter of the use of digital wallets. In July last year it launched Coles Mobile Wallet, supported by MasterCard for use with iPhone and Android devices. The system relies on the use of a PayTag.

Harris said Coles would not move to an embedded host card emulation system until MasterCard had made the technology work more efficiently. At the moment a user of MasterCard HCE must activate the payment by punching a PIN into their smartphones.