For the first time, cash isn't the most popular payment method in the UK.
In 2017, debit cards took the top spot - and more than 50% of all transactions in the UK are now made with plastic of the credit or debit variety.
We've all noticed the gradual shift from cash to card in many of our everyday transactions.
Now, we expect businesses to accept card payments. "We don't take cards" isn't often heard on the high street, even amongst independent businesses.
With the tide turning against cash, it raises another question: should businesses go cashless?
The Cashless Society
In a cashless society, 100% of transactions are undertaken using electronic methods such as cards, instant bank transfers, or other forms of mobile payment. Cash is no longer used or recognised.
No society is yet 100% cashless, but some cities, regions and countries are getting there.
Top of the list is Sweden. Only 1% of the value of all payments in the Nordic country are made with cash — and less than 20% of transactions in stores are made using cash. It's normal for shops and bars not to accept cash, particularly in major cities.
While many European countries are ditching cash, there's another, more surprising country, that's turning its back on coins and notes: China.
In China, the majority of payments are made digitally. Cash transactions are a rarity. More than half of the population say less than 20% of their monthly spend is via cash.
Take up of cards and other digital payment methods certainly varies from country to country, and between different regions within a country. While some place more of an emphasis on the reliability and trust inherent in cash, others have taken to the convenience of digital payments with more enthusiasm.
In regions that fall into the second category, many businesses no longer accept cash.
In the UK, a small number of businesses have gone cashless. The move is most prevalent in:
- London bars, cafes, and restaurants
- Transport systems
- Pop-up shops
- Events, such as festivals and large concerts
Of course, outside these areas, cashless businesses are still very much an exception rather than the norm.
Businesses are going cashless because there's technology to enable it.
Contactless-enabled card readers are now the norm in supermarkets, where a single tap is far quicker than exchanging cash and change at the point of sale. Most consumers are now comfortable with contactless technology, with around a third of card transactions completed in this way.
The other key technology behind digital payments has been mobile payment. Anyone with a smartphone can now pay through platforms like Apple Pay, Google Pay and Samsung Pay. There's now no need to even carry a wallet or purse around, when you can tap and go using the phone that's always with you. With smartphone adoption in the UK now upwards of 80%, mobile payments are an option for the majority of the population
Technology's developed on the business side, too, with card terminals now more affordable and accessible than ever. New entrants to the market offer card readers that cost around £20-40, and link seamlessly to point-of-sale software. These setups encourage digital payments simply by the way they're structured.
Should my business go cashless?
Unless you're business fits one of the categories we mentioned above, it might be a little early to go cashless. That being said, it's smart to consider the impact that going cashless might have, and create a plan of action for if and when you do decide to make the move.
The Benefits of Going Cashless
- No need to deposit cash (and pay the associated fees) at the bank
- Extra security for staff, both in-store and when depositing cash
- Reduced losses from burglaries
- Faster service
- Reduced admin time - no need to reconcile cash payments
- Digital payments are more likely to lead to impulse buys and overall higher average spend
The Costs of Going Cashless
- Pay higher fees per transaction — the BRC estimates the average handling cost of a transaction (fees, transit costs, handling charges etc.) is 1.46p for cash, 5.5p for debit cards, and 16p for credit and charge cards. On a percentage basis, the gap is smaller but still significant.
- Become completely reliant on others' services. A similar outage to the Visa problems in June 2018 can leave your business at a standstill.
- Lose 'unbanked' customers, or those who don't like paying digitally
- Potential reduction in tips and donations
Is 'Going Cashless' Inevitable?
Although it can feel like it, a cashless society is not necessarily a certainty. While cash usage is certainly on the way down, it still has advantages over digital payment methods.
For a start, cash is resilient. It can't be hacked and it won't have 'bugs'. Unlike mobile payments, it still works when your phone's out of battery, and unlike plastic, cash still works if the store's card reader breaks.
Of course, these problems with digital payments don't happen very often — and for many of us, it'll take a much higher incidence rate for us to keep plenty of cash on hand 'just in case'. But in regions with less reliable infrastructure, or more prominent concerns about privacy, cash will always play a role.
In the UK, rural areas aren't likely to 'go cashless' any time soon. In cities, however, the picture is very different.
At some point in the future, being a cashless business in a city will no longer be a talking point. Eventually, the majority of businesses in certain sectors (cafes, retail etc.) will go cashless. Finally, once there's a critical mass of cashless businesses, it'll no longer make sense to carry cash around. At this point, for all intents and purposes, the city will be cashless.
Unfortunately, this will lead to a whole group of people being unable to access shops and other services. Some efforts are being made to make bank accounts more accessible for those with poor credit ratings or no fixed address (basic bank accounts and app-based current accounts), but these still require some form of ID to open. What happens to those without ID?
In Washington D.C., the council is considering a bill that prohibits cashless businesses, claiming that excluding cash customers is discriminatory.
There's no doubt that digital payments are becoming the norm — but it's unclear if we're heading for a completely cashless society.
Getting ahead of the game and going cashless now is a risk — but one that could pay off if your customer base already heavily prefers digital payments.
Do you think your business will go cashless any time soon? Leave us a comment below.