The speed at which we’re moving towards a cashless economy is remarkable. The UK Cards Association revealed that 77 per cent of all retail sales last year were paid for with a credit or debit card.
Further supporting the cashless economy trend, data from the British Retail Consortium showed contactless card payments now account for a third of all transactions in the UK.
Consumers want to pay in the most convenient way for them, so with debit and credit cards so easy to carry around, and with the growing popularity of e-wallets, holding cash is simply not at the forefront of consumers’ minds any longer.
This is even more apparent with younger consumers. Moneymailme looked at Generation Z’s payment habits and found that 48 per cent of 18-25 year olds believe cash will be obsolete within the next 20 years.
This generation has grown up with mobile technology at its fingertips and, for many of them, a cashless economy will be the norm, thus using cash seems like a very outdated concept. 62 per cent of them in fact say feel frustrated if they are forced to make purchases with cash.
Despite these overwhelming statistics, over half a million UK SMEs still don’t accept payment by debit or credit card. Cash, for many, is still viewed as the greatest store of value and many small businesses have been slow to adapt to new technology. Yet ignoring the benefits of offering cashless technology can stunt business growth and lock consumers out.
Recent research by B2B marketplace Expert Market highlighted that SMEs could be losing out on over £23,000 of profit each year by not accepting card payments and the cashless economy. It is clear that businesses cannot drag their feet on offering solutions if they want to protect their bottom line.
In addition to keeping up with the consumer, there are other business benefits to going with the cashless economy. Not only is cash expensive to produce, store and administer, but banking and withdrawing cash is both time consuming and can be accompanied by an unwanted extra fee.
This, contrasted by the ease and security of electronic payment methods, should make businesses willing to embrace this change.
The risks associated with banking cash far outweigh the risks of e-money, especially when you consider how quickly cyber security is evolving. Faster, cheaper payments with enhanced security offer both consumers and businesses a safer and superior alternative to cash.
Similarly, electronic payment is easier to track from an anti-money laundering perspective and can reduce the risk of fraud.
There’s also the MI for businesses which comes with electronic payment methods, which can be hugely informative when it comes to management of stock or marketing. Helping identify consumer trends through payments can help with knowing your customer and increasing sales.
A clear example of a cashless economy company becoming a huge success is Uber, with its “invisible payment” method. It would be hard to ignore that at least some of Uber’s popularity and success is due to the ease of payment by customers not being obliged to re-enter their details every time they make a payment.
Uber is proof that not only can the cashless economy aid a business, it shows how popular this invisible payment concept can be, and that adapting to your customers’ needs ultimately prevails.
Similarly, looking at a country trend level, Sweden is proof that a move to a cashless economy is not just a concept but very nearly a reality. With electronic payments making up 95 per cent of all retail transactions, it’s clear that in no time at all Sweden will have phased out cash altogether.
While technology is fast supplementing the need to carry physical cash, it is my view that it will be the users themselves who drive the electronic payment revolution. Businesses must take notice of this consumer desire to go cashfree, or they will face losing their customers.
The move towards a cashless economy is inevitable and businesses need to understand that it’s just a question of “when” and not “if”.
Mark Bolsom is business development director at Moneymailme