“Physical money in your hand – a system of payment that began 600 years before the birth of Christ – is coming to an end. Apple’s CEO Tim Cook says the next generation ‘will not even know what money was.'” – Jacques Peretti
For those of us who’ve grown up waiting eagerly for pocket money day and saving up some of those precious coins in a money jar, the idea that society is on the verge of becoming totally cashless might seem slightly incredible. However, payment trends and cashless examples from around the world would suggest that this is a digital frontier we’re really not that far from crossing.
By 2020, the European Union is planning to phase out the 500 Euro note and South Korea is planning to have no cash at all!
In Sweden, cashless businesses are already the norm and, in 2018, only 13 percent of Swedes reported using cash for a recent purchase (even the country’s buskers are using contactless machines).
And, back in 2007, Kenya launched M-Pesa – a totally cashless system that allowed Kenyans to make money transfers by text. By 2010, the number of Kenyans using M-Pesa had overtook the number who had a bank account!
While we seem to be at an evolutionary moment in terms of money transactions, going cashless is still a big step for any retail or hospitality business. If you’re considering that leap, here are some of the key ways your business could benefit and a few of the common pitfalls to watch out for too.
1. Increased speed = more customers
When you look at the average time it takes to complete various types of payment, contactless transactions win the race at around 2 seconds. Chip and pin comes in next at between 5-8 seconds and cash takes up the rear, requiring an average 15 seconds.
Over the course of a day’s business, these seemingly small differences that can add up. Cash increases the time that people have to wait in the queue, something which is crucial for certain types of businesses – for instance quick-service restaurants or retailers who rely on the rushed lunch-time trade. With a card-only option, it’s a quick swipe or scan, job done and the queue moves on (allowing your business to serve more people).
2. Higher average transactional value
Around the time of the millennium, Drazen Prelec, a pioneer in the field of neuro-economics at MIT, ran an experiment on campus where 500 students were asked to make sealed bids for tickets for a basketball match. Half of them were instructed to use cash and the other half told to use card payments. The results were informative – on average, the credit card bids were twice as high as the cash ones and some were six times higher!
Prelec discovered that, when dealing with cash, a neural pathway in the human brain lights up which makes us feel an actual moment of pain at the loss of the money! With card payments, however, there’s no such pain and the buyer is released to spend without limit.
Although you might not want to be seen to encourage such ‘spending without limit’, there’s no doubting the fact that card-only payments could be a simple way of raising the average transactional value within your business.
3. Labour efficiencies
The act of taking in and giving out cash to customers is not only a slower process at the till but also presents a whole host of other tasks such as refilling the register with change, reconciling cash at the end of the day and making bank deposits. All of these take up valuable time and exposes your business to the vulnerabilities that come with human error.
Going cashless removes such tasks. Credit/debit card payments automatically reconcile with your bank and because your smart POS software can produce sales reports in real-time, that brings the added benefit of enabling you to maintain a more accurate and timely watch over the business financials.
4. Increased security
Another key benefit of going cashless has to be increased safety and security for your business, your staff and your customers. Tills and cash boxes are like magnets to thieves – including both those who are external to your business and those who are internal (an errant staff member for instance).
However, if your business is cashless, that magnet effect instantly drops. Of course, thieves may still attempt to take goods but, with the lure of hard cash gone, the risks are reduced.
Going cashless is not entirely without risk for businesses on the High Street. The most common pitfalls seem to fall into three main areas:
1. People have not yet gone cashless
Although digital payments dominate, the reality is that people do still carry cash and want to be able to spend it. For some it’s a deliberate choice not to carry a card so as to avoid the urge to overspend; others may be in a position where they are unable to attain a bank account or credit card; and then there are transactions made by children to think about (where cash is still a common option).
It’s important to put in the research and this is where your POS software data could help. Use it to identify how cash is currently being used within your business (compared to card/ mobile payments) and you’ll be able to better evaluate whether going cashless is going to boost or impede profits.
2. Higher fees
With every card payment, there’s a processing fee that your business has to pay for. Of course you can offset this through your pricing strategy but that may put some customers off. Cash may have many downsides but it is the cheaper sale.
Although the infrastructure and internet connectivity are pretty reliable these days, most providers would shy away from claims of 100% availability. The concern is that, should systems or connectivity fail, the cashless business may be left with little alternative than to wait out the problem losing business at every second. If this is a particular concern for you, talk to us at the Goodtill. Our iPad till is amazingly resilient (it can work with wifi, its own sim card or in an emergency via a hot-spot to another phone) and we’d be happy to help you determine whether reliable data connectivity is a risk factor for your business.
How to communicate going cashless
If your business is ready to go completely cashless, this is not something you can implement overnight. Plan ahead and prepare a comprehensive communication strategy so that your customers and staff are informed well before the actual policy sets in.
Set a date for the switch and use every opportunity to get the message across:
- Use your POS software ticketing or e-receipts.
- Plan a social media campaign that’s backed up with prominent messages on your website.
- Place signage around your venue – traditional posters or digital screens plus signs at your point of sale which shows clearly what payment types are available.
- Plan a training schedule for staff so that they know exactly what to do on day 1 of the change and how to respond to customers with concerns.
Right now, moving to a cashless model is clearly not a decision any sensible retailer or hospitality business owner should take lightly. If your business attracts a high proportion of children, for instance, then it’s probably not the best idea (although with pre-paid pocket money cards rising in popularity, that may soon change).
However, there are many significant advantages to going cashless: increased speed, higher transaction values, efficiency/ productivity gains and better security are just a few. There are also benefits around the data gathering capabilities that sit alongside card transactions and the issue of traceability.
With all of this in mind, we believe that modern businesses should at least be placing the idea of going cashless firmly on their radar and take some time to give it fair consideration.
Are you thinking of going cashless?
Speak to one of our team to discuss how the Goodtill can support you with this decision. Call on 0203 764 0800 or chat with us here.