These days it’s becoming easier than ever for consumers to pay with anything other than cash. Our money is at our fingertips in the same way as Instagram or Facebook. Wallets are becoming smaller and cash is increasingly becoming a nuisance to carry. In 2017 The British Retail Consortium announced that cash was no longer the nations preferred method of payment, with over half of transactions now on card. In addition, The UK Card Association noted that in 2016 , 77% of all retail spending in the UK was on card. This begs the question; why do merchants still accept cash?
In the past many merchants have resisted card acceptance or at least made it difficult for people to pay with card (minimum spend/surcharges), with the main argument being that it’s too expensive. However, the cost of card acceptance has been decreasing over the past few years due to the caps on interchange fees that can be charged by Visa and MasterCard making it cheaper and more accessible than ever to accept cards. Not only that, but the introduction of contactless & mobile payment technologies has made it faster than ever to process card payments.
Along with forcing Visa & MasterCard (with some Amex cards to follow) to reduce the fees they charge, the European Commission has also recently outlawed merchants charging surcharges for paying with card (which were often significantly higher than the actual cost), making it easier & cheaper for consumers to pay with card. These actions are a clear indication of changing behaviours and a shift towards a cashless society. The UK Card Association forecasts that card payment volumes are expected to rise from 14.3 billion payments in 2016 to 21.9 billion in 2026.
A popular lunch spot for Londoners, Tossed, the salad bar chain made the move to cashless across each of their 17 shops in 2017. Not only that, but they moved to a model of 100% self-service kiosk. This resulted in improved speed of service and increased capacity during the peak lunch-rush with staff able to focus on order preparation rather than order taking. This helped the company reach a 13.6% increase in revenue 2016-17.
Similarly, catering company Amadeus decided to remove cash payments from the majority of it’s concessions stands at Birmingham’s Genting Arena. These concessions stands can see 15,000 customers in a 2-3 hour window on event days. One of the major benefits they’ve seen, is a reduction of 30 mins per day in the time to ‘cash-up’, resulting in labour savings of £8500 per year. This, paired with the fact that average transaction speed increased by 20 seconds made it a profitable business decision. They’re planning on rolling out to all of their other event venues including the ICC and NEC.
Increased speed of service: Card transactions are significantly quicker to process than cash transactions, especially with contactless technologies. This means that you can serve more customers, in less time.
Increased accuracy: Card transactions don’t rely on your cashiers ability to count, so there’s less risk of customers being mischarged or being given incorrect change. This makes the end of day reconciliation process much easier and protects revenue loss.
Reduced theft & increased security: Employee theft remains an issue in restaurants and retail stores. We’ve had reports of small businesses having an allowance of up to 10% of annual revenues for employee shrinkage. Removing cash makes it almost impossible for employees to steal, protecting your bottom line.
Carrying cash also leaves businesses liable to theft from third parties through break-ins, or robberies while transporting cash. Big businesses employ the services of cash management companies to carry their cash, but most small businesses do it themselves. If you don’t have cash on site, it can’t be stolen.
Fitting with consumer behaviour: Consumers these days are used to paying with card for things. Even purchases like transport that used to be 100% cash have moved to card so it’s becoming the norm. Consumers expect to be able to pay with card with fewer and fewer carrying cash. TFL say that over 40% of pay as you go journeys are now made on card and that number continues to increase.
Effortless operations: Cash is difficult to handle. You need to store it securely onsite, count it and transport it to the bank each day which takes up considerable resources. You also need to have processes in place to track the flow of cash from one place to the next. These process are automated with card payments.
Reduced labour cost: Cash handling can be an expensive process. You need to pay staff to count it at the start of a shift & the end of a shift. If you don’t have these processes then you can save considerable labour time which can be gotten rid-of all together, or reallocated to tasks that bring more value. 30 minutes per day in labour savings adds up to 180+ hours per year!
Higher average spend: On average, customers spend more when paying with card. In the case of Tossed, going cashless allowed them to ‘premiumise’ their offering, moving to a totally customisable product that people were willing to pay more for.
Ease of upselling: When customers pay with cash, they’re limited by the amount of cash they have on them at that time. When a customer pays with card, they have much more money available to them and their propensity to spend is higher. This makes it easier for employees to upsell at the point of sale.
Data collection: Many card payment & EPOS systems use a technology called tokenisation to securely track customer behaviour & spending patterns. You can easily see data on new vs repeating customers & average spend. The more card payments you accept, the more data you’ll have.
Loyalty: Consumers no longer want to carry hundreds of stamp cards, or download apps for every business they frequent. Loyalty companies are starting to use tokenisation technology that allow a customer’s payment card to become their loyalty card. The more cards you accept, the more customers you can have on your loyalty scheme.
Improved hygiene: Cash is dirty and unhygienic and can pose problems to food businesses with employees often needing to change gloves to take cash payments. There isn’t this problem with card payments, were employees don’t need to come into contact with any tender.
Cost of processing: Certain card types can be expensive to process, this is especially the case with international cards. For merchants who have a high proportion of international customers who’d usually pay with cash, going cashless could be expensive. Certain international cards can cost upwards of 2.5% to process, so if you’re in an area with a lot of tourist trade, then shifting these customers from cash to card could prove costly.
Alienating customers: Although consumer behaviour is changing, there are still customers who prefer to pay with cash. By going cashless, you risk alienating these customers. Although, they’re likely to only represent a very small portion of customers & these customers are unlikely to not have any from of card to pay with. To allow for this, Amadeus still have a few ‘back-up’ cash tills at their Genting arena concessions.
Discrimination against the ‘unbanked’: There are still certain groups of people who don’t have easy access to credit of debit cards, whether due to age or financial situation. According to the financial inclusion commission, over 1.5m adults in the UK remain unbanked. Going cashless could not only be deemed discriminatory against these groups, but could also restrict the size of your market (although there is an argument around the commercial value of these customers).
Over-reliance on technology: We’ve all been into supermarkets and seen self checkouts with broken card machines and ‘cash only’ signs. We’ve also all been a store when their card machine has been down. In situations like this, stores are left with no option but to accept cash or turn customers away & nobody wants to turn customers away. In January 2018 Verifone had a huge national outage, which rendered thousands of card machines useless, costing businesses a fortune in lost revenue. How would a cashless venue handle a situation like this?
Overall, it’s pretty clear that the benefits outweigh the costs, and we expect to see more and more business going cashless in 2018. However, there’s still a learning process for merchants who don’t necessarily understand the indirect costs associated with cash handling. Furthermore, the figures given for card usage are UK averages, so there are always going to be certain areas and certain businesses where it makes more or less sense to go totally cashless.
Want to learn more or not sure where to start? Speak to one of our experts today and we can talk you through all of the options available to you. We can look at your business and run simulations to see what’s the best combination of EPOS software & payment processing.