The pandemic has cemented cashless payments as the UK’s favourite way to pay. The dominance of cashless has spurred the payments sector to develop new technologies at a rapid pace, with impressive innovations in mobile wallets, pre-order apps and spending cards, to name just a few.
Many businesses, from start-ups to the tech giants, are competing to develop the next big thing in payments. Apple, for example, has just announced a new iPhone payment terminal feature. With fewer people paying with cash every year, SME leaders need to consider the balance of cash and cashless in their business.
Cash has its drawbacks. For one, cash severely limits a business’s ability to maintain visibility over its finances in real-time. It also introduces the potential risk of theft, increased human error and even virus transmission. These factors, combined with growing customer preference for cashless payments, are encouraging businesses toward ditching cash.
So, what’s holding businesses back from going completely cashless both in the payment journey and for internal company management and expenses? One common issue is the typical 2 to 4% interchange fees which can actually cause businesses to lose money on smaller transactions. That said, the fees on contactless payments are lower than chip and PIN, so there’s room for optimism that future fees will be affordable.
Another obstacle is that a small number of businesses such as microbusinesses still lack the infrastructure to accept cashless payments, with four in ten still only accepting cash. However, the cashless payment processing market is now fully mature, and there are a variety of affordable, easy to use options for businesses that want to accept card payments.
Ultimately, as customers increasingly insist on going cashless, businesses will need to accept the reality that cashless is here to stay. Businesses, then, must decide how best to navigate this cashless world and set themselves up for financial success.
Managing spending without cash
While there’s no end in sight for cash when it comes to accepting payments, making business payments is a different matter. There’s a strong case to be made that SMEs should progress beyond the traditional cash-based approach to expenses to a cashless alternative, and this provides a case study in the potential of a truly cashless future.
The conventional approach to spend management leaves a lot to be desired. Employees often pay for business purchases out of pocket, save the receipt and ‘ ideally, but not always ‘ are reimbursed by the business at the end of the month. This process severely restricts a business’s ability to monitor spending and it’s prone to human error.
Many businesses also maintain a petty cash pot for small employee purchases. This solution trades accountability for ease of use, leaving it vulnerable to misuse. Production companies even go as far as having hefty safes while on set to alleviate the risk of petty cash. And, even when spent appropriately, petty cash produces significant accounting issues.
Instead of petty cash and filling out expenses by hand, businesses should adopt a modern spend management solution, such as the prepaid card-based offerings from many providers. This approach provides all the benefits that have made cashless the top way to pay, as well as significantly improving accountability and quality of life for business owners, accountants and employees.
This also makes overseas spending cheaper, easier and more secure. There are fewer fees for purchasing overseas than a debit card when working internationally, making expansion cheaper by avoiding the build-up of these costs. Furthermore, employers can have greater control and visibility over spending abroad. Businesses can monitor the budget allocated to a given card, keep track of payments, and place restrictions on what it can be used for. Employees, meanwhile, are saved from having to spend their own money and benefit from a streamlined receipt and expense tracking process
Striking an appropriate balance
Today, only one in six payments in the UK is made with cash while a significant majority are equipped for cashless payments. Accepting payments via card or some other digital method provides significant benefits in terms of data, making it possible for business leaders to keep track of every penny in real-time. It also removes the need for cashing up, and the associated training time, risks and work.
However, it’s far too soon to write off cash entirely. UK finance estimates that 17% of total payments in the UK were paid in cash last year, still a sizeable proportion, so businesses could risk turning away customers if they insist on going entirely cashless. Today, the smartest move is for businesses to accept both cash and cashless payments while encouraging cashless as the preferred option.
This isn’t to suggest a 50-50 split on cash and cashless: consumers clearly prefer cashless, and businesses should focus their efforts here while maintaining a limited cash capability. Switching to primarily cashless also means that businesses can keep smaller amounts of cash on the premises, reducing the risk of theft or mishandling.
The payments landscape continues to change, and it’s in SMEs’ interest to stay ahead of the trends. When it comes to making payments, cashless is the clear winner ‘ and the same should go for making business payments. Adopting a modern spend management solution is a must for any business which regularly requires employees to spend company money.
Accepting payments is another matter, as cash remains in common use. Fortunately, it’s entirely possible for businesses to maintain both cash and cashless payments systems, maximising their cost-effectiveness and potential customer pool.