The decline of cash payments in the UK
There’s no getting away from the fact that consumer spending is changing, especially in light of the coronavirus pandemic.
Shoppers are moving away from making cash payments and instead, using debit and credit cards, contactless payments, digital wallets and virtual terminals to pay for products.
Figures by UK Finance show that in 2017, debit cards overtook cash as the most frequently used payment method in the UK and it’s likely this trend will continue over the coming years with the rise in contactless payments and alternative digital payment methods, such as Apple and Google Pay. This is further supported by more recent data which shows debits are the most popular payment methods followed by cash.
To prove that cash is on the decline, research carried out by Accenture, shows that between 17th-25th March 2020, cash usage in the UK had declined by 50% and is expected to reach 40% across the whole of 2020 compared to 2019. Meantime figures show that ATM use in the UK will drop to around 74.2% in 2024 compared to 84.7% in 2019. This was already in decline prior to COVID-19 but is now largely down to the pandemic-related safety precautions which have slashed cash and ATM usage.
So what are the pros and cons of adopting a cashless policy for businesses?
1. Save time and money
While businesses have to pay a fee for each credit card transaction, they also have to pay an employee for the additional time it takes to accept cash. From counting the cash at the end of the day to making frequent trips to the bank and possibly paying deposit fees, these extra hours add up.
2. Increase checkout efficiency
One swipe or tap of a credit card makes for a much faster transaction than the process of counting cash and giving change. Going cash-free can speed up the checkout process significantly and reduce customer queuing time.
3. Decrease risk
Keeping cash in the register leaves your business at risk of theft and robbery. Accepting electronic payments will not only improve the physical safety of both customers and your staff but also reduce cash theft.
4. Improve accounting
Going cashless allows you to track every transaction easily and leads to more accurate accounting which increases efficiency as well as your bottom line.
5. Increase customers by offering a variety of cashless payment options
Offering as many payment methods as possible can be a huge advantage for businesses as you widen your accessibility to a greater proportion of customers. Debit cards are typically the preferred cashless purchasing method but other electronic payment methods and digital wallets such as Apple Pay or Google Pay are also increasing in popularity.
1. Additional fees apply for credit cards
Additional interchange fees are typically charged by the credit card issuer e.g. VISA and Mastercard as a percentage of the transaction value, these may vary, anything from 1% upwards. Remember to factor this into your workings as you decide which payment methods you’d like to offer.
2. You might lose customers
Before the coronavirus pandemic many people preferred to pay by cash for privacy or data security reasons or budgeting purposes. Some simply don’t carry cards on them. Consumers care about comfort, control, convenience, and this includes payment systems. The more payment options you have on offer, the more customer-friendly you are. Essentially, you should now be looking to cater for customers no matter how they choose to pay while keeping your staff and your business safe.
3. The risk of system crashes
All cashless systems are prone to unexpected downtime, if that occurs in the middle of the working day and cash is unable to be accepted as a fall-back option, this could lead to a loss in revenue.