By PayPal Editorial Staff
September 7, 2023
Source: PayPal
Photo Source: Unsplash,
The constantly evolving payment landscape has introduced many cashless payment options, from credit cards to mobile payments on phones and smartwatches. The transition to an entirely cashless business can affect every department of a large enterprise differently, as well as transform customer relationships - both positively and negatively. This article will cover the various advantages and disadvantages of adopting cashless transactions in a large organization.
Cashless business trends 1,347.7 billion cashless transactions were made globally in 2023, and this is predicted to grow to 2,121.6 billion by 2026.1 The global rise in mobile wallet transactions can be seen both online and in store. Mobile wallet point-of-sale transactions are expected to rise to 39% in 2025, while ecommerce mobile wallet transactions are projected to represent 53% of all transactions by 2025.2 The Asia Pacific region and Europe are leading currently, but cashless payments in North America are on the rise.1
Cashless payment trends are steadily growing in the United States, with credit cards proving to be the most popular method overall, and mobile wallets fast becoming a preferred method for ecommerce payments.3 2022 statistics from the Pew Research Centre show 41% of U.S. adults made almost all their purchases with a cashless method instead of physical cash in a typical week, while 44% used a mixture of ways to pay.4
Why are shoppers making this shift? Most customers now expect a choice when it comes to payment methods. Cashless transactions are often faster and more convenient. Plus, constant technological advances mean customers can pay with a variety of methods, including through mobile or by tapping or swiping their physical card. These technological advances include better security in a landscape where payment fraud is common – meaning customers can store their encrypted card details with peace of mind.
Benefits of going cashless From improved efficiency and security to positive customer experiences, there are a few benefits of going cashless:
Enhanced efficiency and reduced costs Cashless payments improve overall efficiency and reduce operational costs in a business. Cashless transactions are faster to process when interacting with customers, customer service teams don’t need to handle, count, or bank physical cash, and all accounting can be stored and completed digitally. This reduces operational costs and saves a significant amount of time, as well as reducing the possibility of human error.
Improved customer experience Speeding up transactions can dramatically improve customer experience. Customers will find cashless transactions more efficient and flexible, and customer service staff can serve even more people than before.
Fast and innovative digital payment methods include contactless, pay later in-store, QR codes, and mobile wallets like Apple or Android Pay. For example, embedding QR codes into the customer experience can improve convenience whether customers pay in-store or buy online and pick up in-store.5 Apple and Android Pay give customers the ability to shop with a business even if they leave their wallet at home.
Enhanced security and fraud prevention Handling and storing cash on site can be a major risk. Brick-and-mortar businesses can be subject to ‘smash-and-grab’ robberies, which can include cash boxes as well as physical merchandise. This causes a huge amount of disruption and can involve a slow police investigation.6 Storing cash on-site can be tempting for thieves and put a business and its staff at risk.
Going cashless can be an effective method of theft prevention. Digital payment systems prioritize payment security by locking customer payment data away with encryption, tokenization, and other advanced security measures. PayPal Enterprise comes with advanced fraud protection, which uses machine learning and insights from 15+ billion annual transactions that can help to protect customers and shield businesses from fraud.
Seamless international payments Operating a cashless organization can reduce friction for international payments. Currency conversions can be a hassle and the fees can be punitively high too, which deters customers and cuts profits. It’s important to choose an online payments provider which makes accepting global and local payment methods simple. This opens up new territories while keeping global and local payment methods simple.
Data analytics and insights Cashless transaction systems provide a huge amount of valuable data on customer behavior, including payment insights, purchase patterns, and preferences. Organizations can leverage this data to personalize marketing strategies, make merchandising and product purchasing decisions, choose which marketing channels to use, and approach customers at different stages of their buying journey.
Considerations of cashless payments There are a few disadvantages of cashless payments to consider too, including processing fees, customer reluctance, and tech reliability. Some of the drawbacks to consider before your organization makes the move to cashless transactions are:
Payment processing fees Both cash and digital payments come with processing costs. Legally, there is currently no cap on payment processing fees for digital and cashless payments, so it’s especially important to choose a provider with low processing fees.
Accessibility and inclusivity According to a 2022 Gallup poll, there is some reluctance in the U.S. to embrace purely cashless payments.7 Even though 6 in 10 make most of their purchases without using cash, Americans aged 65+ are less comfortable, and lower-income families – with a household income of less than $40,000 a year – are more likely to use cash to pay for their expenses.7 Some customers might not have access to cashless payment options, or may be unsure about adopting them. If a customer base includes a variety of demographics, consider how some of them might be disadvantaged or excluded if they can’t pay with cash. One strategy to mitigate this is to continue to offer a variety of payment methods. Customers who wish to pay with their mobile wallet can do so easily, but customers who prefer cash (even if they’re in a minority) can pay their way too.
Technological reliability Every business owner has dealt with technology outages. It can be incredibly frustrating and lead to loss of business. Adopting technology systems can inevitably mean dealing with system downtime, network failures, and cyber threats. When choosing a payment provider for cashless payments, it’s important they have a robust infrastructure, reliable technology systems, and high security standards. This can minimize the risk of fraud, downtime, cloud storage failure, and more.
How to transition into cashless payments We’ve looked at the various cashless payment advantages and disadvantages. It’s also important to understand what the transition to cashless payments looks like practically and economically. This is how to transition into cashless payment options without alienating customers, while improving loyalty and keeping payment security tight.
Offer multiple payment options Even if cash isn’t an option for customers anymore, businesses can give customers the freedom to pay in different ways. That means offering multiple payment options including credit cards, contactless payments, QR codes, and more, to help cater to as many people as possible. Payment data analytics collected in those initial weeks and months will demonstrate which payment methods are the most popular.
Offer loyalty cards
Partnering with a loyalty payment app makes it easier to reward customers and keep them coming back. This has other benefits too, including increased customer lifetime value (CLV), improved customer satisfaction, and helpful customer spending data.
Prioritize cybersecurity Security can still be a risk in cashless businesses. The risk of in-store theft might be lower, but anti-fraud measures still need to be a high priority in case of digital threats like phishing, chargeback fraud, and card-not-present fraud. An effective cyber security payment platform will have all the tools to combat these risks.
Considerations before going cashless Here are a few more factors to consider before deciding to move to cashless payments.
City and state provisions Some cities and states across the U.S. have banned cashless businesses, including New York City, New Jersey, Connecticut, Massachusetts, and Pennsylvania (Philadelphia).8 New bans have been proposed or are progressing in other locations too, so moving entirely to cashless might not be a good idea right now depending on a business’ operating locations.
Business transaction size The volume of sales processed can indicate whether it’s a good idea to go cashless or not. Generally, the more transactions a business processes, the cheaper the processing fees can be. Smaller individual transactions can also carry lower fees.
Your target customers Different demographics prefer different payment options, and some businesses need to cater to as wide a group of potential customers as possible. 71% of American adults aged 50+ say they always carry cash, compared to 45% of adults aged 18-49.9 This is even more interesting when the generations are segmented. Just 11% of 18-29-year-olds use cash for most or all of their purchases, compared to 37% five years ago.10
Management within your organization The transition to cashless payments can be smooth in some respects, but it still requires thorough planning, infrastructure upgrades, staff training, and change management. This can be time-consuming and expensive if not organized correctly, so make sure a cashless transition timeline accommodates these adjustments.
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