Is Cashless Worth It?

As fewer people carry cash, it could be time to consider a cashless society…

There are around 53,000 free ATMs (Automated Teller Machines) in the UK. However, if LINK’s ATM footprint report is anything to go by, that won’t be the case for much longer. Hit by falling transaction rates and an increase in cashless alternatives, cash machines – especially free ones – are becoming less economically viable for operators. This trend isn’t just confined to the UK. Across the world, fewer people are carrying loose change. But what does this mean for business?

From paper to card

Digitalisation, ecommerce, new payment options and online banking are just some of the reasons that the number of cashless transactions is falling. They have, of course, been replaced by cards – contactless or otherwise. According to the Federal Reserve, only 35 per cent of US transactions in 2016 were made with cash. There are even a handful of US businesses that don’t accept cash at all, including Flatstick and Bluestone Lane. The aim is to appeal to new, digitally savvy demographics, but not everyone is riding the bandwagon. There are still people who are ‘unbanked’, which means that they only use physical notes and coins. The percentage of cash transactions may be in decline, but the Federal Reserve’s estimate of 35 per cent is certainly not insignificant. What’s more, essentially all of the infrastructures in place today are designed to handle cash payments. Disabling cash payment services at scale would be complicated, costly, and perhaps more trouble than it’s worth. And, on a personal level, there are obvious benefits to carrying currency. There are some situations that call for cash – like buying items at a market or festival, or paying for a taxi in locations currently unserved by Uber and its competitors. There are also numerous situations where you wouldn’t necessarily want to have your card with you, like in a foreign city, music venue or on a night out. Cash is limited – cards are not.

Better for business?

The impetus behind the rise of cashless commerce in the US is to target digitally literate millennials. It’s popular to suggest millennials are a marketer’s nightmare, but by offering a totally cashless, streamlined service, businesses like Flatstick and Bluestone Lane hope to attract this difficult demographic. From a business perspective, there are various other benefits that come with cashless. This includes the essential elimination of cash theft, both from outside and within the company. Big businesses may also welcome the move away from cash because, through greater standardisation, it would be theoretically easier to handle payments. In fact, most companies are equipped to handle card and contactless, so taking cash out of the equation might not have a notable effect.

Although cutting out cash may not affect B2B or major B2C transactions, that is not the case for small to medium enterprises. Some SMEs only deal in physical money, and are reluctant to pay for the technology needed to accept other payment types. Admittedly, most businesses (even sole traders) offer some kind of online based payment methods. But those that don’t – think quaint restaurants, for example, or small independent businesses – still make up an important chunk of the economy. Then there are also charitable organisations to consider. Charities rely on the cash donations made in shops and on the streets. Luckily there are already ways around this, including contactless donation boxes and innovative payment methods. However, the fact that cash is on its way out remains a worrying prospect. The closer we move towards a cashless society, the more work will need to be done to make sure that these businesses are not left behind.

In developed economies, cash is no longer the dominant form of payment. Nonetheless, it will continue to be a viable and popular way to pay. People, especially millennials, might be carrying less cash, but it’s very difficult to imagine a socio-economy that doesn’t support traditional transactions. The massive infrastructural overhaul needed to cut cash would be, at this stage, pointless. That said, regulators need to police the increasing popularity of cashless alternatives. This is what groups like the UN’s Better Than Cash Alliance aims to do by bringing governments, companies and international organisations together to encourage the spread of digital payments without compromising existing economies. One day, cash may well be lost to antiquity.

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