When was the last time you paid for something using cash? With the range of innovative payment technologies hitting the mainstream, cash is fast losing popularity.
This is in large part thanks to contactless capabilities. It’s allowed payment methods to change radically, meaning you can now pay for items using your wristwatch, or even the jacket you’re wearing. £7.75 billion was spent in 2015 in the UK using contactless cards, compared to £2.32 billion in 2014, according to The UK Cards Association. 38 per cent of UK consumers now say they regularly carry contactless with them, according to this year’s UK Sage Payments Landscape Report.
But cash also carries a financial burden with businesses losing out due to theft and inaccuracies incurred specifically as a result of handling cash. The report reveals that cash costs the UK’s Small and Medium Business population an incredible combined total of £9.4 billion every year as a result of human error and theft both by staff and from external thieves.
Of the business owners and entrepreneurs surveyed, almost a quarter (24 per cent) said they have been the target of cash theft by a member of staff in the past year while 34 per cent admit to losing cash due to human error. What’s more, more than half (56 per cent) say they spend up to an hour or more counting and transporting cash to the bank each week.
As the pound plummets further and inflation rises, it’s more critical than ever for Small and Medium Businesses, as the lifeblood of our economy, to keep hold of every last penny. With developments in technology, handling cash (and losing money as a result), is not only avoidable, but also potentially off putting for customers.
The successful adoption of contactless in the UK has paved the way for its growth in the US, consequently opening the door to mobile payments. 69 per cent of UK consumers use mobile payment – this number could soon be the case globally, as smartphone adoption in emerging economies continues.
Perhaps as a result of this reliance on smartphones, Apple Pay recently released figures claiming that 75 per cent of contactless transactions in the US were made via its payment app. Additionally, according to our research, online wallets such as PayPal, Amazon Pay or Google Wallet, were the most likely to make a business seem modern and progressive. Overall, it shows that corporations see the future of payment technology in mobile and contactless, and consumers are responding positively to their efforts.
Strong voice for choice
This strong consumer reaction is being fuelled by the demand for choice, and this has to be reflected in payment options. The majority (90 per cent) of consumers we surveyed in the UK claim it’s important for businesses to offer customers a diverse range of payment methods – this figure rises to 96 per cent in South Africa. In the US, 87 per cent of consumers said a range of payment choices were important in making a business seem progressive.
Consumers feel strongly enough about this to act on it, with 58 per cent in the UK claiming they would be more likely to shop somewhere that offered them multiple ways to pay. South Africans place even more importance on it, with a huge 90 per cent of respondents to our survey prepared to shop elsewhere if a business didn’t offer them payment choice.
Interestingly, it’s the older age groups that demonstrate the greatest willingness to move away from cash, with 59 per cent of over 50s saying that they either don’t deal in or have little dealings in cash.
Work in progress
The advances in payment technology mean that it’s a hugely exciting time for Small and Medium Businesses. Not only is there a consumer hunger for choice in how they pay, there’s a collective desire to improve cash flow practices and financing, to the benefit of everyone in the supply chain. Moving away from cash means that transactions become more transparent, and much easier to track and report on.
But it’s a work in progress. The barriers US businesses cite to speeding up cash flow are internal procedures (24 per cent) and slow payments from customers (23 per cent), suggesting that there is some work to be done by all businesses to accelerate payments. Indeed, businesses across the pond feel the same way; 62 per cent of UK businesses say they define accelerating payments as a priority. Technology may help, with 52 per cent of US businesses surveyed saying platforms such as payment management dashboards would improve their view of the movement of money.
The way we pay
Both businesses and consumers think contactless will be the most popular payment method by 2020 – yet only 12 per cent of UK businesses are ready to invest in it in the short-term. Consumers know what they want, but businesses are failing to match the demand; cash-only is no longer an option.
We’re even seeing the embrace of new online currencies. Bitcoin is no longer confined to dark internet forums, instead becoming a legitimate currency accepted by huge multinational companies – Microsoft and Bank of America recently announced they’re embracing Bitcoin’s Blockchain technology to improve financial transactions and more will likely follow. At the same time, Mastercard has recently launched ‘selfie pay’ and Alibaba is soon to introduce a virtual reality payment system.
All of this indicates that the UK government’s recent investment into the new 12-sided pound coin and plastic £5 notes may have been short-sighted. At the other end of the payments spectrum, Link is reviewing the need for hole-in-the-wall machines as consumers opt for more innovative types of payments, as 34 per cent of consumers agree cash will become far less prevalent within the next 20 years.
The way we pay is changing dramatically, and businesses need to be prepared for it. The message from consumers is clear: give us the choice we want and you’ll be rewarded with loyalty. Fail to keep up and we’ll happily check out the shop across the road instead.
Seamus Smith, CEO, Sage Pay
Image source: Shutterstock/MaximP