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Cash-free transactions are becoming common, but the road to a cash-free society is long.
As the world moves towards a digital economy, businesses are increasingly adopting cashless payment options. While a completely cashless society may still be a distant reality, the trend is undeniable. If you’re new to business ownership, you should start off on the right foot by getting ahead of this movement.
This guide will explore the current state of digital payments, the advantages and disadvantages of going cashless, and how new businesses can compete with established players in this evolving landscape.
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Cashless options carry distinct benefits and drawbacks. Here are some pros and cons customers weigh as they navigate cashless options.
Cash and credit card alternatives are growing more popular, especially in specific regions and industries. For this reason, staying informed about digital payment options is wise.
Consider the following popular digital payment options:
Most establishments that accept digital payment methods also accept cash. There’s little backlash against offering digital payments. However, there is sometimes opposition to businesses that don’t accept cash, and instead, accept credit cards and digital payment methods only.
Businesses that don’t accept cash are often seen as discriminatory against people with lower incomes, recent immigrants or those who â for other reasons â may not have access to credit and traditional banking.
Cash-free businesses even face legislation. In 2019, Philadelphia became the first city in the U.S. to ban cash-free businesses. In 2020, New York City followed suit and Seattle and Detroit may be next.
Even if your city doesn’t pass an outright ban on cash-free establishments, as a new business owner, you should consider the ramifications of participating in an increasingly fraught practice and evaluate whether accepting both cash and digital payments is worthwhile.
Accepting digital payments â along with cash â offers significant benefits to new business owners, along with their workers and customers:
The concept of a cashless society isn’t new. However, the path to digital-only payments is long. It took decades for store credit systems to be replaced by charge cards and finally, credit cards and cash survived all that. It wasn’t until 1979 that the first national department store (JCPenney) accepted Visa or Mastercard and it was years longer before accepting credit became common at small businesses.
While it may be true that cash will eventually be phased out in favor of digital payments, if credit cards haven’t been able to kill off cash, it’s doubtful that digital transactions will become ubiquitous or exclusive anytime soon, at least not in the U.S.
According to Pew Research, the number of Americans using cashless payments for most of their transactions continues to trend upward â but some consumers still rely on cash. Three out of 10 Americans with an income of less than $30,000 annually say they use cash for most purchases.
Small businesses tend to be cautious and skeptical about tech adoption. Businesses that serve a diverse clientele â in terms of age, income and resident status â are less likely to go cash-free, as doing so would hurt their bottom line. Additionally, some thriving small businesses don’t have websites and don’t accept credit cards and many successful restaurants don’t use POS or mobile POS systems.
However, new small businesses must balance serving their customers’ needs as they explore the future to increase their bottom line. For example, according to a 2021 Xero report, early technology adoption can boost revenue by 120 percent.
Small business owners who resist new technology like cashless payment methods risk losing customers and profits. Being left behind makes it difficult to attract and retain top talent and causes more inconvenience than exploring cashless payment technology to satisfy a wide array of customers.
As the world becomes increasingly digital, the question arises: Is cash on its way out? While digital payments are gaining popularity, cash still holds its ground. Businesses that offer both cash and digital payment options can cater to a wider customer base and maximize their revenue potential. New small and medium-sized businesses that prioritize early adoption of the latest technologies while ensuring their products are available to all will go farthest in the changing landscape.
Natalie Hamingson contributed to this article.