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Contactless and cashless payments are on the rise. According to the FDIC, cash only represented about 30% of all payments in 2017.
Some cities like San Francisco and even some states banned cashless stores for political reasons. But despite politics, slow early adoption, and the COVID 19 pandemic, consumers are now overwhelmingly ditching cash in favor of cards.
Contactless technology and cashless options like Apple Pay, Google Pay, Samsung Pay, PayPal, Square Cash, Venmo all make going cashless easy for consumers.
But going cashless or contactless (especially since the pandemic) comes with some challenges for businesses.
It leads to questions like:
We dive into what you need to know about running a cashless business. Read on for more.
Cashless business and cashless payments are a recent trend (especially in retail) of not accepting hard, physical cash, banknotes, or coins as payment. Instead, many businesses and companies “go cashless”. They’re using mobile apps, SMS text messages, credit cards, debit cards or even cryptocurrency to accept digital payments.
Cashless payments and contactless payments get referred to interchangeably. But they mean two different things.
Cashless payments are payments made without using physical cash. But they require customers to swipe, enter a PIN, or sign with a credit or debit card. Contactless payments are cashless payments. But they don’t require physical touch using near-field communication (NFC) technology or radio frequency identification (RFID) technology.
How does contactless payment work? With a contactless payment card, you just wave your card with an EMV chip near the card reader to make payment. There’s no need for magnetic stripes.
Bottom line, contactless payments are cashless payments, but not all cashless payments are contactless.
Below are some reasons why you might want to go cashless.
While only a few small businesses experience robbery, you might feel safer without cash lying around. After all, keeping money in the store makes it prone to theft. Going cashless reduces the risk of robbery or employee theft.
A cashless store also reduces the risk of spreading germs and viruses (important since the pandemic). Think about how often a physical bank note changes hands.
Counting money and making change takes time. By transitioning to cashless payments, transactions get faster and more efficient.
If you’re in retail it can also enable you to handle more transactions per hour. Which can boost customer satisfaction – as customers wait times to pay get reduced.
You can also couple cashless payments with other reminder systems like SMS text messages for instant text-to-pay transactions.
Cash N’ Go, a payday lender even increased their on-time payments by 30% with text messaging.
Cash payments are physical. And they come with overhead. Consider the costs of using and training employees on cash registers and point of sale systems.
Then there's the logistics of making physical bank deposits and moving cash between locations. All of these expenses add up and can total thousands of dollars a year.
This is where switching to cashless payments can help lower operating costs. It can also help you improve your small business invoicing.
You can also automate and track accounting, invoicing and payments with software like QuickBooks Online. All of which leads to more data and smarter business decisions.
Many businesses have started accepting mobile payment methods like Apple Pay, Google Pay, etc. This is because customers find mobile payment more convenient. It speeds up transactions and saves time.
If your business conducts international business or operates on a border, then converting currency can be a hassle. Cashless business makes buying in foreign currency more frictionless. Foreign customers can pay through their payment apps – which already take into account the currency exchange rate.
Here are some ways you can start to make the transitions to running a cashless business and collecting cashless payments:
Different customers will probably use varying cashless payment options. To ensure inclusivity, set up your business to accept multiple cashless options, including mobile apps and credit cards.
That way, your customers aren't limited in their choice.
Suggested Article: Top 4 QuickBooks Payments Alternatives
Gift cards, loyalty cards, and prepaid cards provide customers with:
Consider partnering with a loyalty payment app to help reward customers for choosing your business. You can use loyalty apps such as cash-back offers and digital punch cards.
It pays to keep up with your customers' payment preferences. Thus, always be on the lookout for new and trendy payment options. For example, credit cards and payment apps are commonplace now. But payment fobs and biometric payments are gaining popularity.
While a cashless business eliminates the risk of robbery and funds embezzlement by employees, it increases the risk for cyberattacks. Adopting multiple cashless options means multiple ways for fraudsters to steal your money and customer and account information.
Seeing that your customers will be transferring their data alongside the payment, you must prioritize cybersecurity or risk data breaches.
Vet all your payment options. Only consider methods that adhere to security standards like encryption and card tokenization.
Before going cashless, consider the following:
Not everyone supports a cashless society. As mentioned above, some cities and states prohibit cashless businesses.
These include New Jersey, Connecticut, Massachusetts, Pennsylvania (Philadelphia.) More cities are on track to prohibit such stores citing discrimination against people who do not have access to mobile devices.
Nearly 60% of payments under $10 are paid for with cash. Typically, the number of cash payments decreases as transaction size increases. Nonetheless, if your sales are usually below $25, consider sticking with cash payments or adopting cashless payments partially.
You’ll also want to consider whether the saved time and increased efficiency outweigh high transaction fees.
The 2020 Economic Well-being report notes that roughly 20% of American adults don’t have proper banking. Customers must have a bank account to benefit from a cashless payment structure.
As a business owner, you’ve got many cashless payment options. Here are the top four to get you started.
Some business text messaging applications (like MessageDesk) include text-to-pay payments features. This lets you send online payment links to customers via text. Your customers can then follow the link to view the invoice and make payment from their phone.
Text messaging is ideal when sending invoices digitally. Emailing is still the standard for collecting big invoice payments. But texting can lead to faster on-time payments due to its higher open and response rates.
Better still, texting helps you provide better customer service with more conversational messaging. Many consumers prefer making payments on their phones. Texting makes it even easier to connect with and send information to your customers at the right time.
Mobile wallet applications are gaining traction. They’re fast, convenient, and secure payment methods as they enable consumers to store, send and receive money.
Mobile wallets are cardless and cashless and work in different ways. For example, a customer’s mobile phone may contain a chip or contactless card that's waved near a reader.
Many payment processors and POS systems come with integrations that allow you to accept payments from mobile wallets.
Shopify, Square, and Stripe all boast various retail-focused mobile point-of-sale (POS) systems that help businesses sell online.
These are all great options for cashless businesses. If you run a physical storefront, then in most cases all you need is a mobile device and a card reader. You can also use a payment terminal or POS setup based on your business needs.
Platforms like Shopify are also loaded with selling features, such as store credit, discounts, inventory & customer management. It's also up-to-date with electronic selling methods, such as curbside pickup, local delivery, and digital gift cards.
These applications and systems also provide different selling and payment options. For example, your customers can order online and pick the item at your store.
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