Any glance at any payment statistic, from Faster Payments to contactless, to click and collect and to the growing global trend of Request to Pay, would suggest that cash no longer has a place in any business in this mid- pandemic 2021 digital world.
Have digital options even replaced the petty cash tin?
In a later post we will look at cash usage from the point of view of a consumer but here we look at the situation from a business stance. With all the digital possibilities, why would any business still need to pay anything in cash and why would they still be accepting payments by way of cash? Have digital options even replaced the petty cash tin?
Taking business payments first
For medium to larger businesses, electronic banking, Bacs payments together with credit, debit and charge cards for business payments and expenses have long been reducing the need to hold cash for any purchase or supplier payment for the business. The “petty cash tin” may well have been the only place left, largely wiped out now by the rise in contactless payments and the associated acceptance for small value payments, coupled with cost effective and secure platforms to manage and control business expenses and payments, particularly across large workforces in multiple locations.
For smaller businesses, access to digital solutions has been assisted by product developments in online banking and mobile banking providing low cost and effective payment methods for supplier and payroll payments. Indeed, the rise in digital only banking tariffs, Faster Payments, free online banking and challenger bank online or app only banking, has revolutionised payments for businesses of all sizes but particularly for smaller businesses where anecdotally we would have expected most of the cash transactions to occur.
All these solutions were in place before the pandemic and cash usage for business payments has been in decline for many years – according to the PSR report for 2019, only 3% of Business payments were made in cash. Thus for 97% of the time, even before the pandemic, businesses did not need cash for their payments.
The 3% of payments made in cash – and likely now to be a lower percentage still – represent a business choice to use cash. If removed as an option, then any of the methods used for the remaining 97% could be introduced as an alternative.
Does the same apply for payments to businesses?
For any business where there is no face-to-face contact with customers – whether business to business or business to consumer – again with the range of digital options now possible it is difficult to see why any would need to accept cash from their customers or indeed would even choose it as a payment option.
The situation has not been so clear cut for retailers with face-to-face transactions but at all levels, the move to digital has been assisted by the prevalence of payment solutions which have enabled card payments to be accepted without the need to be tied into expensive monthly contracts. This has been a virtuous circle with the rise in contactless payments: there has been a greater demand to use contactless payments and with easy to set up, instantly available payments solutions without a minimum monthly contract, there has been a greater ability and willingness for businesses to accept card payments.
For example, just 10 years ago finding a mobile food outlet that accepted a card payment would be a rare sighting; now most have a mobile or digital device – and certainly again over the last year (when allowed to operate) many have chosen either only to accept contactless payments or certainly have expressed a preference for contactless over cash.
Thus, perhaps we would come to the same conclusion that for businesses of all sizes and of all types, the need to either accept or pay by cash has now disappeared, hastening in a wholly digital world.
The pandemic has certainly hastened the decline in cash usage but as witnessed within the ATM Tracker there remains a consistent floor in cash usage that does not show any sign of reducing any further at the present time. Whilst many payments would be consumer to consumer some of the cash withdrawn will be both for business use and to pay for goods and services.
Thus, the main reason for choosing to accept cash is to acknowledge that – currently – to become cashless is to exclude those who have to use cash or choose to use cash.
If cash were not available this would not be an option but while it remains in circulation any business refusing to accept cash by default will exclude those customers. During the pandemic this was more prevalent due to the possible concerns for staff in handling cash but as the restrictions are lifted many who had refused cash may now be re-considering their decision as we return to more normal conditions.
Taking a local independent coffee shop as an example, over the last year the owners may have chosen to become cashless with the perceived safety outweighing both the potential loss of sale and the disenfranchising of the consumer who cannot use a digital payment method.
As we move out of lockdown, like many outlets they may relax their cashless stance as in our not quite cashless world it does exclude those for whom cash is the only option. What was acceptable during the pandemic where safety was the over-riding issue may be less so under normal conditions.
So, given the above, should we continue to advocate cash as the answer to exclusion thus preserving cash for its own sake?
The demise of the cheque was accelerated by retailers refusing to accept them as a method of payment – should and could the same thing happen with cash and hasten its demise?
The difference is that removing cheques was an initial inconvenience to those who had become used to this method of payment but the removal did not exclude anyone – consumers could either move to digital options or switch to cash.
The same option would be possible if we only needed to consider the consumer who chooses to use cash but, if forced, could switch to digital methods. It would be an inconvenience but one that could be managed with relative ease.
However, this is not the case and the removal of cash as a payment option leaves large sections of society without any viable alternative.
Access to cash and the ability to pay by cash is currently necessary but it is only part of the answer. Alongside should be an equal focus on ensuring that cashless options are inclusive and removing the barriers that prevent people from accessing digital options.
This is not something that businesses can tackle – it needs a holistic approach from government and industry to manage the decline in cash and provide inclusive and accessible cashless options.
Our overall conclusion therefore comes back to the individual choices of each business owner.
There are many payment solutions available for all types of industries and for all types of businesses covering all requirements – so a business can choose to be wholly digital even including all face-to-face retail transactions. Businesses do not need cash.
However, until cashless solutions are accessible to all, it is likely that many businesses will continue to choose to accept cash even though they do not need to do so.
About the Author:
Mike Chambers is the former CEO of the UK’s systemically important payment schemes (Bacs, CHAPS and Faster Payments). Mike is the Chairman of Request to Pay (the UK’s first accredited Request to Pay provider) and the founder of Northey Point Limited providing payments advisory services to Payment Service Providers, Payment System Operators, Central Banks, financial institutions, trade bodies, infrastructure providers and corporates.
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