In the payment world, a popular adage has fallen by the wayside. Cash is no longer king. The advent of cryptocurrency and a steady increase in credit and debit card usage has led to the increasing popularity of the cashless business.
Brick-and mortar businesses that have historically thrived on cash are making the switch to purely digital forms of payment. These include food service companies like salad fast food chain, Sweetgreen; Washington D.C.-based salad and sandwich restaurants, Jetties; and 2nd City restaurant in New York City.
Businesses going cashless may just be following the sign of the times. According to the Federal Reserve Payments Study 2016, total noncash payments increased 5.3 percent annually from 2012 to 2015. The number of credit card payments reached 33.8 billion in 2015 with a value of $3.16 trillion, up 6.9 billion or $0.61 trillion since 2012. This was the largest growth rate among the payment types.
David Johnson is CEO of Latium, a tasking platform that pays its users in cryptocurrency.
“As the global economy has evolved over the last few decades, we've seen a massive move from physical to digital business models," he says. “To say cashless business is the wave of the future is a dramatic understatement. I doubt that cash will be used 20 years from now."
Going cashless does appear to be gaining tremendous ground, agrees Laura Orrico, president of Laura Orrico Public Relations. She receives her payments digitally.
“Paying without cash is a much faster way of sending and receiving payments," Orrico says. "In this fast-paced world, convenience is paramount, and digital payments are convenient."
Potential Benefits of Having a Cashless Business
Business owners say that there are many positives to running a cashless business. Some of these benefits provide more convenience for your company, while other benefits may positively affect the bottom line.
1. Allows for faster, more efficient customer service.
Cash can slow down customer service, from customers digging around for cash to employees counting out change—sometimes incorrectly. Then the cash must be counted and deposited into the bank. You also need to have cash on hand to make change. This all can add to administrative overhead.
A credit or debit card transaction requires no counting and can result in a quick and efficient deposit into a business owner's merchant account.
2. Reduces the possibility of theft.
Some companies that have switched to cashless have done so because of theft. They've found that not having cash on hand lowers the chances of robbery. This can help make the business safer for customers and employees.
3. Offers easier accounting.
When you go cashless, all of your financial records can be at your fingertips. There's no need to sort, count and record cash and add it to debit and credit sales. Instead, you can quickly access your sales for the day.
You can also use accounting software to update your finances based on what's in your bank account. This can give you real-time data as to how your business is really doing.
“With a cashless business you gain full transparency into every detail of how your business operates," says Johnson. “This access to data and analytics allows you to make more informed business decisions."
4. Appeals to customers who prefer to pay with credit.
The younger generations, such as Millennials, tend to be more likely to pay with credit.
If young and tech-savvy people are your target customers, this may work in your favor. Being a cashless business can set your company apart from competitors.
Potential Drawbacks of Running a Cashless Business
Like any emerging concept, there are potential negatives to running a cashless business. You may alienate customers who prefer to pay with cash. There are costs associated with accepting debit and credit cards, and there is the potential of chargebacks. You could also increase your company's risk of credit card fraud. Using a service that mitigates credit card fraud and training employees to detect credit card fraud is advised.
7 Steps to Making a Cashless Business Work
To have a successful cashless business experience at your company, keep the following seven tips in mind.
1. Look at how your customers currently pay.
“Let the data tell you if migrating to a cashless business is the best move for your business," says Johnson. "Don't just switch because you've heard it's a good idea."
In addition to looking at the portion of your business that is cashless, think about how you could convert some of those cash customers to cashless.
2. Consider the costs of going cashless.
You may want to research several merchant services providers and determine if going cashless will fit into your budget. Estimate how much the additional costs for debit and credit transactions will be. Also consider how much it'll cost you to do marketing about becoming a cashless business.
3. Poll your customers and employees.
Ask customers what they think about your company going cashless and compare their opinions. Also survey your employees for their viewpoints.
4. Communicate with customers about the switch to cashless.
Explain to your clients the reasoning behind your move to going cashless. Spread the message around via as many channels as you can, such as social media, in-store signage, email blasts, blog posts and word-of-mouth.
5. Make a gradual transition to cashless.
You're likely to get less pushback if you make the change to cashless gradually. Rather than an abrupt switch overnight that leaves customers shocked, let clients know that in a certain amount of time the business will become totally cashless.
“Don't rush into the process," says Johnson. “Take your time integrating cashless options into your model. Make sure it's a good fit and you have the right systems in place."
6. Be flexible when you make the switch to all digital payments.
“Businesses can make the cashless concept work, as long as they're flexible," believes Orrico. “If you're going to start accepting just credit and debit cards, then don't insist on a minimum credit order amount."
7. Plan ahead.
“Cashless business is a growing trend that isn't going to stop," says Johnson. “Even if cashless is not a good fit for your business model today, do yourself a favor and get educated about the space. That way you'll avoid waking up and discovering that your business is failing because no one uses cash anymore."
Read more articles on industry trends.
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