For Business Owners

The Benefits of Being a Cashless Business in the UK

Heather Young
Cashless business|UK Finance Total Payment Volumes Chart|UK Finance Payments Age Split Chart

Many small businesses baulk at the idea of a cashless society. With good reason, cash has been the lifeblood of local economies for as long as most business owners have been alive. And the rate at which shoppers are moving to card payments, and contactless payments, has been relatively rapid. Is this a good thing? Here at Swipii, we are on the side of the fence that thinks a cashless society could be a great thing for businesses. Why? Well, you’ve just discovered the very point of this article. Read on to find out why we think there are so many benefits of being a cashless business in the UK.

What’s happening to cash?

First, it’s important to look at the trends in payment we’re experiencing in the UK. There are some stark stats to be looked at when reviewing the steady downfall of cash over the past few years, and the years to come. Here are some quick facts:

  • In 2018, cash was used for a surprisingly small 28% of all payments made in the UK. A report by UK Finance projects cash to fall to just 9% of all payments by 2028. A section of the 2018 figures and 2028 projections can be seen below.
UK Finance Total Payment Volumes Chart
  • UK Finance also noted in a separate blog that “One in ten adults in the UK are already leading a largely cashless life, turning to cash only once a month or less frequently”.
  • In the middle of 2018, Which? reported that “1,500 ATMs disappeared from the UK in just five months” during the period between November 2017 and April 2018. Consumers’ access to cash is reducing month on month, which will inevitably lead to fewer cash withdrawals and a demand for cashless businesses and card machines.
  • The UK now ranks 3rd in the list of world’s most cashless countries, according to one article by Worldpay, based on a study completed by Forex Bonuses. The ranking was found “based on six different metrics including amount of credit cards per person, amount of debit cards per person, cards in issue with contactless functionality, growth of cashless payments over five years, payment transactions made using non-cash methods and people aware what mobile payment options they have available to use”.

Why are people moving over to contactless and card payments?

So what’s the deal? Why are local shoppers going cashless in favour of card and contactless payments? The answer, for the most part, is convenience. However, there’s another element which is part of the story here. An increase in trust that consumers have in technology is hugely important also. Apply Pay, Google Pay and Samsung Pay have become widely used by younger generations, with convenience playing a huge part in this, but also trust in the technology behind the security of these payments. The ability to freeze and unfreeze your card has definitely contributed to reducing shoppers’ fear of card theft and being left with major fraudulent bills when cards go missing. Compared to older generations, the number of young people utilising mobile payments is a significant portion of the market (Source: UK Finance).

UK Finance Payments Age Split Chart

Recently, an article from the BBC stated that millions are choosing a cashless lifestyle. Cash has been used by people across the UK to budget, for example, I’ll take £50 out to go shopping and when that runs out, it runs out. In 2019, there was a rise in popular digital banks like Monzo and Revolut which not only provide another reason for the increase in card payments but also provide shoppers with an easy way to budget, with digital receipts and “You’ve spent £22 of your £25 budget” push notifications now commonplace.  

The downsides of not being a cashless business

All this aside, cash is still an acceptable form of payment, used by 1.9 million across the UK  as their main payment method for day-to-day spending (Source: UK Finance). But it comes with multiple downsides. Some more obvious than others. Do any of these downsides apply to you having a cashless business?

  • For one, there are multiple security issues involved with accepting cash payments. Not only does cash leave you more liable to theft from both public and staff, it also presents other security difficulties depending on the type of business you work in. Some bars, for example, have to send a member of staff to the bank with a rucksack full of cash in order to get the money deposited. With small businesses, the owner often has to carry large amounts of cash by themselves to banks in order to cash it in. It can be an uncomfortable and somewhat risky task carrying so much cash on your person at any one time.
  • Yes, there’s a cost associated with accepting debit card, credit card and contactless payments. However, we’re discovering that in more and more cases, the fee that banks are charging for cash collection and depositing is more expensive than the card transaction fee. We've rounded up the best card machines for small businesses to help shed some light.
  • Payment flow is another aspect where cash falls slightly behind. The phrase “cashflow” really isn’t that accurate. With card machines, the customer swipes, taps or inserts their card and the money is in your account almost immediately in many cases. Cash can be slightly different. When someone makes a cash payment, for many businesses, it will remain as cash for minimum 1 day and as long as a week before the business owners get a chance to deposit in the bank. This can often mean you don’t have as much money in the bank to make the payments you need to.
  • Of course, an issue with most non-digital aspects of running a small business is that there is an element of human error. Whether it’s accidentally accepting notes and coins that are being taken out of circulation (for example, the old paper five-pound notes in Scotland) or just miscounting when cashing up. Being a cashless businesses means you can guarantee there are no mistakes.
  • It is easier to commit fraud with cash. With technology more advanced than ever before, it can be so much easier to replicate and you could end up with a couple of dud notes in your till more often than you would like.
  • Hey, after all of this, you should know that one of the downsides of taking cash is that so few payments are now being made using notes and coins. This makes it a tedious addition to your normal accounting at the end of the working day as it begins to be a smaller and smaller portion of your overall daily payments.

The significant advantages of using card machines

The use of card machines, on the other hand, has become an absolute necessity for businesses big and small as the number of consumers who a) have debit and credit cards and b) use them extensively, has increased dramatically and continues to grow especially as a result of the 2020 pandemic. As a small business, it may seem from the offset that a card machine is just another cost to the business that you feel will be to your detriment. But there are some huge benefits that come along with accepting card and becoming a cashless business! Here’s what we found:

  • The increase of card and contactless payments means more opportunity for your business to impulse/spontaneous payments from customers. When your customers rely on cash, they rely on a finite amount, but with the increase of card and contactless payments, they may be more likely to spend a little more with you. A study by Clearscore, quoted in this article by The Guardian, found that “72% [of those surveyed] said that contactless payments make them prone to impulse purchase”. This definitely works out in favour of the business!
  • Some individuals are now opting to leave their purses and wallets at home. In this article by the BBC, one man said that he does just that. He can use contactless payments for his commute, at the vending machine and on just about everything in between. As many loyalty programs (including Swipii) are now opting for payment card or smartphone-based processes, there really is no need for most individuals to carry more than just a payment card and their phone.
  • It’s faster. Both for the money to reach your account as we’ve previously mentioned, and also at the till point. We know many small cafes and independent businesses that are running a fast-paced till point, which is made easier when customers choose to opt for a quick contactless payment over the more laboured act of counting coins and checking change.

What do you think?

What’s your opinion on the continual decline of cash usage? We’d love to hear your take on the situation!

If you're a local hospitality business looking for a customer loyalty tool that will integrate seamlessly with your business and generate more revenue, visit Swipii for Business or book a free 15 minute demo with our team!