We have all heard the saying “Cash is King”. This phrase is often used to describe the amount of notes and coins that we carry in our wallets. However, how does this phrase now sit in our world with the increasing reliance on new payment technologies such as “Tap & Go” and “Apple Pay” to make cashless payments?
In recent times, we have seen the growth and success of a number of business models that only deal in “cashless” payment systems. A great example of how successful a business can be using the “cashless” business model is evidenced by the success of “Uber”. In 2016 Uber generated revenue of 6.5 billion (USD). Who would have thought that hiring an on-demand driver could be done at the press of a button on a smart phone device?
How has the importance of cash declined with the push towards a cashless society and how far away is Australia from being a truly “cashless” economy?
Australian consumers appear to be embracing the move towards a cashless society. The use of smart phones and tablets to enable transactions has resulted in around 82% of Australian payments being made using non-cash dollars. It is estimated that more than three out of four face-to-face transactions are tap-and-go.
This year the Reserve Bank plans to launch technology to facilitate the move towards enabling more cashless transactions. The New Platform System (NPP) will allow money to be transferred almost instantaneously, even when the payer and payee are with different banks.
The whole process of paying for services will become simpler and the transactions will be based on an email address or phone number.
The debate continues about Australia’s end date towards achieving the end goal of being cashless. Some commentators have touted that we may see a cashless society sometime after 2020.
What lessons can be learned from this?
Although “Uber” is often used to promote the success of the cashless business model it is interesting to note that they have not always strictly adhered to their cashless business model. One example of Uber deviating from their cashless business model is in India, where Uber introduced a country-specific initiative to accept cash. This initiative was driven partly by India’s banking regulations but also by understanding the cash economy in that country. Across all of India the cash method is the preferred method of payment by users and drivers. Uber’s understanding of the economic landscape in India lead them to adjusting their cashless business model.
How does this apply to you?
All businesses need to be flexible nowadays. It is important to look at the impact of how a cashless economy would impact on profitability and ultimately survivability.
- Does your business have the technology to handle cashless payments?
- Cash is still an important draw card for consumers around the world – How is your business placed to handle this?
- Most customers appear to adapt to cashless payment platforms but it’s important to educate them about the cashless platforms available within your business.
Main Benefits for Small businesses:
- Time saving in not having to handle cash and making physical deposits at banks; and
- The reduced risk of not having to keep cash on business premises.
How does this apply to your customers?
- The key benefits for consumers is the pure convenience of using these new payment platforms;
- No credit card fees for using a credit card to make purchases; and
- The main concerns for consumers is centred around privacy and fraud risk. Transaction history can be tracked in a cashless payments system.
How will this benefit the Australian Government?
The major advantage for governments operating in a cashless economy is the significantly reduced risk of tax evasion.
Only time will tell how successful the push towards a cashless economy will be in Australia. Will the concept of carrying cash be a dim memory of the past?