The idea behind a cashless society is pretty much what you’d expect: an economy driven entirely by electronic payments with zero reliance on paper money. While the concept does seem a bit ambitious, it’s not actually as far off as you might think.
Sweden is already on track to become the world’s first entirely cashless economy and some estimates predict that Australia will follow suit as early as 2020 (although more conservative estimates are closer to 2022). We’re already in the top 10 countries in the world for cashless transactions, so it’s a very probable future.
Will Australian Consumers Embrace a Cashless Economy?
Well, many Australians are already starting to go cashless themselves. The Reserve Bank of Australia (RBA) released figures that show ATM withdrawals are at a 15-year low. The number of ATM withdrawals in January fell by 7.7% when compared to last year and this follows two consecutive years of ATM withdrawals falling by more than 6%.
According to a 2016 MasterCard survey, a majority of Australians (58%) already think that cash will be phased out completely within the next 5 years. Around two-thirds (64%) of Australians have already started carrying less cash, with more than half (53%) carrying less than $50 and 43% saying they’d happily see coins phased out before paper money.
Speed and convenience continue to be the main motives for consumers desiring a cashless society, however, 36% of Australians also believe that society would be safer without cash.
Many Australians (89%) also have negative perceptions of ‘cash-only’ businesses. Consumers mainly associate these cash-only businesses as being very small (70%), trying to avoid declaring income or paying tax (42%) or being unsophisticated (19%).
The Cashless Society and Small Businesses
With the ‘Black Economy’ taking up a reasonable chunk of Australia’s GDP and accounting for about $3.5 to $5 billion in lost tax revenue every year, the benefits of a cashless society are pretty apparent for the government. However, how will small and medium sized businesses fare if Australians do end up going completely cashless?
The answer is actually reasonably well! For SMEs, the main benefits will come mostly in time saved not having to handle cash or deposit it in the bank. For retailers, there will be a security element with not having cash on site as well. Small businesses will also be able to overcome the negative perception of them by most Australians.
Embracing a cashless society will become much easier for small businesses with the launch of the New Payments Platform (NPP) later this year. The NPP is a new payments infrastructure being led by a number of different companies, including the RBA.
Any application built on top of the NPP will allow Australians to send money to any person or business in real time (including outside banking hours). The NPP will also let you identify your payee using their email address, telephone number or, in the case of businesses, an ABN. Similar technology is already being used in Sweden.
In addition to the NPP, the reduction in the fees that banks are allowed to charge businesses for processing credit cards will also facilitate a decrease in the use of cash (and probably end up saving businesses a bit of money). This should get rid of the need for business to add a surcharge or a ‘$10 minimum spend’, resulting in happier customers and more opportunity for the business. The maximum fee on a $4 cup of coffee will be around 3 cents.
How Can Businesses Prepare for a Cashless Society?
The main thing is awareness. Be conscious of the fact that a cashless society is a possible reality within the next decade and make decisions with that future in mind. The entire country isn’t just going to drop cash altogether overnight, but it is happening right now, albeit gradually. Future-proofing your business now is more practical (and probably cheaper) than implementing changes once it’s too late.
Many smaller businesses have already phased out cash purchases to varying degrees. Depending on the nature of your business though, it may be impractical to just cut out cash completely right now (take a café for instance, where customers would use cash to buy a $4 coffee). One option would be to gradually start phasing out the number of cash payments you process by promoting tap-and-go and mobile payments like Apple Pay and Android Pay.
Investing in a solid payment integration system is a good place to start. There are many different options out there that can cater to a variety of business types.
A Cashless Society may not be a complete reality within the next three years, or even five, but it is certainly, and inevitably, on the way. Many Australians are already heading in the cashless direction and if businesses want to stay ahead of the curve, they too should start preparing. If a business isn’t preparing themselves for the reality of a cashless society, they’re ultimately going to lose out on profits and may even get left behind.