If cash is more than 10 per cent of your business receivables, you need to read this.
The acceptance of cash has started to trend upwards again, but payment technology is helping businesses to deliver consistently better experiences, so what does the future hold? And how can businesses be ready for evolving payment technologies?
- Cashless transactions grew significantly at the start of Covid-19 but, over the past year or so, cash acceptance has rebounded slightly.
- The cost of cash processing increasingly weighs against its value, particularly when considering the growing benefits digital payments offer.
- As Australians adopt the latest digital payment methods, the future of frictionless, automated transactions will offer a completely new customer experience.
One of the most significant social and economic shifts during Covid-19 was the rapid move towards a cashless economy. The trend was evident well before then but gathered pace in the last three years as businesses promoted card-only and contactless payments in response to lockdowns and infection concerns. Consumers, too, preferred to use contactless payments or to shop online.
In the 2021 financial year, the number of payments on card rose to 12 billion, a 22 per cent increase on 2019 and up by more than 4 billion since 2017.1 Despite the rise in card usage, as of September 2022, 46 per cent of SMEs continued to accept cash2 and have dropped their focus on discouraging the use of cash.3
The hidden cost of cash
For many organisations, completing the sale with the least disruption is usually more important than eliminating cash. Yet cash payments are expensive for businesses to manage. There are hidden costs in staff time to accept, handle, count, reconcile, deposit and fix errors.
This means that the cost of cash can range between 2 per cent1 and 6 per cent2 of cash takings; and as the volume of cash continues to fall, the cost of accepting it increasingly weighs against its value.
Getting more from digital insights
Businesses know that digital payments are faster, secure and more convenient. However they can also be used to generate rich data that would otherwise be impossible to collect.
“Capturing transaction data can give businesses deeper insights into their customers, staff rostering and store locations,” says Adrian Yee, director client consulting, transaction banking solutions at Commonwealth Bank. “Using year-on-year comparisons, trend spotting and analysis, businesses can identify risks and opportunities to work their receivables harder.”
“CommBank provides our business customers with Daily IQ to deliver business insights including detailed, anonymised information about their customers, how far they travel, how much they spend and how often – insights increasingly vital for business planning and forecasting.”
Responding to consumer payment preferences
Australians are at the forefront in adopting digital payments. Research by Marqueta last year revealed that 83 per cent of Australian respondents had used a mobile wallet in the past 12 months, a key driver being convenience and simplicity. Further, 69 per cent\% of Australian respondents were so confident with digital wallets that they were comfortable leaving their physical wallet at home. So, it’s not surprising that 31 per cent of Australian respondents said they never use cash.3
This acceptance of digital payments supports greater convenience and increases pressure on organisations to offer digital and mobile-first customer payment experiences. Ten years ago the introduction of tap-and-go contactless payments transformed customer convenience, and now newer point-of-sale technology makes payments even easier.
In retail environments, smart, compact, portable payment terminals mean customers can be checked out anywhere in the store, capturing more sales and reducing queuing.
Features like surcharging, tipping and split billing are now more seamless. The merchant experience can be augmented with apps that are tailored to industries, allowing businesses to customise the payment experience so they can better deliver to customer preferences.
The future of payments
As mobile wallets become ubiquitous, more and more customers are doing away with plastic cards altogether.
“We are already seeing this in large retail businesses, where not just payment but ordering, registering and purchasing are becoming increasingly seamless,” says Yee. “The technology is already there and costs to adopt are falling. This leads to wider adoption and acceptance of frictionless retail experiences where customers leave a store or a supermarket with their basket contents automatically billed to their device without a card or contact.
“The acceptance of this technology will ultimately extend to every activity: transit, services, venues, all with the same automated, contactless handling.”
The technology for frictionless payments is ready to go mainstream and, based on current trends, will likely be rapidly adopted by consumers looking for an easier retail experience. A recent survey highlighted that one in two shoppers are prepared to switch to frictionless retail if it is available while 41 per cent of consumers said they were willing to pay more for a product if they could buy it more quickly and conveniently.1
The priority for businesses is to be ready for this transformation in payments by engaging with digital technology today.
“For businesses, it is critical to understand that cashless transactions are just one part of an overall reimagining of the relationship with their customers and improving the speed and efficiency of business operations and finances. ‘Going digital’ is multi-faceted, adoption is often uneven – but critically it is no longer a ‘trend’.”
“Ultimately, the risk for businesses lies in missing out on the significant efficiency and customer experience benefits that digital businesses will offer,” concludes Yee.
Speak to your business banker today about how CommBank can help you optimise your digital payment opportunities or visit commbank.com.au/retailers
Things you should know
1 Australian Payments Network, Future State of Payments Action Plan 2021 Update, December 2021
2 Australian SME Banking Council, Additional analysis for CBA by RFI Global, September 2022
3 Australian Payments Network, Australian Merchant Acceptance Program, June 2022
4 CBA, Cash Automation 2020, February 2016.
5 VISA, Cashless Cities, October 2017
6 Marqueta, What happens when the new normal becomes plan old normal, 2022, accessed 1 March 2023.
7 PwC, Frictionless – the future of shopping, November 2022.
This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information. The information in this article and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its publication but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made in this article. Commonwealth Bank of Australia ABN 48 123 123 124. AFSL and Australian Credit Licence 234945.