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% increase on 2019 and up by more than 4 billion since 2017.1 Despite the rise in card usage, as of September 2022, 46% 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%1 and 6%2 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 in 2022 revealed that 83% of Australian respondents had used a mobile wallet in the last 12 months, a key driver being convenience and simplicity. Further, 69% 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% 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 1 in 2 shoppers are prepared to switch to frictionless retail if it is available while 41% 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.
To read more from leading industry experts about what’s important to business and the economy, visit CommBank Foresight™ – insights for future-facing businesses.