Transitioning to a cashless business

The move to online trading has seen a dramatic acceleration over the last two years, and cashless transactions go hand in hand with this. More and more businesses are choosing to adapt their payment systems to meet customers’ demands for ‘no contact’ and cashless transactions. So, should SMEs go cashless?

Gary Epstein, MD of EazyBiz Technologies, the authorised QuickBooks Online partner in South Africa, discusses the pros and cons.

According to a survey by Visa South Africa, 48% of consumers indicated that they did not want to shop at a store that had contact-based payment systems, while 59% of people prefer to engage in contactless money transactions in general.

US-based business strategy consulting firm, Boston Consulting Group (BCG), estimates that a move to a cashless society would add about 1 percentage point to the annual GDPs of mature economies and more than 3 percentage points to those of emerging economies. This is a significant motivator to transition to a cashless society.

The power of mobile
One reason for the increase in GDP could be that mobile money increases the speed of transfers. Another is that digital transactions provide more transparency, making it easier to offer and obtain financing. Small businesses, in particular, could benefit, with mobile payments enabling them to rent, buy, and get paid more easily.

Reach more customers
In order to stay relevant, SMEs need to keep abreast of digital trends; however, the degree to which they can do this differs for each business. Many still require on-site service, while others can go completely remote. This will also affect how cashless they can become. Even with a physical store, having an online presence means businesses can reach more customers, and offering a non-cash-based payment system provides an easy, safe way for customers to pay.

To successfully run a cashless business, SMEs would need to offer debit and credit card facilities, and should consider offering the following payment systems as well:

• Mobile wallet apps
• QR Codes
• Card tapping
• Electronic Funds Transfers (EFTs)
• Online payments (also in different currencies)
• Digital gift cards or vouchers

There are several advantages to adapting to a cashless payment system, including:

• Reducing costs and saving time – cash being a physical item, needs to be moved and tracked and staff must be trained to deal with it. With electronic transactions, it is also easier to automate and track sales, and record trends in purchases and products.
• Greater security – theft of cash happens easily, but online theft is much more difficult. Thus, a cashless business is safer.
• Convenience and increased spending – the speed and efficiency of transactions lead to a more convenient customer experience. Customers using cards tend to spend more, and this is further encouraged by rewards programmes.
• No need to stash – there is no necessity to keep and handle large amounts of cash on the premises.

There are also certain disadvantages, for example:

• Fees – cash payments are immediate and free of fees; alternative payment methods are not.
• Excluding customers – customers who don’t have bank accounts would not be able to buy.
• Privacy – a business could become a target for hackers. Using cash apps, contactless payment and swipe payments create new ways for stealing account information.

For many small businesses, other hurdles, specifically cost and digital literacy, need to be overcome. These include the cost of data, being able to maintain cash flow properly, and finding alternative distribution channels.

Finance and distribution
Banks can be helpful in providing credit or cash flow financing, though, and online accounting software, for example, QuickBooks Online, can help SMEs manage their cash flow better, and generate quotes, invoices, receipts and insightful reports.

Finding a new distributor is also not insurmountable, thanks to the numerous online distribution companies available.

Usable data
What is very beneficial for SMEs is that online payments systems become data – this data facilitates the ability to understand more about customers: their choice of products, spending patterns and payment preferences. It becomes usable data to better provide for customers’ needs.

As people’s lifestyles become more digitised and more business is done online, payment systems will inevitably adapt. For SMEs, this is a chance to broaden operations, analyse customer behaviour and provide more advanced, more convenient payment systems to their client base, with the result of growing business and creating new opportunities.