Community
In the last two years, there has been a considerable change in payments. The rapid digital transformation that Covid caused across all industries has been particularly evident in payments as supporting new ways to engage with their customers became an urgent need. Over 23 million people in the UK alone have stopped using coins, a third of transactions are now contactless, and predictions indicate that in ten years, only 6% of transactions would be made using cash.
However, the use of cash is resurging. This comes following a significant growth in the cashless trend and cost of living crisis. Many households are oblivious to the disadvantages of cash, turning towards it as a method for budgeting and security. This is proven to be common in the more vulnerable parts of society. In reality, cash is labour-intensive, riskier, and more expensive as you might have to pay more for your bills.
Another, more straightforward issue now arises: how do businesses adapt to this? The answer lies in embracing a cash-lite economy, creating an environment for customers to confidently choose between cash and cashless.
Switching from cash
An estimated 15 million people in the UK still depend on cash to keep track of their spending but have found it increasingly difficult with businesses rejecting notes and coins. Hygiene and safety precautions during the pandemic significantly reduced the acceptance of cash by businesses and banks are increasingly making it harder to use cash with rising machine and branch closures. Alongside this, concerns around data, cybersecurity and identity theft have created a culture of reluctance to move to digital forms of payment.
However, assumptions that cash is more private and secure prevent people from benefiting from solutions such as Direct Debit. As a result, people end up paying a premium for utilities and are at higher risk of theft. Businesses need to support overall financial understanding by having open and honest two-way communication with customers so people can finally begin to take advantage of a cash-lite economy rather than relying on a cashless one.
What does "cash-lite economy" mean?
A cash-lite economy builds on the significant behavioural changes of the pandemic. It recognises one key fact: cash will always have some place in payments for the foreseeable future. This is because businesses such as salons, vending machines and car washes try to avoid high card processing fees, and certain generations feel most comfortable with it.
A cash-lite economy provides greater control over data, reduces fraud, and lowers costs, all while keeping the consumer empowered in the decision-making process. It is truly the next generation of payments. While many industries have made significant progress in deploying payment infrastructure, the key is to ensure that these systems can slot into the average person's daily life seamlessly and offer clear advantages over cash payments.
For businesses to achieve a cash-lite system means taking an innovative approach to the payments process. Having open and honest communication between customers and merchants is the key to making them feel empowered to pay. In addition, creating a financially inclusive payment offering is viewed as more trustworthy, improves the relationship and leads to customer loyalty.
Swapping admin for automation
With rising inflation, higher interest rates, and cash making a comeback, accounting and finance teams need a solution that has an impact and supports a customer-first mindset. Convincing companies to switch up their software in legacy-driven industries, such as finance and accounting, can be an uphill battle.
For a cash-lite approach, merchants must take advantage of the digital tools available. Leveraging digital tools ensures businesses' data is connected and gives real-time cash flow visibility. Merchants can also access rich payment history, transaction volume and frequency to improve customer relationship management and better understand their payment patterns.
Given the numerous bills flowing through accounts and finance, manually tracking who has paid what from different sources is incredibly time-consuming. Merchants can connect billing, collection, and reconciliation on one platform to reduce the risk of human error. If payments are disrupted, businesses can know proactively to make more informed decisions on how to engage with customers and move customer behaviour in the direction that suits both sides.
One simple mistake can create a setback in the upcoming billing report period, putting the finance team on the back foot. Gone are the days of sifting through individual Microsoft Word documents and Excel spreadsheets. With automation, non-complex, routine payment tasks are taken care of, freeing up resources and time for more important tasks like strategy and growth.
Embrace the cash-lite economy!
Payments will sadly seem more of a biting topic than in previous years as the world approaches the winter months. Nonetheless, the discussion around the future of payments continues. If merchants do not develop a plan to support their customers effectively, their services will face the consequence as the customer looks to those suppliers who meets their particular needs.
Businesses must work closely with customers to satisfy their needs. They must outline advantages of digitising payments for better security, choice, flexibility, and the capacity to schedule transactions in advance. This will not only boost financial confidence but will help businesses to adapt to everchanging times with certainty.
Fostering financial confidence must be a major focus for businesses who want to stand out. It's time for businesses to embrace both cash and cashless, championing a cash-lite economy!
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Nick Green Director at Purple Patch Broking Ltd
22 August
Oleg Stefanet Chief Risk Officer at payabl.
20 August
Venkatesh P Co-Founder and Director at Maveric Systems
19 August
Welcome to Finextra. We use cookies to help us to deliver our services. You may change your preferences at our Cookie Centre.
Please read our Privacy Policy.