Small businesses have been hit hard by the pandemic, and many have had to make significant changes to their operations to stay afloat. One of the most significant shifts has been towards digital payments. As customers increasingly opt for cashless transactions, small businesses must adapt to keep up. In this article, we’ll explore the benefits and drawbacks of going cashless and provide guidance on how small businesses can make the transition.
Many businesses have reported a drop in cash transactions as a result of the epidemic, which has expedited the shift towards cashless payments. A Pew Research Centre survey found that in 2022, up from 29% in 2018, 41% of Americans claimed they did not use cash for their transactions during a normal week. Due to consumer demand, quicker checkout, lower labour costs, and improved security, small businesses are moving more and more towards accepting cashless payments. However, going cashless has drawbacks, including the inability of low-income consumers to use credit cards, privacy concerns, and a learning curve for company owners who might not be familiar with setting up digital payments.
Despite the potential drawbacks, there are many benefits to going cashless for small businesses. Digital payments offer immediate payment, increased sales, and the ability to sell to customers who might use other currencies. They also allow for faster checkout, reducing wait times for customers and freeing up staff for other tasks. Due to mobile apps’ ability to accept cashless payments and reward points, digital payments can also promote client loyalty.
Juanny Romero, the founder of Mothership Coffee Roasters, adopted digital payments early on in her business’s history. She began using Square, a low-cost digital payments system for small businesses when she founded her first coffee shop in Las Vegas fifteen years ago. She avoided paying $3,000 a month in merchant fees for credit card processing thanks to Square. As Ms. Romero’s enterprises expanded to include four locations in Las Vegas and two more are on the way, she added more payment options like Apple Pay and Google Pay. She saw a change in client behavior during the pandemic, with customers no longer preferring to use cash and her employees unwilling to handle it. She ran out of money completely when the coin scarcity struck in 2020, yet she discovered that labor prices were reduced. Nevertheless, client demand compelled her to resume cash transactions, which are now maintaining a consistent 11% of her overall revenue.
Going cashless has numerous advantages, but there are also difficulties that small firms must take into account. Some business owners, for instance, are cautious to move too quickly because they fear that the technology of today may become outdated tomorrow. Issues with compatibility and cost must also be taken into account. A quick transaction might not be appropriate in sectors where products can be expensive since customers may need more time to decide. Another barrier to adoption is privacy concerns, as some people favor the secrecy that currency offers. Finally, although this is gradually improving, many Americans still have little or no access to financial services like credit cards and mobile wallets.
The pressure to adapt to digital payments is growing. More than 2.8 billion mobile wallets were in use at the end of 2020, and that is projected to increase by nearly 74% to 4.8 billion by the end of 2025. However, the United States lags behind other countries in adopting cashless payments, with only 1% of transactions made with cash in the UK compared to 11% in the US. To encourage adoption, payment companies like Mastercard are offering training to small business owners to help them understand the complexities of digital payments. Small businesses that wait to make the switch risk losing revenue, but those that embrace digital payments can benefit from increased sales, faster checkout, and increased security.
Going cashless is a necessary step for small businesses in the digital age. While there are challenges to consider, the benefits of digital payments include increased sales, faster checkout, and increased security. Small businesses that embrace digital payments can benefit from increased customer loyalty and increased sales. To make the transition, small business owners must understand the complexities of digital payments and be willing to invest in new technology. With the right tools and training, small businesses can thrive in the digital age.
First reported by The New York Times.