We’ve used cashless payments to do business for hundreds of years. While there was once a balance between physical currency and cashless payment methods, data shows us that the world is trending toward becoming completely cashless.
A recent FIS Global Payments Report estimates that, based on current trends, cash will account for under 13% of all payments worldwide in the next five years. A small number of people are still staunch believers in the dollar, while others refuse to even carry money, instead depending on cashless payment methods.
To determine whether 100% cashless payments are the future of business, we need to first understand these payment methods. The way they work, their benefits, and other factors all play a role in their adoption. Let’s take a closer look.
What Are Cashless Payments?
Cashless payments are payment methods that allow customers to send funds without the use of paper and coin currency. We typically use a payment gateway to transfer money using cashless payment methods, like credit cards, debit cards, and ACH transfers.
Cashless payments are nothing new. In fact, checks have actually been in use for hundreds of years. Likewise, people first began using money orders in the late 1800s. While these payment methods are still around today, advanced technology allows us to do cashless payments in a variety of more convenient ways.
Common Cashless Payment Methods
You’ve inevitably accepted cashless payments at your own businesses. In all likelihood, you’ve used them yourself when paying for goods and services. There is a wide range of cashless payment methods, including newer options that are also considered contactless payment methods.
Some of the most common, older forms of cashless payments include checks, debit cards, credit cards, electronic bank transfers (like ACH transfers), and money orders. We can even consider banking apps, which allow you to transfer money between accounts, as cashless payment methods.
As technology has advanced, we’ve also seen the rise of digital wallets and payment apps. Also referred to as mobile wallets or e-wallets, this payment method is a type of financial application that can run on your phone, computer, or smartwatch.
Examples of popular digital wallets include:
- Apple Pay
- Google Pay
- Samsung Pay
Buy Now, Pay Later (BNPL) is also growing in popularity. This payment method allows customers to buy items via a BNPL provider, then repay the provider in installments over time, like a loan.
Cryptocurrency has also gained widespread use. People can send crypto, like Bitcoin, via payment apps. Big-name businesses, like PayPal and Microsoft, are now supporting and accepting cryptocurrency as payment.
Lastly, central bank digital currency (CBDC) is a type of currency issued by the central bank of a country in the form of digital tokens with the same value as physical money. CBDCs are fairly new, but they are secure and convenient. Plus, they make digital payments more accessible to more people.
Reasons Why Cashless Payments Are Taking Over
People have innovated different types of cashless payments for years for one primary reason: convenience. Carrying around paper and coin currency can be quite a chore. Plus, it’s simply unrealistic to carry enough money to make large purchases.
Without cashless payments, you may end up choosing between one item and another if you have limited physical money. Meanwhile, debit cards give you access to your entire bank account. Credit cards allow you to use an entire line of credit. Cashless payment methods remove friction and allow people to buy as much as they like - which is key for businesses.
There’s also a security risk to carrying large sums of cash on your person. If someone were to steal your wallet, you’d simply lose that money. Cashless payments, like credit cards, come with protections from issuers in case of fraud.
It’s also worth pointing out that Covid-19 expedited our shift away from physical currency. Cashless payments allow us to avoid physical contact with others, which is critical when hygiene is of concern. Since cash can harbor bacteria, shoppers were extremely willing to leave it behind.
Contactless payments grew by more than 30% in the first year of the pandemic, according to Visa. Per data from Statista, people used cash for just 11% of transactions in the US in 2021 - that’s down from 16% in 2017. Meanwhile, people used credit cards, debit cards, and digital wallets instead.
How Cashless Payments Benefit Your Business
While customers love cashless payments for their convenience, hygiene, and security, your business also benefits from these payment methods. Here’s how.
In a brick-and-mortar store, a person paying cash must get out their wallet, count out the cash, and then wait for the teller to count it and provide change. This can create long checkout lines, which may frustrate customers and cause them to abandon purchases altogether.
Cashless options are generally faster than cash, with some being incredibly speedy. Credit and debit cards require a simple swipe and a PIN or signature. Meanwhile, digital wallets or cards with a contactless chip only require a tap. Customers can check out in seconds, which keeps lines moving and shoppers happy.
Cashless payment methods allow you to make the customer experience more pleasant by removing barriers your customers may encounter when making a purchase. These payment methods provide the easiest, most seamless experience. The more you can improve customer experience, the more you can earn.
For example, customers may find the process of counting cash quite unpleasant. They may not feel confident in their counting capabilities, which adds stress to the shopping experience. Similarly, cash and coins can be cumbersome. They take up space and may even be loud or heavy.
Shoppers feel far more at ease with cashless payment options. They can check their bank account or line of credit ahead of time, and rest assured that they have enough without needing to count any cash. The simplicity and ease of swiping a card or tapping a phone provides a fast, stress-free, frictionless checkout.
In an all-cash world, customers are limited to the amount of money they have with them. That means they’ll end up having to pick and choose what they can buy on any given trip.
With cashless payment methods, funds are much larger. Customers can have access to their entire bank account or a line of credit, allowing them to buy whatever they like. Plus, they can move funds around or use multiple payment methods to buy more.
With cashless payment methods, customers feel encouraged to buy more. That means you can encourage impulse purchases, offer add-ons, and upsell customers to increase your revenue.
Each form of cashless payment comes with its own security features to protect the customer, as well as your business. For example, credit and debit cards use tokenization during transactions to disguise payment information. ACH transfers require customer authorization and sometimes use encryption and tokenization.
Digital wallets offer even more security measures. First, they use tokenization and encryption to encode and protect customer information. On top of that, digital wallets also require authorization, which can come in the form of a passcode or biometric, like a fingerprint.
These measures also benefit your business. They can help protect you from fraudulent transactions, lost merchandise, and a damaged reputation.
You can’t make an online purchase with physical currency. Meanwhile, certain types of cashless payments facilitate ecommerce transactions. Without credit cards, debit cards, bank transfers, and digital wallets, your business could not make online sales.
What’s more, some cashless payments make ecommerce transactions incredibly fast and easy, which encourages people to shop more. For example, customers can checkout with a single button using Apple Pay. As we discussed above, the easier you can make checking out, the more sales you can earn.
The Future of Cashless Payments
It’s clear that cashless payments are here to stay, in one form or another. Even when some payment methods fade in popularity, like checks, others arise to take their place. As financial technology companies continue to innovate, there’s no doubt we will see today’s cashless payment options evolve into new, more secure, more reliable alternatives.
Still, will the world move toward a 100% cashless payment system? It’s unlikely. While people are using less cash than ever, 14% of Americans still report using cash for all or most of their purchases, according to the Pew Research Center. 44% say they use cash for at least some transactions.
Cash is primarily popular with smaller purchases. According to the Diary of Consumer Payment Choice, 40% of consumers still use cash for small-value transactions.
With that in mind, it’s important to highlight that cash is only expected to make up 13% of global purchases by the year 2025. As a business owner, you’ll need to accept a variety of payment methods, both cash and cashless. By meeting your customers’ needs and preferences, you can earn their trust and loyalty, ultimately boosting sales.
Why Choose Pay.com as Your Payment Service Provider?
Remaining flexible and agile is critical for business success today. With Pay.com, you can easily accept a wide variety of cashless payment methods, including credit and debit cards, ACH transfers, Apple Pay, Google Pay, PayPal, and more. It’s quick and easy to add or remove payment methods. In fact, you can do it with a simple click of a button on the Pay Dashboard.
The Pay.com system provides your customers with a frictionless checkout experience every time. It all starts with the setup. Your developers can integrate with our APIs and add hosted payment fields to your website or app, providing a seamless experience for your customers. You can also get started fast by adding your branding to our no-code checkout pages.
No website? No problem. Use Pay Links to send a payment request directly to your customers via SMS or email. They can click the link and use a personalized checkout page to pay you with their preferred cashless payment method.
Pay.com also makes security a top priority. We maintain Level 1 PCI DSS compliance, which means we use industry-standard security measures to protect your business and your customers. Plus, we support 3DS2, allowing us to spot potentially fraudulent transactions and stop them with two-factor authentication.
Our powerful payment solution all comes together in our easy-to-use Pay Dashboard. There, you can review in-depth reporting on revenue, customer preferences, KPIs, and more. Track payments, add payment methods, review fees, and more, all with one intuitive platform.
Click here to get started with Pay.com now!
The Bottom Line
Cashless payments are a critical part of today’s economy. They allow people to make fast, secure, and easy payments. Plus, they enable larger purchases, reduce friction, and allow your business to sell online. While cash will likely stick around for the foreseeable future, it takes a secondary role to cashless payment methods.
In order to compete with other companies, your business must accept a variety of cashless payment options. Start accepting digital wallets, bank transfers, credit cards, and more with Pay.com. Getting started is easy and takes just a few minutes. Click here to create your account now!