Payments have undergone a significant shift in the last two years. The industry has gone from hybrid payment methods to overwhelmingly digital in what feels like the blink of an eye. In the UK alone, over 23 million people have abandoned coins, a third of payments contactless and reports predict cash accounting for just 6% of payments within a decade.
But just like that, as the trend is about to take a permanent place and the cost of living crisis bites, cash is coming back. With households trying to budget and seek financial security, particularly in the poorer and more vulnerable areas of society, many are unaware of the cons of cash. To name a few, it is labour intensive, higher risk and costly as you can end up paying a premium on your bills.
To cash or not to cash raises a second, quite obvious question: how do businesses move forward? Rather than going cashless, creating a cash-lite economy and one that builds consumer confidence rather than concern is essential for businesses.
The shift 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. Not only that, but 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 emerging payment technology like Request to Pay and Buy Now Pay Later (BNPL), resulting in them paying a premium for utilities or being at higher risk of theft. Businesses need to improve 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 is a cash-lite economy?
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 because salons, vending machines and car washes can’t function without it, and certain generations feel most comfortable with it.
The benefits for businesses include instant payments, improved security and greater transparency on customer behaviour. On the flip side, it provides a positive payment experience for customers, enables two-way communication with their providers and makes them feel empowered by the ease with which they pay. Similarly, this two-way communication allows businesses to improve customer relationships leading reduced churn.
Convenience is key, and supporting people’s understanding of the benefits of cash-lite processes is essential. Payments are part of our everyday life, and to enable safe, friendly and cost-effective payments means businesses must collaborate with their payee to offer them choice and flexibility in how they pay and get paid. In other words, if payments are an inevitable part of everyone’s everyday lives, why not make it as seamless as humanly possible?
More automation, less admin
With rising inflation, higher interest rates, and cash making a comeback, accounting and finance teams need a solution that has 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 the likes of automation gives businesses real-time cash flow visibility and access to 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.
The future of payments
The debate on the future of payments will continue, and as the world approaches the winter months, making payments will, unfortunately, feel more bitter than in previous years. The impact for businesses that rely on current legacy payment processes will be significant if a strategy is not put in place by merchants to help their customers.
Businesses must collaborate with consumers to meet financial security needs and collect payments successfully. To thrive in a cash-lite economy, businesses must communicate to customers the benefits of digitising payments – from improved security, choice, flexibility and the ability to forecast finances through scheduling to meet budgeting needs. Not only that but improving financial confidence will be essential.
Building financial confidence amongst consumers must be a top priority for merchants to be an attractive choice instead of their competitors. It’s time for businesses to look at both sides of the coin and be the pioneers in the cash-lite economy.