In recent years the UK has seen a dramatic shift in favour of digital payment methods, and the use of cash has significantly declined. In 2007 63% of all transactions were made using cash. But today that stands at only 34%. UK Finance estimates if these trends continue in 15 years time cash will account for only 10% of all transactions. In fact a 2017 study by Forex Bonuses found the UK to be the third most cashless society in the world. But what are the benefits of a cashless economy for small businesses? And how can SME’s harness the potential of our burgeoning cashless society? 

WHAT ARE THE BENEFITS OF A CASHLESS ECONOMY?

Our decreasing reliance on cash can reap many benefits for business owners. The first benefit is an increase in security. New payment technologies will lead to safer payments and businesses won’t have to leave cash on their premises, which can potentially make them vulnerable.  A recent industry survey estimated cash handling costs each British retailer £3,638 a year on average, adding up to a total national bill of £17.8 billion. Thereby highlighting a strong business argument for a cashless UK. Secondly, a cashless economy can lead to greater efficiency and productivity for businesses. And by the increased collection of digital data and card transaction histories, businesses can build better behavioural profiles on their customers, which is a strong asset.

However, a different perspective is offered by the chairman of the Federation of Small Businesses, Mike Cherry, who has warned that many UK businesses could suffer “devastating” losses as the UK continues to move closer to its cashless future. “There is a danger card and contactless payment fees will soar without competition” as cash transactions “disappear.” Cherry argues that small businesses need protection from unrestricted bank charges for cashless transactions, which can erode SME profit margins.

WHAT ARE THE RISKS?

We should note that our increasing dependence on electronic payments is certainly not without risks. The 2018 ‘Access to Cash’ review found that should Britain become entirely cashless in the next 15 years, 25 million of its inhabitants would struggle. Today 2.2 million Brits use cash for all their outgoings. This group tends to be low income earners --  15% of people with an income under £10,000 a year rely completely on cash for payment. Furthermore, it’s prudent for business owners to recognise the impact that a cashless society would have on rural British communities. Often these communities are subject to declining ATM and bank branch systems. Meaning that in many corners of the UK digital payments are challenging, or impossible. With cash flow being the lifeblood of any small business, it’s important to consider how these rural “black spots” will be handled in a cashless UK. The impact a cashless society may have on debt may be the difference between your company's success or failure.

But according to chief cashier of the Bank of England, Sarah John, we cannot expect a full cashless society any time soon. “The tangibility of cash is a key benefit, allowing them to physically calculate and budget their spending. Digital payments do not yet work for everyone. Technological advances in payments have the power to support financial inclusion. But they currently tend to be designed for the mass market rather than for vulnerable groups, meaning vulnerable groups are rarely early adopters of new payment offerings.”

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