By Animesh Chowdhury, Founder and CTO of Goodtill by SumUp
The effects of COVID-19 have been wide-reaching and the past year in lockdown has had a greater impact than anyone could have foreseen. One of the major changes felt by those in the financial or retail sector has been the drastic change to how transactions are carried out, most notably the increased use of contactless payments. Of course, cashless transactions were a very real possibility prior to the events of 2020. However, they were used significantly less frequently and it was not uncommon to come across an establishment that did not offer a contactless payment option.
Now in 2021, going cashless is not only a very real possibility but is actively encouraged by governments and retailers of all sizes. In the name of public safety, many establishments now refuse to take cash and the contactless payment limit has risen from £30 to £100. The culmination of this saw Mastercard record a global increase in the use of cashless payments by 40 percent in the first quarter of 2020 alone. A separate study by YouGov also found that ATM withdrawals had decreased by 60% during lockdown.
These major changes came about as a direct result of the global pandemic, but what many businesses and customers have come to learn is that the process of contactless payments is also incredibly quick, profitable, and convenient. Therefore, with the end of lockdown in sight, the question of whether we will continue to use cashless payments as frequently in the future seems to already be answered.
As contactless transactions are here to stay, it’s important to explore where businesses can add value to their operations using these methods.
Speed, Efficiency and Improved Revenue
On average, contactless transactions take around 2 seconds, 3-5 seconds quicker than Chip & PIN, and 12 seconds faster than lengthy cash payments. Over the course of the workday, this time adds up, most notably cutting queuing times and increasing customer satisfaction.
Additionally, although responsible retailers do not want to be seen to encourage spending without limit, cashless payments are a simple way to increase revenue. Drazen Prelec, a pioneer in the field of neuro-economics at MIT, discovered that people are more likely to spend without limit with card payments compared with cash.
Cash payments not only mean slower transactions but also bring with them a host of other tasks such as refilling the register with change, reconciling cash at the end of the day, and making bank deposits. All of these take up valuable time and expose businesses to the vulnerabilities that come with human error. Going cashless eliminates these tasks and brings the added benefit of maintaining a more accurate and timely watch over the business financials.
Not only do new payment systems bring with them convenience for both businesses and customers, but for many retailers they have become the core system for managing data and workflows relating to inventory, by helping to ensure businesses source the right products, stock them in the right quantities, price them correctly, and as applicable, ship them on time in the fulfilment methods the customer desires. Synchronising inventory data with POS sales reports will ultimately lead to smarter, better-informed purchasing decisions. Not only will this help a business to decide what to keep or discard from the merchandise list, but it will also assist with decisions about minimum stock levels and re-stocking schedules.
Prioritising Health and Safety
Another key benefit to going cashless is the increased security it brings businesses. With fewer trips to the bank and less cash on the premises, retailers are a less attractive option to thieves. Remote cash handling also eliminates the risk of fraud and money laundering, making online financial transactions, when used alongside the appropriate precautions, a much safer option.
Improved Customer Loyalty
Moving to cashless payments also provides the ability to gain better access to invaluable data, such as customer buying patterns and preferences. This means that organisations can create tailored offers that better suit customers, which is a vital tool to cultivate loyal and long-term customers in an age where shoppers have more choice than ever before.
The move to cashless payments increases the businesses’ opportunity to offer a personalised experience to the customer including communications, discounts, offers or unique rewards based on their profile or previous purchases. Retailers can use these improved offers or perhaps a points-based loyalty programme to promote more customer loyalty, which in turn increases repeat transactions and supports business growth.
The Road Ahead
Therefore, with all the benefits that can be brought about by contactless payments, it seems increasingly likely that they will play a large role in the future of sales transactions. Just before the events of 2020, UK Finance released a report that predicted that 9% of all payments by 2028 would still be using cash. However, in light of the recent changes, it seems more than likely that the face of POS systems and monetary transactions have changed far more than anyone could have foreseen.
There’s no doubt the UK’s transition to contactless payments would have been considerably slower had the pandemic never happened. However, as the industry continues to adapt to the changing circumstances, it has become clear that we are now entering an age of revolutionised sales transactions. Although this was originally done in the name of public safety, the convenience, added security, and easy personalisation that comes with these new systems has set contactless payments up as a permanent fixture in the future of finance.