In the future, payments for purchases of goods and services might become strictly cashless. Around the world, the use of digital wallets and debit/credit cards is encouraged to enable society to move away from paper bills and coins.
Becoming cashless means there is far less time and resources to handle, store, and deposit money. It might also lower the crime rate because criminals cannot easily rob customers without tangible currency.
Singaporeans are among those who seemed to have embraced electronic payments. In the past year, over a million people started using fund transfer services for the first time to pay for their purchases. On the other hand, the ratio of cash withdrawals from automated teller machines fell from 32 percent in 2016 to just 12 percent in 2020.
Many consumers are also taking advantage of credit card offers. Nearly three-quarters of all adults in Singapore own at least one credit card.
For consumers, adopting the cashless lifestyle offers convenience because it eliminates the need to carry around paper bills and coins which are bulky and can easily be lost. Through payment and bank apps, consumers also gain better control of their finances because they can better track their expenses.
For businesses, what can being cashless do? Here are the benefits of foregoing tangible money for electronic payment.
A More Streamlined Checkout Process
When there is no physical money being exchanged at the till, customers can go in and out of the store as quickly as they want. During a busy day, staff can immediately feel overwhelmed by the number of people inside a store. There are long lines that form, which only cause frustrations among waiting customers who probably have more important things to do. Chances are, if you keep your customers waiting, they will leave the queue and never push through with a purchase.
However, when stores and customers go cashless, the process of completing a transaction is significantly reduced. The customer does not have to fish out money from their pockets or bags. The cashier does not have to calculate and count change. Queues will move faster because, in every transaction, the customer pays the cashier the exact amount needed right down to the decimal points.
Increase in Sales
Credit cards give customers the freedom to spend more even if they do not currently have the funds. Those who have low balances in their bank accounts can still purchase goods and services because they do not have to pay them until the next month. Customers can also choose to pay for expensive products in increments.
This is a good thing for businesses because it encourages impulse buying. In the United States, American consumers spend a total of US$450 (around SG$600) a month or US$5,400 (about SG$7,200) a year on impulse purchases.
Customers are more likely to purchase an item at the last minute when there is an easier and more convenient payment system, leading to better revenue for the business.
Wages Paid Electronically Benefits Employees
Transitioning to cashless transactions also makes employees happier. One study in Bangladesh revealed that employees who received their wages electronically did not want to go back to using cash. They found that it was more secure because there is a lower risk of becoming a victim of a crime.
Happy employees become more productive. They are less likely to miss workdays, and they do not leave their employer after a few months or a year.
Moreover, for businesses, the cost of paying wages is also reduced. Although the difference is more significant for larger establishments, the savings can rack up over time, and funds can be used instead to invest in growing the business.
Reduces Business Expenses
The most important reason why financial institutions and businesses push cashless transactions is cost. Tangible money — from the production down to handling and storing — costs money.
The management of paper bills and coins is expensive. Money has to be moved constantly. When a business does not have enough, they have to withdraw money from the bank. When they have too much in hand, they have to deposit it into their bank accounts. In between, they also have to manage and protect large amounts of money.
It is a lot of work. So much time and resources are wasted on tangible money. A cashless society removes all these problems.
Going cashless is not the answer to all problems. Also, entrepreneurs have to make expensive initial investments in the infrastructure needed to enable the business to go cashless. However, the benefits are clear, and it prepares the business for the future.