Who doesn’t like fat stacks of cash? Even crumpled-up dollar bills and the clink of loose change in one’s pockets have their charms.
“Cash is still a very relevant and prevalent feature within consumers’ lives,” despite an undeniable shift of spending power from cash to credit cards and mobile payment solutions, Paul Bridgewater, executive vice president and managing director of Sage Payment Solutions US, told Small Business Computing. And consumers aren’t the only ones clinging to legal tender.
Cold hard cash is “still an incredibly relevant and important method of payment” for small and midsized businesses (SMBs) and “a key part of a small business’ cashflow,” Bridgewater added. Cash and paper checks – a cash equivalent for all intents and purposes – are an “established part of their business lifecycle,” a tried-and-true way to pay suppliers, contractors and the like.
Cash also helps stitch local small business communities together. The physical act of handing over cash and checks cements working relationships between neighborhood vendors and suppliers. Weekly deposit trips to the bank become cherished rituals that often involve a friendly chat with a bank teller, a stop at the corner coffee shop and a fill-up at a nearby gas station.
Yet, there’s a downside to cash and its costing SMBs billions of dollars each year.
Cash Costs Billions
In the U.S., SMBs are losing an estimated $80.6 billion each year to human error and theft, according to the Sage Payments Landscape Report (registration required).
More than a third (37 percent) of the more than 300 SMB leaders polled by Viga for the study reported losing cash to human error. Alarmingly, 29 percent said that a worker or staff member had stolen money in the form of cash. “Unfortunately fraud happens within all businesses [and] within all verticals,” lamented Bridgewater.
Sixty-four percent said the act of counting and transporting cash to the bank each week can eat up an hour or more of their time, which can be better spent on assisting customers or drumming up new business.
Finally, 36 percent of SMBs believe that cash will be extinct within the next 20 years. By 2020, they feel that contactless payment methods like Apple Pay will emerge as the most popular.
Those beliefs are not unfounded. Today, consumers are eagerly adopting other ways to pay.
Non-Cash Payments on the Rise
Citing data provided by Apple, the report notes that as of July, 75 percent of all contactless transactions in the U.S. used its payments app. In its first six months after its launch in the U.S. and South Korea last year, Samsung Pay notched 5 million users and processed more than $500 million.
In short, millions of shoppers are whipping out their iPhones and Samsung Galaxy handsets to pay for their lattes or bags full of groceries instead of digging through their pocketbooks and wallets. SMB retailers that refuse to offer a multitude of payment options could wind up missing out.
Nearly all consumers (90 percent) consider it important for businesses to support a multitude of payment methods, stated Sage’s report. More than half (58 percent) would favor establishments that offer them a range of payment options.
Contrary to popular belief, millennials aren’t the only ones flocking to contactless and alternate forms of payment.
Sage’s study found older age groups are rapidly adopting cashless lifestyles. Fifty-nine percent of those over 50 said they had little, if any, dealings with cash.
Faced with this landscape, entrepreneurs are advised to keep their options open. “You’ve got to meet the customer where they want to be met,” said Bridgewater. “Stay open minded. Look at innovations that are meaningful for your business for your customers.”