Cashless retail? It’s a false economy.

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The past decade has brought incredible innovation in the finance sector. With a revolution in digital payment technology, the emergence of SaaS businesses built on open APIs, and the move to the cloud – businesses now have greater visibility over finance than ever before, a wealth of transaction data, and the means to optimise their operations.

The pandemic saw an acceleration of digital transformation in multiple sectors, not least payments, prompted by social distancing and the growth of e-commerce with cash usage declining; cash accounted for 59 per cent of Europe’s point-of-sale transactions in 2022, down from 72 per cent in 2019, according to the European Central Bank.

The UK too has seen a global shift toward cash-free transactions with cash usage declining from fifty per cent of all transactions to seventeen per cent between 2010 and 2020 according to the Bank of England. 

The pandemic accelerated this trend, with hygiene reasons, the growth in ecommerce and a decline in-person transactions, and an overall increase in acceptance of cash-free payments after retailers’ invested in new technology.

But there has been a partial recovery in cash transactions as the pandemic has eased even in the UK cash is still the preferred payment method for more than a fifth of people, according to the Bank of England (2020), and that number may be even higher today given the cost of living crisis, as many see cash as a vital budgeting tool.

The costs of taking cash payments.

Combined with the growth of alt-fi and cryptocurrencies, the innovation has been fast enough and dramatic enough to prompt discussions about a ‘cashless society’ in the future.

But this is a bad idea, and a false economy. The answer lies not in turning cash buyers away, but by automating cash acceptance where possible.

Cash usage is declining overall, as e-commerce continues to grow, payment technology continues to evolve, and retailers continue to encourage cards as an in-person payment method. 

Part of this is financial. The British Retail Consortium estimated that in 2016, the average retail cash transaction cost 0.15 percent of turnover, compared with 0.31 percent across all payment types.

But this is only part of the picture – while there is a direct cost in card payments – most costs of cash acceptance are indirect. Between leakage (theft), staff time consumed by accepting payments, and the considerable back-office costs of managing and running till floats, cashing up and depositing funds at the bank, cash costs estimates range between 1 percent and 10 per cent of transaction value, depending on which study you read.

Do customers prefer cashless payments?

The jury may be out when it comes to supermarkets, but self-service screens are often preferred when buying a ticket, or in quick-service fast food retail, as they can add positively to the customer experience, and these machines are often card-only.

But this doesn’t mean that customers don’t like paying in cash. Cash remains a useful budgeting tool for people with lower, fixed incomes and those ‘unbanked’ who don’t use credit or debit cards – a surprisingly high number of people and not just the very old or the very young. As lockdowns eased post-pandemic, we saw a global increase in the use of cash in 2022 as people started to go back to normal.

Over five million adults in the UK alone rely on cash in their day-to-day lives and cash remains the preferred payment method for 21% of the population, according to the Bank of England, with cash “vital” for the 1.2 million people with limited access to banking services and “can be an essential budgeting tool for the 3.8 million in financial difficulty.”

Quite apart from companies having a social responsibility to retain cash payment options from a financial inclusion perspective, it makes commercial sense too.

Why payment automation makes sense.

Retailers can make big gains through automation. For example, if a grocery store instals three checkout stations at a total cost of $65,000 (including repairs and servicing) that have a shelf life of five years and only require 20% of one person’s wage to supervise them; this still costs less than three members of staff, even if you allow for ‘retail shrink’.

That’s why most studies suggest automated checkouts will be a growth category for the next decade; 

“The global self-checkout system market is projected to grow from $4.51 billion in 2022 to $12.01 billion by 2029, at a CAGR of 15.0 per cent” (Fortune Business Insights, 2020)

“The number of cash automation devices installed at retailers increased by more than 20 per cent between the end of 2019 and 2022 to reach more than 900,000. Between 2022 and 2027, the number of retail cash automation devices installed at retailers worldwide will grow to around 1.3 million.” (RBR, January 2023)

“The global self-checkout systems market size is expected to reach USD 10.50 billion by 2030… a CAGR of 13.3 per cent from 2022 to 2030.” (Research and Markets, April 2022)

From our experience, retailers who reintroduce or increase cash acceptance also see an increase in overall takings – savings made by going cashless tend not to offset the loss of revenue that comes from not accepting cash.

We should be wary of assuming people don’t want to pay in cash, especially in difficult financial times. Our focus is on making cash more manageable through our range of automated cash-acceptance devices and IoT platform.

We have developed a portfolio of new compact and customisable cash payment devices to meet retailers’ requirements for a mix of automated, semi-automated and cashier-led checkouts. They’re secure, removing the risks of theft, as staff need not handle cash, and our IoT platform tells the retailer how much physical money they have and where.

This is the inconvenient truth with cash: its use may be declining globally, but from a financial inclusion and commercial perspective it seldom makes sense to go completely cashless – better to continue to support it, but automate it to reduce the cost of cash management.

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Angus Burrell

PayComplete is a global leader in physical finance, with a proprietary cloud hosted IoT platform connecting devices and data within and outside its own payments ecosystem.

As a Strategic Partner Director Angus Burrell is responsible for building Global Partnerships with a focus on the Retail Technology, ERP and Payments spaces. He is also taking commercial responsibility for the launch of ‘new to market’ Retail devices and solutions across the business.

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