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Could you run a cashless business?
Can SA business owners and their customers benefit from a cashless society?
A little while ago, Woolworths announced that their in-store coffee shops would be ‘going cashless’ and accepting only card or digital payments. This caused quite a stir on social media, with some customers complaining that they were cash-only buyers, although the storm died down quickly.
However, the brief furore did raise the question of whether South Africans are ready for a cashless society. If you own a business, paying suppliers and getting paid by customers are integral to your operations. Is eliminating cash from your transactions feasible? Will it benefit customers and improve your profit margin?
What is a cashless society?
A cashless society does not use physical banknotes and coins. You store all your money electronically in your bank accounts, and you make and receive payments using debit or credit cards, tap and go, e-money transfers, cryptocurrencies, or online and mobile payment services like M-PESA, PayPal, Apple Pay, Samsung Pay, Google Pay and others.
The pros of going cashless for businesses and customers
Enhanced business efficiency
Cashless operations can help streamline payments for small businesses, in particular. They allow you to receive payments efficiently and reduce the time you spend handling and banking cash, and you never have to give customers change. They also enhance your record keeping through simplified, paperless data collection. Likewise, your customers can pay quickly and easily, without having to wait for change and weigh down their pockets with coins.
Added security
Cashless businesses do not keep any physical cash on site, so they are more secure against theft or loss. Many customers who go cashless do so for the same reason – you don’t have to carry money around and risk it being stolen.
Stroll through a local market on a Sunday, and you’ll notice that even small vendors can now accept cashless payments. However, they’re unlikely to make their businesses completely cashless until customers stop wanting to pay with cash.
Retailers who offer cashless payment options should be wary of excluding a large customer base … and continue to accept cash payments
Potential cons of a cashless society
Customers without bank accounts are excluded
In South Africa, most of our traders operate informally, and many citizens and residents don’t have bank accounts. A purely cashless society would leave them at a serious disadvantage and increase economic inequality. Those with minimal access to bank cards or digital banking services would be excluded from the economy.
It costs more than cash
A R100 note can buy something priced at R100 – there are no bank charges added. A monthly account fee puts many people off opening a bank account. Even low-cost pay-as-you-use accounts will charge fees for certain transactions. Free card swipes at retailers are a welcome feature, but what will other transactions cost? Fee structures can be confusing if it’s your 1st bank account. The challenge for both banks and retailers is to create cashless payment options that are affordable and convenient enough for customers on very tight budgets, even though they cost a little more than cash.
Risk of cybercrimes and invasion of privacy
Cybercriminals prey on exposed personal data, and potential data breaches are a reality that consumers need to be educated about. Cashless transactions connect your device to the retailer’s computer system and your bank’s digital network, and possibly to a 3rd-party payment provider. If a hacker breaches security anywhere along that chain, your sensitive information could be exposed and your accounts compromised. You could be locked out of making payments, and the fraudsters could withdraw money from your accounts. A cashless society would also mean that everything you buy is recorded, so unauthorised access to your records puts your privacy at risk.
Technology dependence and South Africa’s infrastructure limitations
A purely cashless economy that could rely completely on electronic payments would need 2 systems in place before we could even consider it:
- A reliable electricity supply.
- Countrywide high-speed internet coverage.
As long as we have minimal to no internet connectivity in some parts of the country and Eskom load-shedding continues, South Africa can't become a completely cashless society.
A Stats SA report concluded that 1.8 million South Africans are informal traders. Only 20% of these traders have a bank account, and only 60% of those traders use their accounts to receive payments. This means that only 12% of traders have a bank account, which does not compare well with countries like Norway, Finland and Canada, where more than 80% of the population uses debit or credit cards for digital payments.
Because the informal sector operates mainly using cash, we’ll need some fundamental changes before we’ll be able to convince traders and their customers to switch to cashless payments.
Until then, retailers who offer cashless payment options should be wary of excluding a large customer base with significant buying power and continue to accept cash payments, too.
