The Rise of the Cashless Economy
The idea of exchanging value for goods has been around since the stone age. Historians believe that metal objects were used as money as early as 5,000 B.C. People would trade items of need for items of value and thus, money came into existence and common use.
However, it’s 2017. The digital economy has taken over. A very welcome and convenient evolution in the 21st century. Along with most of the world becoming digital, there are still a lot of smaller businesses that only accept cash. With many predictions expecting Australia to be cashless by roughly 2022, it is only a matter of time before this idea becomes a reality.
Where do we stand?
Australia has been at the forefront of the cashless society movement. In fact, we have been ranked amongst the top 10 cashless economies in the world. Although, we still use cash for around 15% of our purchases, the Swedes only use cash for 2% their payments. In fact, there’s been something of a stigma developed recently, with some believing that if you pay too often in cash, there is something wrong or potentially shady with the buyer or the product
Australia sits as a relatively early adopter of the cashless economy. We rank sixth in world’s top 10 cashless economies and as a portion of our total spending, our cash use has moved from 38% in 2007 to a mere 18% in 2013. This indicates our spending habits are moving towards cashless, though when we do use cash, we are using it for smaller purchases such as coffee or a snack on the go. This trend is set to continue in more recent years, and throughout 2017 and beyond. This, alongside a Reserve Bank report on ATM use sitting at 15-year low levels, indicates a shift to a cashless economy is imminent, some speculating as close as 2020.
How it affects SMEs
You’re probably wondering how this affects small business owners. Frankly, there’s much to consider: SMEs will have to be more mobile, meeting expectations with ease and types of payment in order to keep cash flow high and fluid. There are many solutions now available for the everyday business owner and entrepreneur, from tap-and-go hardware and software for easy card transactions through applications on devices, to small pieces of hardware sometimes used by retailers and market stands.
The move to a cashless society is not only affecting mobility and accessibility, but allows you to keep much more on top of invoicing and payments flowing in and out of your business. Being in a cashless economy means that tracking spend is a lot easier and therefore, producing financials can take half the time and be done at the click of a button. It will also be easier for businesses to analyse their spending and learn where they need to crack down on unnecessary purchases.And let’s be honest… one of the great advantages of not having cash is emptying out those pockets full of loose change weighing you down!
Cashless payments and risk
With cashless payments comes some inherent risk and certain disadvantages – as with most technology! If you lose your phone, it’s a double whammy – you’ll lose your card details too as smartphones are typically connected to your bank account, moreso with the advent of Apple Pay and Android Pay technology. Security becomes an issue when theft becomes easier and more profitable. Furthermore, there is always the possibility of Australia’s ageing population finding it difficult to learn these skills. Changing to a new process could be stressful or potentially problematic for these people.
On the whole, a cashless economy is a step forward for business, as it allows for an increase in efficiency and a company’s ability to adapt to customers’ payment preferences. It saves a significant amount of admin with accounting software and added functionality with the major banks. We hope to be seeing this shift as a smooth and seamless process in the coming years, as more fintechs continue the charge to a cashless society.
Until next time,
The Spotcap Team.