Tapping into Cashless Payments
In the era of the electronic economy, cash is no longer king. With consumers being provided with more options to pay using Near Field Communication devices (aka ‘tap and go’) than ever before, our use of cash is in serious decline.
If you’ve been resisting the cash-free movement, or you’re still literally passing the buck on to your customers through surcharges and minimum spends, its time to make a change. Below we break-down why you should embrace cashless payments, what your options are, and how to choose the best solution for your business.
Why your customers prefer cashless payments
Less is more when it comes to what the average Australian wants to keep in their pockets. There’s an amazing amount of options for cashless payments now: between our bank cards, smart phones, watches, rings and even coffee cups letting us ‘tap and go’, jangling around for change at the counter is something most consumers would prefer to leave in yesteryear. With Australians among the fastest in the world to adopt new cashless technologies it’s not surprising that almost half of people think that cash-only businesses are ‘hard to do business with’, and a quarter claim they would reject a cash-only business altogether.
According to the RBA, the most commonly cited reason that consumers paid in cash in 2016 came down to ‘merchant acceptance’. In other words: consumers would have preferred not to use cash but cashless payments were either unavailable, incurred a fee, or required a minimum spend.
Its not just kids going cashless
Millennials and Gen Y-ers aren’t the only (or even primary) group tapping on to the e-payment bandwagon. When it comes to making mobile payments (or mPOS), those in the 50–64 year age group are twice as likely to use this NFC technology than those in the 18–29 year age group.
The trend even continues amongst older generation Australians. For people in the 65+ age group there has been a notable decline in using physical cash for purchases: cash-based transactions are down from 78% in 2007 to 51% in 2017.
The signs are clear: the shift towards cashless payments is a permanent one, and if businesses want to compete they need to make sure they’re providing easy cashless options for their customers.
Getting the right card processing solution for your business
A quick Google search for ‘merchant EFTPOS solutions’ will churn out options as complex and confusing, as they are numerous. It’s important to get it right when choosing your EFTPOS provider — ideally you should be searching for an option that allows your business to reasonably absorb the cost of cashless payments without needing to pass the surcharge on to your customers. Here’s a breakdown of the major players in the card payments game, so you can find the best option to suit your unique business needs:
- Banks
The big banks are often a first port of call for EFTPOS solutions — and not without reason. Especially for bigger businesses processing a large volume of high value transactions, most banks can provide great account stability. Banks are also generally able to process payments more quickly, meaning that many are also able to offer daily settlement on payments. Another bonus is that you have the opportunity to negotiate with banks. It is well worth doing the ring around to see what deal they can put together should you choose to run your business accounts and EFTPOS through their institution — ask about free set up and reduced fees on business accounts.
As for the negatives, unexpected and excessive fees for your EFTPOS can be a huge hit to your business, so it’s crucial that you know what you’re up against before you get signed into anything. The big banks are the worst offenders when it comes to hidden fees as they can liberally charge extra amounts for merchant service, interchange, on charge payments, participation, and exceeding transaction limits — just to name a few.
For small businesses that are processing a high amount of lower value transactions (for example, a café), the percentage taken per transaction can also be another hard hit, as the banks start skimming the froth off every cappuccino. But when the value of each of your transactions reaches the higher end banks begin providing more competitive and economical rates.
2. Independent Merchant Services
Services such as TYRO and Square are increasingly proving to be a viable competitor to the banks, particularly for business processing a high volume of lower value payments. While again it pays to shop around, generally speaking the percentage rate charged per transaction is significantly lower than that which is offered by the banks.
Additionally, most services will offer you no ongoing fees, and no early-termination fees or lock in contracts which allows you to trial the product stress free, letting you easily opt out if its not the right fit for your business. You also have the opportunity to buy the device outright relatively inexpensively, setting you free from the pesky on-going device rental fee that is charged by most banks.
Both TYRO and Square integrate seamlessly with digital counter-top POS systems and also partner with Xero, meaning that the reports and statistics that will make it easier to run your business can be found all in one place.
The negatives with choosing this option are few, but worth considering — namely the delay that can occur before settlement is made in your account. Usually the deposit is made next business day, but if any red flags are triggered (which is rare but can happen for various reasons) then payment can be delayed. For businesses where cash flow is a major concern even short delays in settlement can cause headaches for business owners.
3. Third-Party Payment Processors
Most commonly, these processors take the form of mobile credit card readers that can be plugged into your phone or tablet enabling you to swipe and tap credit cards at any location. These devices are most useful to businesses that don’t work out of a bricks and mortar location, or those that only process a small volume of low to middle value transactions.
The common pricing model for this type of device operates by charging a higher percentage fee per transaction, but a very low (or even free) monthly rate. As with the Independent Merchant Services, mobile payment processors are usually void of excessive fees and have a great capability to integrate with applications that will help to maximize efficiency and grow your business.
Get App Happy
What about processing payments without any cards at all? Mobile applications are the other shiny side to the coin of cashless payments. Partnering with application services aren’t a replacement for your in-store EFTPOS, but they do provide an excellent opportunity to attract new customers and keep your existing customers happy.
Throughout the hospitality industry, services such as Foodora, Deliveroo, Clipp and Hey You have unquestionably increased the accessibility and the efficiency of thousands of restaurants and cafes. Through forming a partnership with food and beverage establishments, these delivery platforms offer the promotion of menus through their app, before sending drivers or cyclists to the venue at an agreed time to collect the order and deliver it to the customer.
As a restaurant or café attendant, this means receiving the order as usual, preparing and packaging the dish for delivery, and receiving an electronic payment without ever needing to liaise with the customer. The service of course comes at a cost; the delivery app takes a cut for each order they process. However unlike the percentage fees being paid to the banks, these guys are actively driving new business to your door and handling all of the logistics that come with the delivery process — some even throw in free marketing services as an incentive to use their company.
The take-away then is that partnering with a third party order and delivery app is an excellent way to receive cash-free payments as well as attract new customers that might not otherwise have used your services.
Some businesses have also started offering PayPal as a payment option. Its relatively fast and easy to set up, payments are generally processed within 1 day, and (depending on who your customers are) there’s a good chance that people will have the app on their phone already.
If you want to take app-based payment even further you could get a specific app developed for your business. There’s a lot of options here: you could get something built from the ground up, or find a plug-and-play solution that just needs your branding and the items you sell. These apps may sound like a lot of effort but they can be a great way to take control of your promotions, your loyalty program and your payments all in one hit. Multi-location businesses like Messina Gelato and Burger Project have rolled out their own apps, and all signs are that this is a trend that will continue.
Two Cents Worth
While it would appear that we are looking at a cash-free future, it might not be time to do away the cash register and declare yourself ‘completely cashless’ just yet. However, if you want to keep your customers happy and your business growing the signs are clear:
- Provide your customers with a reliable, easy to use option for card payments
- Ditch minimum spends and surcharges on non-cash payments
- Select a vendor that matches your business model and its needs
- Depending on your customers, explore app-based payments
If you’re doing these things then you’re well on the way to happy customers and a happy business.
This article was originally published in our Deputy blog by Caitlin Wynn on May 8, 2017. Caitlin is responsible for researching and producing content that helps our clients run their businesses better.
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