The rise of the cashless society appears to be written on the wall – tap payment devices are almost everywhere you shop in Ireland.
By 2020, card payments accounted for 64% of all payments in Ireland. What’s more, e-money transactions through methods such as Apple Pay and Google Pay saw a 1,700% increase that year.
The trend looks set to continue. The Monitor’s contactless data shows tap payments reached a new peak, with transactions worth almost €3.8 billion in Q3 of 2021.
This fast-changing landscape could dramatically shift the way small businesses interact with their customers. Here, we look at what the cashless society means, the benefits and potential drawbacks.
The rise of cashless payments
For those of us old enough to remember the pre-contactless world, it can seem remarkable how quickly the consumer experience has changed. There was a time when using ATMs to withdraw cash was a fact of life, and euro notes were synonymous with money.
The debit card arrived in Ireland in 1996, marking the beginning of a steady shift towards chip and pin payments. However, in 2010, 60% of payments were still being made in cash. But the arrival of a new, even more convenient system would change that.
Contactless cards morphed into in-phone tap payment systems such as Apple Pay and Google Pay. By 2020, more than 60% of Ireland’s transactions were card-based, and almost 10% were made using e-money systems.
It’s a trend replicated across Europe. According to the European Central Bank, the number of non-cash euro payments follows a steady upward trend, from just over 35,000 in 2000 to more than 100,000 in 2020.
Cashless Europe is, of course, closely tied to the rest of the globe. Other parts of the world have been pivotal in the trend from paper to plastic to device. Apple Pay was itself created in California in 2014, but the United States is surprisingly behind the trend – 30% of Americans don’t even have access to a bank account.
Sweden, on the other hand, plans to become the world’s first fully cashless society by March 2023.
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Cashless vs contactless
Cashless means any payment made without traditional note-and-coin methods. Contactless refers to any payment method that simply requires a tap, rather than swiping a card or inputting a PIN. This means all contactless or tap payments are cashless, but not all cashless payments are contactless.
Different hardware may be required for each, though many Square terminals and readers can process PIN card payments and several types of tap transactions.
Cashless card payments often use a closed-loop payment system powered by banks, whereas contactless payment technology such as Apple Pay uses near-field communication (NFC) or radio-frequency identification (RFID) to power payments.
Why are cashless payments on the rise?
Cashless payments are often seen as a more convenient alternative to cash. This attitude is especially common among younger people. According to a 2017 survey titled The Future of Money, 75% of Generation Z – those born since 1995 – would consider using new technologies for payments.
Irish adults carry an average of just €32 at any given time, with some shunning notes altogether.
As well as new ways to pay, the rise of the internet has also created new ways for small businesses to streamline payment processes.
New apps and digital wallets, for instance, have become commonplace. Anyone who owns an iPhone has access to Apple Pay, while Android smartphone users can download Google Pay in just a few clicks.
Smart watches make the process even more convenient – instead of opening their wallet and fumbling for the right change, customers can simply tap their wrist to the reader. Fitbit Pay is one such example.
The convenience doesn’t just benefit the customer, but the business too, because faster payments require less time at the till.
The increasing flexibility of contactless payments also makes it easier than ever to adopt this as your go-to payment option. There is now no upper limit on contactless payments in Ireland, making it even more attractive to consumers.
Contactless payments also have an unexpected benefit. They’re more hygienic than traditional chip-and-PIN payment systems, which thousands of fingers may touch each day. When the Covid-19 pandemic hit in 2020, this unintentional perk became a huge selling point, turbocharging the path towards a cashless society.
Acceleration of cashless transactions due to Covid
Contactless payments have become more commonplace in Ireland since the advent of the pandemic in 2020. It’s no surprise – in an era when hygiene became paramount, the appeal of the no-touch, tap payment system is easy to understand.
In 2014, many Irish people had received a contactless card from their bank, but usage was low. The average person was making a payment this way just five times per year, according to Core Media’s Shane Doyle.
The shift was helped along by policies as well as attitudes. The limit for contactless payments rose from €30 to €50 in the first lockdown, allowing more people to use tap transactions for their everyday purchases.
Consumer behaviour shifted during the pandemic more generally. A move towards online shopping naturally drove transactions away from cash. Some of these habits may stick, so we may see even more payments being made via the internet in future.
Small businesses and corporations alike also started discouraging the use of cash at the start of the pandemic. The idea was to increase consumer confidence, protect public health and reduce the burden on staff – who might otherwise need to regularly sanitise their hands. Some went so far as to only accept contactless payments, which comes with the added benefit of not needing to sanitise card readers.
Does a cashless society leave people behind?
The march forwards towards a cashless society may sound like the ultimate efficiency, but there are drawbacks too. As younger and more affluent people embrace gadget payments, there is concern some people could be left behind.
Cashless payments don’t yet work for everyone. It’s important context to bear in mind as your business weighs up the pros and cons of going cashless – there’s a chance such moves may create a backlash or alienate a portion of your customer base. Using technology alongside cash allows you to service everyone.
What are the benefits of going cashless?
Going cashless has many purported benefits for businesses and society. In Sweden, for instance – which is leading the charge towards cashless living – crimes linked to cash have fallen.
Cashless payments may also decrease tax evasion and reduce the waste generated when unspent coins leave circulation. For businesses, they can increase transaction processing speeds, since cashless payments take one to two seconds to process, compared to seven seconds for cash exchange. According to VISA, consumers also spend more on a card than they typically will with cash.
If your small business has ever faced problems with theft, it’s good to reduce or eliminate the risk of cash going missing.
The hygiene benefits will also remain long after the end of Covid-19 public health measures – people have become more used to a sanitised experience, so many features of the pandemic shopping experience could be here to stay.
Pivoting the way you do business to account for changing needs could help small business owners stay competitive. More online shopping could mean you need a payment system able to cope with the demands of a shifting high street landscape or access new customer bases.
Whether you’re just starting out and need your first card reader or you’d like to upgrade and futureproof your hardware, the drive towards cashless business can be an exciting prospect. Allowing for contactless payments gives your customers more options – useful as more consumers make the transition to digital wallets.
Square can help you to manage all payment types, even if you’d prefer to keep using cash alongside the latest technology.