With fewer people using cash since the start of the pandemic, should retailers make the switch to completely cashless payments? In this blog, we consider the risks and opportunities for retailers focusing on alternative payments to cash, and whether they should be embracing this trend.
COVID-19 accelerated the cashless trend
Cash use has been in decline for many years, but this trend accelerated rapidly following the COVID-19 outbreak, leading over six in ten British consumers to use it less than before the pandemic. For some, this was imposed on them due to fewer places accepting cash, while others voluntarily avoided cash due to hygiene concerns. If these were the only reasons for avoiding cash, then we could expect usage to return to pre-pandemic levels as the economy reopens and fear of the virus subsides.
However, the experience of being forced to use alternative payment methods alongside the roll-out of new technologies and regulation, such as the increase in the contactless payment limit, has introduced people to new ways of paying. As a result, just a third of those using cash less since the COVID-19 outbreak plan to increase their use of cash once restrictions are lifted.
Give customers choice over when and how they pay
Consumers increasingly expect retailers to offer a choice of how and when to pay. The rapid growth of interest free buy now, pay later options is testament to this. Consumers may not make a purchase if their preferred payment option is unavailable.
However, the ubiquity of buy now, pay later has made it harder for retailers to use this as a point of differentiation. This will be compounded as some buy now, pay later providers, such as Klarna and Zilch, opting to make their service available at all retailers, whether they are a partner or not.
One way around this is to use the payment itself to enhance the customer experience. For example, H&M offers greater buy now, pay later options to members of its loyalty scheme, while Currys PC World uses its buy now, pay later options to maintain an ongoing dialogue with customers beyond the point of transaction.
There are now more ways to pay than ever before and it is important for retailers to facilitate this choice as much as possible, giving control to the customer while focusing on delivering the right products, in the right place, at the right time.
Where is cash use headed in the long term?
Cash is unable to match the flexibility and ease of other payment options, especially with so many sales now taking place online as a result of the pandemic. Use of cash will never return to pre-pandemic levels, however, it may experience a temporary post-pandemic bounce as the hospitality sector recovers and students return to university.
This is because cash remains the preferred payment option when buying food/drink in a bar/restaurant for around a quarter of consumers, and this is especially true among 18-24 year olds, highlighting the ongoing importance of cash as a budgeting tool.
For retailers, it is important to note that cash remains vital for some, either for budgeting, or simply because they are unable, or unwilling, to use alternatives. With fewer consumers using it, accepting cash may offer limited commercial potential or appear outdated, but even those who don’t wish to use cash themselves are likely to look favourably upon retailers that continue to accept it.
