Slowly but surely, we’re bidding goodbye to a society where customers scrounge for change at the till.
Bank Negara stats show that direct debit transactions increased from 3 million in 2017 to 4 million in 2018, while the number of transactions made via debit cards jumped a whopping 83.5 million.
Along with the crowded e-wallet market, these stats certainly stand for something. It illustrates our ever-dwindling reliance on traditional paper-based payments, favoring the usage of debit and credit cards, online banking and mobile wallets among others.
But Malaysia’s shifting payments landscape probably isn’t news to you. What matters more is - should your business follow suit?
You should go cashless if....
Think about all the infrastructure and labour involved in handling cash transactions.
There’s the finding, hiring and training of staff - of whom are then required to manage the cash register, plus manually count, verify and reconcile accounts at the end of every workday.
That cash has to be transported and deposited into the bank too, further exposing your funds to risk. Not forgetting too, that cash in the register is usually deposited every few days. In the long-run, sitting on all that cash is incurring your business opportunity cost from what could have been interest earned.
With digital payments on the other hand, cash is almost instantly credited into your account - an exact amount at that too.
Holding physical money exposes your business to the risk of theft and robbery. We’re not just talking external theft either, but internal as well.
It’s no secret that petty internal theft is costing businesses more than they’d like to believe, with small businesses exposed front and center.
This 2018 report estimates that businesses lose 5% of annual revenue on employee fraud and abuse. Wary of such concerns, businesses then dig deeper into their budget to install security measures from the likes of surveillance cameras and automated door locks, as well as all other manners of security systems.
A cashless business means that on top of eliminating the risk of petty theft, you can rest assured that every penny going in and out of your business is leaving a traceable footprint.
When we don’t see cold hard cash leaving our hands, we don’t feel it as much. This partly explains why so many of us fall prey to credit card debt.
Interestingly, this German survey shows that out of all the SMEs surveyed, 43% reported an increase in bill size and shopping basket amounts when cashless payments were used.
A cashless payment process will heavily influence consumer spending at your store. As it stands, exercising self-control is already difficult for most. By removing the pain typically associated with paying, customers will be more willing to sway from their usual spending behaviors - in your business’s favor.
Come time for your month-end closings, does all hell break loose in putting two and two together? A lot of the time when things aren’t adding up, human errors are to blame.
In a cashless business, transactions would be documented as they come, allowing for more efficient tracking of your cash flow.
With a stronger digital footprint in place, any discrepancies can be more easily traced. Utilizing cloud accounting software on top of this would only further help to minimize mistakes in an area so mistake-prone.
You shouldn't go cashless if.....
One point of concern that’s brought up by many is the how cashless businesses may act as a hindrance to current efforts on financial inclusion. Surely, we can’t expect senior citizens to be whipping out their handphones to pay for breakfast?
Typically, we see two affected groups - the unbanked and the apprehensive.
In Malaysia, the unbanked made for 8% of the adult population, while it was found that security-related concerns make for the top barriers to e-wallet adoption.
On costs and compatibility
If only it was as simple as a yes or a no. The reality is that many factors go into deciding whether going cashless should be in your business’s future.
Accepting cashless payments can sometimes incur more transaction fees by way of merchant fees imposed (MDR), though MDR percentages are steadily declining...
But it’s more than just transaction fees. When taking into account labour, manpower and infrastructure, costs involved in supporting cash payments aren’t all that cheap either - they’re just less obvious.
It’s worth noting as well, that Malaysian consumers tend to prefer paying in cash when it comes to everyday expenses like dining out and buying groceries.
In finding the right payment method for your business, all these and more have to be taken into account. While a larger company might find the tech needed to go cashless a worthwhile investment, smaller ones might find the fees too painful.
Contact our corporate advisory team here, and let us help you meet your customers where they are.