The evolution of payment trends: is cash really dead?

Has something similar happened to you lately? You're at a local market and pick up a really yummy-looking block of smelly cheese and artisanal crackers, daydreaming how delicious they will be with those juicy grapes sitting in your fridge, only to be met with a "cash only" sign.

The problem is, it's been so long since you've seen actual cash, let alone used it, you've forgotten if the $20 note is the red or orange one. So, you have no choice but to put the cheese back and walk away with an empty shopping bag and a heart (and stomach) full of regret.

In turn, the lovely lady who has worked so hard crafting her product has lost the sale. Depending on how many other customers have had to leave without making a purchase because they no longer carry cash on them, this could severely impact her take-home profits for the day... and the long-term success of her budding business.

Indeed, with so many payment options available in a digital world, it's more important than ever for smaller businesses to keep up with all the changes, because not doing so may have serious consequences on their cash flow.

Xero's recently released report, I want to pay that way, reveals that more than a quarter (28 per cent) of Australians would turn to a competitor business if their preferred payment option wasn't offered.

The cloud-based accounting platform's research shows that while the vast majority (86 per cent) of Australians prefer using credit cards and debit cards to make in-person and online payments, only 55 per cent of small businesses offer these options.

Businesses need to meet customers where they are when it comes to payments

According to Alistair Scarrott, who is a consulting chief financial officer, different businesses need to work out which payment methods to offer depending on what they sell and their payment terms.

Scarrott manages the finances for a range of businesses, including staging and interior-design firm Blok Design Co, as well as property developers, childcare operators and IT firms.

"With a business like Blok Design Co, clients pay us before we stage the property and prepare it for sale. A fully styled property costs between $5000 and $7000, and most clients pay upfront by direct credit or through Stripe, which is a credit-card merchant facility [and] a bolt-on application to Xero," Scarrott explains.

On the other hand, subscription-type businesses that rely on regular payment arrangements — like streaming services — would need to be set up to receive direct-debit payments.

"Many companies in IT have integrated the GoCardless application into their Xero platform to make it easy to collect one-off and recurring payments from customers' bank accounts. For the business, it means no time wasted chasing people for payment," he adds.

Customers want convenience

Younger consumers are quick to adopt new payment methods. According to the Xero report, Gen Z are more than four times more likely to use mobile payment platforms like Apple Pay or Google Pay than Baby Boomers. However, only 18 per cent of small businesses accept mobile payments.

Based on the above insights, this should be a wake-up call for businesses to embrace evolving payment trends based on demand, or risk losing customers who will go elsewhere if their preferred payment method is not available.

Generational preferences aside, Scarrott says the payment method people choose is often a matter of convenience. "Servicing your car is a good example. When I get a text telling me my car is ready to collect, I'll pay using Apple Pay on my way to pick it up."

The same can be said for cash. Just as a customer could be put off if a cash-only business doesn't allow them to pay by card or phone, cashless businesses could lose out if some of the millions of Australians who still prefer to use physical money walk into their store.

Simply put, the easier you make it for your customers or clients to pay, the better it is for your business.

"The upshot of offering people payment choice is you can create more revenue, generate more efficiencies and work smarter, not harder. No one wants to spend two or three hours a week chasing receivables," says Scarrott.

As to the future of cold, hard cash, businesses are increasingly shunning this payment method. "None of my clients accept cash anymore," he says.

That said, you wouldn't want to alienate those potential customers who want to pay cash, either. So, for our money, we'd say that cash isn't dead… yet.

To keep your business running smoothly, you're better off on Xero. Head to xero.com to start your 30-day free trial today.

The information provided in this article is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.