What the death of cash means for small businesses
By Anthony O'Brien
When was the last time you paid for a purchase with cash? Chances are that it was a while ago.
According to the Reserve Bank's (RBA) most recent data, in 2022 cash was used for just 13% of consumer payments, down from 27% in 2019.
Every sector has experienced a downturn in the use of cash. COVID may have hastened the decline, but cash was starting to fall off a cliff long before the pandemic.
Losing business
Amanda Rose, chief executive of advocacy platform Entrepreneurial and Small Business Women, believes the decline in the use of cash is seeing small businesses hit with high merchant fees and the risk of losing business when payment systems are down.
"This premature pull towards a cashless society will hit business owners at a time when profit margins are already thin," says Rose.
"A large segment of Australian customers, such as elderly people, still use cash - going cashless means businesses and customers both stand to lose."
However, RBA research found otherwise.
It notes that those Australians who have traditionally been associated with using cash more frequently, such as the elderly, low-income earners and regional residents, have recorded the largest decline in cash transactions.
The legality of going cashless
Many businesses have responded by choosing to go cashless.
Payment platform Square found one in 12 Australian businesses was cashless pre-COVID.
By 2021, that figure had risen to one in four.
Is this legal? Yes.
Consumer watchdog, the ACCC, says businesses don't have to accept cash if they make it clear which types of payments they accept before consumers make a purchase.
The cost of card payments
It's true that businesses face costs for accepting card payments. However, the expense is typically passed on to consumers by way of a card surcharge.
This can be about 1.5% for Visa and Mastercard credit cards, and slightly less for debit cards. There are two important issues to be aware of here.
First, small businesses cannot profit from surcharges. They can only recoup the cost of having a payment processed.
More importantly, a business cannot apply a surcharge if it doesn't accept cash.
As Anna Bligh, chief executive of the Australian Banking Association, observed in May this year, many small businesses may be unaware of this rule.
The risk of tech outages
Second, as Rose points out, one of the biggest risks of cashless trading is a failure of online systems as occurred in late 2023, when a day-long Optus outage left many of the telco's small business customers unable to process electronic payments.
The possibility of such outages makes it critical for small businesses to have back-up options, such as a secondary telco provider or electronic fallback capability that allows EFTPOS terminals to continue processing transactions in the event of a network failure.
It's worth remembering that in our post-piggy-bank world, the 'good old days' of cash came with costs of their own.
Seasoned business owners will recall lengthy bank queues to deposit the day's takings, and even lengthier delays between depositing handwritten credit card payment slips and the payment landing in a business bank account.
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