Derek Hough, retail director at Wincor Nixdorf UK examines whether the concept of a cashless society is still a long way into the future and how retailers should prepare

Derek Hough, retail director at Wincor Nixdorf UK examines whether the concept of a cashless society is still a long way into the future and how retailers should prepare

The concept of a cashless society has been on the cards for a while now, yet despite all the hype a society run solely on card-based transactions, still hasn’t materialised, said Derek Hough, retail director at Wincor Nixdorf UK.

“There are a number of benefits that could make a cashless society a viable future option for the retail industry, not least that card payments are more cost effective for retailers,” he said. “But before we are able to make this shift, there are a number of key social and technical developments which need to take place.”

He said it was important to discuss the potential benefits of a cashless society, as well as the implications and issues that need to be addressed before such a concept can have a real future in the UK.

The dream of a cashless society

“According to the BBC, 95% of all of the world’s money is saved digitally,” Hough said. “With a boom in online shopping, that number is likely to increase. Electronic cards make it possible for consumers to go online and buy almost anything, from gadgets to groceries. In contrast, Retail Banking Research (RBR) estimates that the process of managing cash costs each individual in Europe €130 per year. For UK consumers, a cashless society would result in savings of up to £110 a year. In addition, with a cashless society there would also be the benefit of increased security for consumers. Consumers would no longer carry cash and would potentially have one card to be used in all transactions, from retail to banking.

“For retailers, removing the physical medium of cash reduces banking costs substantially. In fact,” he said, “internal Wincor Nixdorf research has shown that retailers spend up to 7 pence in every pound on cash handling. It is considerably cheaper to process card payments than to handle and manage cash. Along with adding a valuable service is one of the reasons supermarkets have introduced cash back schemes to better use the cash in their cash cycle.

“A good example of the move towards a cashless society and its successful uptake is Oyster card from Transport for London (TfL). Its ease of use and usage incentives have led to high adoption rates. The closed loop nature of the proposition is also helping consumer confidence and education. With 10 million Oyster cards now in circulation and cash only accounting for 3% of TfL’s transactions, the project has proven to be successful.”

How to avoid the cashless ‘nightmare’

However, despite all the benefits, the reality of a completely cashless society is still more of a pipe dream. Hough continued: “According to the UK Payments Administration UK consumers currently pay by cash 66% of the time with more than half of all cash payments for less than £5. Although some stores are trying to bridge this resistance by introducing contactless payments – allowing consumers to pay for any amount of up to £15 by touching the card reader with their card – the UK still lacks the infrastructure and confidence in its security required to support a cashless society.”

He added: “Even though cashless comes with a number of benefits, uptake and implementation will undoubtedly be slow because of these issues. However, this still leaves retailers with the costs of managing cash. One way to resolve this in the meantime, is for retailers to make their cash handling more efficient.

"By simplifying and streamlining the cash office and by automating their cash handling processes as much as possible, retailers can reduce operating expenses and simplify business processes. They also slash the amount of cash lost in the system through security issues. Invariably, cutting down the number of times cash is handled will see theft and human errors reduced. This kind of efficient management can have a huge effect with research showing that optimising the cash cycle can save retailers up to 20% on costs. This represents a huge incentive for retailers to take action.

Where are we now?

He concluded: “Although it comes with a huge range of benefits – especially for retailers – the UK is still only in the introduction phase with contactless payments. Banks, retailers and those organisations offering payment services will need to invest heavily to address issues such as security, infrastructure and consumers’ confidence in next generation card payments. Only then will cashless go from pipedream to reality.”