The Covid-19 pandemic has accelerated the move away from cash as customers increasingly demand low-touch or contactless payments.
New research from Yoco, polling 4 386 small business owners from its customer base, investigated how many businesses had elected to go cashless by implementing digital payments such as card machines, online payments, QR codes, and EFT, and rejecting physical cash in the form of notes and coins.
The survey found that only 8% of the respondents did not accept cash payments at their businesses prior to March 2020. However, by June this year, that number grew to 32% – a seismic shift that represents a 300% increase in businesses going cashless.
“Covid-19 has made people think twice about close contact situations, and consumers are avoiding anything that unnecessarily increases touching or contact,” explains Yoco co-founder and chief business officer Carl Wazen. “There is no definitive evidence that handling cash can transmit virus pathogens as confirmed by the World Health Organisation (WHO), but people remain wary.”
Despite consistent growth in the adoption of electronic payment methods, as evidenced by Yoco’s growth from 50 000 customers in September 2019 to 100 000 currently, a surge of this nature in such a rapid space of time is unheard of for an emerging nation like South Africa.
The food, drink and hospitality sector experienced the biggest increase – a 500% rise from three to 19%, with most other sectors reporting a 300% to 500% increase in cashless payment acceptance.
“What remains to be seen is whether the cashless payment adoption will endure beyond the pandemic or whether businesses will revert to the usage of cash once their customers feel it is safe to do so,” says Wazen.
Of the businesses that made the change during the national lockdown, 65% indicated that they would remain cashless owing to the convenience and benefits of electronic and digital payments.
“That would mean a post-Covid cashless rate of 20% to 24%, rather than the 32% experienced during the pandemic, which is still a prolific rise from the pre-pandemic level of 8%,” Wazen says. “And this outcome bodes well for merchants, consumers and the economy.”
A significant body of research has shown that handling cash costs small businesses between 5% and 15% on average in the form of time, resources, security, and transaction and deposit fees.
Conversely, card payments enable faster, safer transactions and the adoption of electronic payment solutions enables small businesses to transfer resources and attention to product and customer-focused tasks which drive growth.
The digital footprint created by digital and card transactions creates access to funding, credit, and other financial services. This makes adoption of card payments an especially useful shift for small businesses. Many small businesses still struggle to secure loans as they lack the verified historical data to do so.
“A digital footprint increases a small business’s ability to access vital working capital to sustain them through this crisis, and kickstart growth once the economy is back to full strength,” Wazen says.