Surviving and profiting in a cashless world

In Norway, the world leader in abandoning physical currency and coins, only about 3% or 4% of all transactions use banknotes and coins. While it may take a while before things reach that point here where the government, like that in Norway, requires banks to offer “cash services,” there is no question that cash is well on its way to being “old school.”

Consumers and businesses are voluntarily moving toward credit and debit card payments at a remarkable rate. In fact, those cash-dispensing ATMs may be on borrowed time as studies show consumers are increasingly embracing technology for transactions and moving towards a cashless society.

But it is not only consumers flocking toward a cashless society; businesses are too. Any garden center that ignores developments such as the EMV smart card technology, Apple’s mobile wallet and other mobile payment vehicles may see a sales decline. It is a similar story for any business that ignores electronic payments, cyber currencies and other payment options and may also face an impacted bottom line. Will your garden center be prepared for a cashless society?

A look at cashless

There was a time when a credit card was the only non-cash alternative for most people. In fact, those with good memories may remember a time when credit cards were used only for large, special and emergency purchases. Today, consumers are distancing from paper money and are comfortable using cashless payment methods for small, day-to-day purchases. And, boy, do those payment options exist. Consider:

Peer-to-peer payments. The use of person-to-person (P2P) payment apps has surged dramatically for sending money to loved ones in need, paying back neighbors for groceries or sending rent to landlords during the pandemic. P2P payments have become so popular that at least one P2P service provider, Venmo, was forced to increase its sending limits for person-to-person payments by 40%.

Cash App, Developed by mobile payments company Square, Cash App allows users to send P2P payments, make donations and even tip professionals. All that is required is a phone number or email address to create an account and link a debit or credit card before sending and requesting money with anonymity (if desired). For an independent garden center, Cash App is a free point-of-sale (POS) solution that allows the operation to manage multiple types of transactions without having to wait for a bank to process or withdraw them. Naturally, Cash App isn’t the only POS option.

Smartphones are facilitating complete transactions and removing the need for cash or a physical card to interact with a POS terminal. Online payments are completely remote while proximity payments are used in both attended and unattended businesses. Of course, most proximity payment methods are still backed by credit and debit cards, which are often stored in an e-wallet.

Mobile wallets, or digital wallets, are smartphone apps for storing credit and debit card information and allowing so-called contactless transactions.

Apple Pay, designed for users of Apple devices, is one of the most popular mobile wallets. While debit card payments are free for the merchant, credit card transactions incur a 3% fee.

Google Pay allows Android users to pay for purchases using their phones anywhere that supports near-field communications (NFC). Users can also perform P2P transactions as well as pay for in-app and online purchases. Debit card payments are free but credit payments currently incur a fee of 2.9%.

Samsung Pay is the third major mobile wallet option. It works similarly to both Google and Apple Pay but is meant to be used by Samsung Galaxy owners. It can be used anywhere since it employs magnetic secure transmission (MST) technology that allows payments wherever traditional magnetic cards can be swiped.

Not too surprisingly, the success of mobile wallets has encouraged others to enter the online payment market. PayPal, for example, has its own contactless payment app.

PayPal is particularly useful for P2P transfers. Since the money is coming from one individual’s PayPal account or a linked bank account there is no charge. If a linked debit card is used, however, a fee is charged. PayPal’s merchant fee has a base rate of 2.9% + 30 cents per transaction.

Venmo is one of the three most popular P2P payment platforms and only recently opened up for selective business use. Venmo is accepted almost everywhere that accepts PayPal, its parent company. Unfortunately, independent garden center retailers and other “merchants” must route Venmo payments through a third party for all business transactions. It charges the same fee for merchants as its parent company — 2.9% + 30 cents per transaction.

Zelle is another payment app for transferring money to someone using their email or phone number. Zelle has transformed from a consumer-only service to a B2B and P2P mobile payment application. Garden center operations with a small business checking or savings account can begin using Zelle immediately since many major banks have incorporated Zelle into their mobile banking apps.

Facebook Pay, available only on Facebook, Facebook Messenger and Instagram, allows users to send and receive money through the Messenger app. Compared to a bigger payment processor such as PayPal, this is best suited to small online businesses without an official storefront that relies on one-on-one contact with buyers through social media or occasionally sells in person (at farmers markets and art and craft fairs, for example).

Square’s Cash App, as mentioned, is just one of the many products and services offered by Square. A garden center can use Square to accept mobile credit card payments from their customers and create a seamless selling process from anywhere. Square’s standard processing fee is 2.6% + 10 cents for contactless payments, swiped or inserted chip cards and swiped magstripe cards. Payments that are manually keyed in have a 3.5% + 15-cent fee. Square’s other services include Square Register and Square Point Of Sale.

NOTE: Naturally, those merchant fees are likely to rise, or may already have.

Cryptocurrencies, such as Bitcoin and Ethereum, are an increasingly popular tool used for money transfers. There are, however, risks and regulatory hurdles that make them impractical for most everyday transactions.

Electronic business payments

Many independent garden center retailers in the U.S. are familiar with the Electronic Federal Tax Payment System (EFTPS) for making tax payments to the IRS. Few, however, are aware that all federal benefit payments must now be paid electronically.

However, taxes and the payment of government benefits aren’t the only possibilities for electronic payments. The movement toward cashless has created a number of alternative forms of payment including:

• Electronic check conversions, which give businesses faster access to customer check payments
• Electronic payments, which ignore checks altogether by permitting the exchange of funds through paperless methods
• Wire transfers, unlike direct deposits, are not free. While direct deposits are most often used for recurring payments, wire transfers are only used occasionally.

Electronic Funds Transfer (EFT), or direct deposit, is the electronic transfer of a payment from a customer into the garden center’s checking account — or vice versa — used daily by governments and businesses to transfer millions of dollars.

Automated clearing house (ACH) payments move money from the customer’s bank account to the merchant’s account electronically. Direct deposits are made through the ACH system. Most major accounting software platforms currently offer an option that allows small-business owners to turn on the ACH invoice payment feature.

Best of all, there are no processing fees for ACH payments, resulting in a cost-effective tool for many independent garden centers.

The unbanked

Although going cashless may be inevitable for a garden center business while appearing to be a “win-win” situation, that’s only true if the operation — or consumer — is financially secure. There are definitely downsides, particularly for small businesses, start-ups and certain segments of the population.

Labeled as the “unbanked,” many individuals and businesses don’t have access to affordable banking services, relying instead on check cashing services and payday loans. In other words, while there may be a cashless society in the future, today there are many who are unable to make digital payments because they lack a bank account, credit or debit card or smartphone.

A cashless future

The widespread use of credit and debit cards, and the recent explosion of digital payment options has given the average person little reason to touch cash. The launch of innovative cash-free (and cashier-free) stores, such as Amazon Go, may make it appear we’re heading for a truly cashless society someday.

Going cashless would, obviously, move us toward a more efficient, convenient and even hygienic society. Today, consumers are comfortable using cashless payment methods for small, day-to-day purchases.

However, along with the convenience offered by a cashless society, comes a growing awareness of security concerns with all types of digital payments.

Love it or hate it, cash is playing an increasingly less important role in society. Unfortunately, the decreasing use of coins and currency may be at the expense of many, both individuals and businesses. Will your garden center continue to profit in that new, cashless society?

The author is a financial writer based in Pennsylvania.