Strapped for cash: New rules introduced to give customers access to cash transactions

As online banking tools like Google and Apple Pay boom, new powers have been granted to ensure local communities are still able to access cash.

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The Financial Conduct Authority (FCA) has been given permission to fine banks that do not provide customers with ‘reasonable’ access to cash.

The legislation forms part of the government’s pending Financial Services and Markets Bill, which promises to protect communities that are being hit by ATM or bank branch closures.

For a number of years, experts have been warning that the UK is moving too quickly towards becoming cash-free.

Earlier this week, Lloyds Banking Group confirmed it plans to close 28 branches, leaving the group with just 1,387 sites across the UK.

Below, we’ll look at what this means for small businesses and their relationships with customers.

Why is the UK becoming cash-free?

The cashless effect has been gaining traction in the UK for some time. However, the COVID-19 pandemic has helped to speed up the process.

During lockdown, social-distancing measures meant customers were encouraged to use QR codes and place orders through their phones. Ecommerce sales also boomed, as people got used to spending online rather than in-person.

Another motivator is innovation. Payment systems are improving at an impressive rate, making it easier than ever to use our smartphones as wallets.

In fact, tech-giant Apple was recently accused by the European Union of being anticompetitive over its exclusion of rivals from its Apple Pay mobile payment system.

Commenters predict the ruling will mean more choice of mobile payment technologies for consumers.

This consumer trend towards digital and card payments, alongside technological transformation, means both banks and businesses are choosing to move entirely online.

As a result, cash is getting harder for consumers to access – a key motivator behind the FCA’s new rules.

Who will be most-affected by the shift towards digital payments?

When you’re relying on technology for your card and mobile payment systems, something as simple as a dead battery can be a nail in the coffin.

Remote areas typically have poorer broadband connectivity. Individuals and businesses based in rural locations, without the necessary infrastructure to cope with paying for items digitally, will be hardest hit by a loss of cash.

Popular payment brands including takepayments have added 4G capabilities to their products as a way to combat this issue. However, even that will be scuppered by a bad mobile signal.

How should small businesses react to the change?

Lots of sellers have already opted to forgo physical money and manage all of their payments online.

For certain industries, it makes sense. After all, only 14% of the nation always carry cash – and just 8% of adults under the age of 29.

But what are the pros and cons of giving up on notes and change? Should your business do so? Or is it a cold, hard pass? We weigh up the positives and the negatives below:

Why should your small business go cashless?

Amongst the benefits of accepting only card payments is added security. Handling payments digitally means that your firm is at less risk of being robbed for on-site cash.

Card transactions are also more efficient. Modern small business point-of-sale systems mean you don’t have to mess around with handling cash and working out change. Plus, every transaction is recorded, saving the time and effort utilised in accounting processes.

Examples include the Square Stand, which can play the role of multiple small business tools.

Design improvements over the past half-decade means that POS systems are also more convenient for both customers and sellers to use.

Why should your small business not go cashless?

You could also shoot yourself in the foot by refusing notes or coins. As we’ve touched upon, SMEs based in rural areas can struggle with quick digitalisation, as they are more susceptible to power outages.

Research from AgeUK also shows that 20% of people aged 65 or over still rely on cash for everyday spending. If this is your target demographic, going change-free is not an option.

Speaking more generally, lots of customers just like having the flexibility to pay or tip with cash should they choose.

Should your small business say goodbye to cash?

With its new directive to protect the availability of withdrawal and deposit facilities, the FCA has given strong indication that the UK is heading towards becoming a cashless society.

Customers now expect the convenience of card or mobile transactions, while small business owners are taking advantage of the smart designs of today’s SME-friendly payment systems.

Urban-based firms with younger target audiences will be best-placed to wave goodbye to physical currency. However, we’d advise against rushing into going completely cash-free for now.

Instead, SMEs should introduce a mix of digital payment options and hard currency to satisfy the technophiles, without excluding those groups that are still reliant on using cash in-store.

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Helena Young
Helena Young Senior Writer

Helena "Len" Young is from Yorkshire and joined Startups in 2021 from a background in B2B communications. She has also previously written for a popular fintech startup.

Included in her topics of interest and expertise are tax legislation, the levelling up agenda, and organisational software including CRM and project management systems. As well as this, she is a big fan of the films of Peter Jackson.

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