Cashless payment has become a trend. It got a boost, especially after COVID-19, and now it’s a part of almost every business. Due to its convenient approach and quick transaction, many business professionals like to incorporate digital payment options. They offer multiple options to clients to complete the digital transaction at their convenience.
If you want to gain a deep understanding of cashless payments, read this article until you read the last word. Let’s move ahead to unlock more information.
What Is a Cashless Payment?
Cashless Payment also known as digital payment is a process of making payments using digital modes without using hard cash. This payment type can be made by using credit cards, debit cards, mobile payments, digital wallets, and bank transfers.
Mostly the e-commerce industry takes the digital payment advantages. This enhances the customer relationship by offering the most convenient payment options to the client and keeping sales smooth. On the other hand, businesses get on-time payments and keep their cash flow on course. Thus, contactless payments offer the best way to manage finances.
Cashless transactions can take place in the following ways –
- Using mobile wallet
- Using net banking
- Using payment card
- Using E-wallet
- Using Buy Now, Pay Later (BNPL)
- Using gift card
What Are the Different Cashless Payment Methods?
Business professionals can offer numerous cashless payment methods to the client for transactions. This means businesses can receive cashless payments in many ways.
1. Mobile Payment
Mobile payment is one of the most convenient cashless payment methods. Users can make instant and secure payments regardless of time & location using their mobile device. However, they need an internet connection to make the payment. Mobile payment has a broad spectrum that covers many other options like Apple Pay, Google Pay, and P2P payment apps. It also uses the near-field communication (NFC) technique.
2. Credit and Debit Cards
Using credit and debit cards for payment is not a new term. Many businesses have been using these digital payment types for a long time. Here the major role is a magnetic stripe card or EMV chip card. It uses near-field communication (NFC) technology.
Credit and debit cards also offer a secured payment method. A user needs to enter the card details and also needs to enter a PIN to complete the transaction. Payment by swiping the cards on the swiping machine.
3. Cryptocurrency
Based on blockchain technology, cryptocurrency is not very useful for making payments. Still, it is considered a cashless payment category and a good alternative to online purchases. Many small businesses and retailers consider cryptocurrency to make their transactions.
The highest used cryptocurrencies are Ethereum and Bitcoin. Some countries legalize crypto transactions, but some countries don’t. It might be one of the popular cashless payment systems.
4. Bank Transfer
Transferring the amount directly to the bank account using net banking or other digital modes is another such payment type. The transaction takes place from one bank account to another bank account. However, there are some limits to transactions.
The most popular method is the Automated Clearing House (ACH) network which leads to seamless transactions between bank accounts. It is useful for B2B direct deposit.
5. Buy Now, Pay Later
BNPL is another cashless type of payment. It’s usually applicable when consumers purchase heavy amounts of goods like home appliances. The major concept is that the vendor allows customers to buy the product before making the complete payment. Customers pay some part of the total amount to take the product. Later on, the remaining amount he pays in installments.
Customers can pay installments in one week, one month, or some days, depending upon the company’s policy.
6. Peer to Peer Payments
A P2P known as Peer to Peer Payment, can take place in banking or mobile payments. In this type of digital payment, the transaction is between person and person. They can send and receive the payment by transferring the amount through a mobile payment application or within a bank account.
7. Mobile and Digital Wallets
Many people consider digital wallets and mobile wallets the same. However, they are different in their approach, but their major role is to make digital transactions.
Mobile wallets are specially designed for mobile devices that use Near Field Communication (NFC) or using QR code scanning to make the payment. It covers Samsung Pay, Google Wallet and Apple Wallet.
A digital wallet is a broad concept in digital payments. It stores information and manages the same.
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What Are the Advantages of Cashless Payments?
Cashless payments provide numerous benefits for both businesses and consumers. Here are some key advantages.
1. Time Saver
Cashless transactions are super time savers. Technologies like NFC and code scanning make it possible to pay the amount in less time. Transactions are quick and efficient when using online payment methods.
2. Cost Effective
Cashless payments are cost-effective because no processing fee is applicable to handle paper money. For this reason, businesses can save some amount of money using digital payments.
Those businesses that use cash transactions have to bear heavy transaction and processing fees. Additionally, armored car service charges are also applicable. Overall, it leads to a heavy transaction cost.
3. Convenience
Digital payment is highly convenient for the business to receive the payment and the client to send the payment. People don’t have to worry about carrying cash everywhere. That means there is no headache for the user to stand in a long queue at an ATM. Business professionals also receive the payment. Additionally, they can easily track every incoming or outgoing transaction.
4. Rewards and Cashback Offer
Many payment methods offer rewards and cashback offers. This does not apply to cash payments. This enables the user to enjoy money savings.
5. Safe for Environment
Due to less use of paper, digital payments also offer a positive impact on the environment. It reduces the cutting of trees that are required to process paper.
6. Tracking and Maintaining Records
Online payments are an excellent way to track and maintain records. Once you make a transaction, every required detail is recorded and professionals can effortlessly check the details.
7. Checkout Efficiency
Adopting cash payments is time-consuming for your business. It includes giving change to the customer, maintaining a cash register, and manually calculating the total amount. Instead of this approach, digital payment offers automation while reducing the traditional approach to managing financial transactions.
What are the Disadvantages of Cashless Payment?
We have seen the positive side of cashless payments. Now, let’s understand the merits of the same.
1. Customer Exclusion
Adopting a complete cashless payment approach can be dangerous for a business.Many people still prefer cash payment. In this case, if your business offers only digital payments, it can lead to losing your customers.
2. Processing Fees
It’s an agreeable term that digital transactions are cost-effective, but processing fees apply to credit card transactions. This typically ranges from 1.3% to 3.4% of the total purchase amount.
3. Technology Dependent
Cashless transaction processing is not possible without technology. Technical issues can cause transaction failures, leading to inconvenience for users. Meanwhile, it also gives rise to payment delays.
4. Involve Risk
Digital payment methods are prone to fraud and involve risk factors. Users need to be aware when dealing with online payments. Sharing confidential information or any careless approach can lead to heavy losses.
5. Challenges
Business professionals need to set up the cashless payment system and it often leads to challenges if the professional is unfamiliar with the technology. Therefore, adopting complete cashless transactions can be full of challenges.
6. Errors
Digital payments can only be error-free when there is strong technical support. Due to technical glitches, there can be payment delays, duplicate payments, or complete payment failures.
How Much Security Cashless Payments Offer?
Cashless payments are very secure because they follow proper security measures including tokenization. Furthermore, it covers the encryption process that helps to prevent unauthorized access.
Privacy policies are another security measure that eliminates the chances of disclosing personal information to third parties.
Business professionals can prevent fraud using geoblocking techniques. They can restrict the payment method to specific regions.
Cashless payment offers a fully authorized concept. It includes entering a PIN and tapping your fingers which prevents third parties from accessing the transaction. Users can also avail of 3D security, commonly known as 3DS technology, considering two-factor authentication.
Which Businesses Must Adopt Cashless Payments?
Adopting cashless payments is very beneficial for some businesses. Businesses easily manage their settlements using cashless transactions.
Hospitality – Professionals who offer hotel stays and restaurant services can get many benefits by adopting cashless payments. It is helpful to track total sales and expenses.
Taxi services – Customers like to pay through cashless transactions during their taxi trips. Offering cashless payment methods gives rise to happy customers.
Salon – Salon professionals are now adopting digital payments.
E-commerce – Cashless payments are very useful for e-commerce businesses to make their selling process easy.
Moreover, it enhances client relationships while offering the most convenient payment method. Business owners or accounting teams can easily manage the transaction.
How to Accept Cashless Payment with Moon POS?
Moon POS is one of the best Points of Sale, suitable for different businesses. It offers various cashless payment options that help to smoothen your accepting cashless payments. Moreover, it makes the checkout process simple and quick.
- Create your POS account and log in with your credentials
- Add your items to the checkout screen
- Scan the product through the camera of Moon POS
- Choose the required payment methods like tap to pay, digital wallets, QR codes, and one-touch billing
- Generate the ordering link
- Update the online menu to show or hide items
- Track sales using the sales tracker available on the dashboard
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Last Word
Cashless payments are now a core part of any business transaction. They not only make a smooth transaction but also help businesses to maintain their client relationship. In the coming time, digital payment will come with more advanced facilities that lead to super quick, more secure, and more convenient. Thus, we can say it will rule the business market.
Frequently Asked Questions
Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.
