Cash is not dead, but its reign as the payment method of choice is over. Consumers are now making more debit card payments. This evolution and the costs involved could pose problems for small businesses. Alternative finance can help them afford the transition.

According to UK Finance, in 2017, for the first time, the number of payments made using debit cards was larger than the total made in cash, at 13.2 billion, compared with 13.1 billion. Furthermore, the use of tap-and-go payment is also growing fast. The use of mobile payment, led by Apple Pay, Google Wallet and PayPal, is becoming increasingly popular and is widely tipped to grow particularly rapidly in the next few years.

Cashless payments bring many benefits, not least convenience, but for small businesses, this advance comes with a significant bill. For starters, the technology has to be acquired and set up, and authorisation fees and operating system costs have to be factored in and paid.

In addition, there is the matter of ensuring the security of cashless payments, especially mobile ones. The importance to businesses and brands of assuring consumers of the security of their data and keeping their trust can’t be overstated. The recent huge data breach at Dixons Carphone is a case in point. A company already under pressure now has to deal with a massive hit to its reputation and consumer trust levels thanks to a cyberattack that gained access to 5.9 million payment cards.

So, giving consumers the choice of cashless payment, and ensuring that tills keep ringing, comes at a cost for businesses. For a long time, businesses could share some of this particular burden with consumers but, since January, they have been banned from imposing surcharges for credit and debit card payments. While larger firms are better equipped to absorb this cost and others, for smaller ones it’s a different picture.

Alternative finance can help small business owners manage the cost of the move to a cashless marketplace. More and more SMEs are turning to this sector in the face of prolonged caution from traditional lenders and increasingly challenging market conditions. The likes of peer-to-peer lending, crowdfunding, asset finance and invoice finance are helping businesses raise capital for a range of investments, including new hardware and software.

This is how a small business in Sussex used peer-to-peer lending, through a commercial finance broker that specialises in alternative finance, to get the money to buy new equipment.

People will still use cash, but it is clear that card and tap-and-go payments are the future. The amount of sales made using cashless payments is only going to grow larger in the short term, and small businesses can’t afford to miss out. Alternative finance can help them stay plugged in to key revenue streams.

To find out more about A&T Business Associates services, contact Tony on 01903 602211 or tony@atbusinessassociates.co.uk.