I recently enjoyed ten days of touring in and around Boston Massachusetts. A mix of seaside and history and the eighth State ticked off my list. These days, news travels across the Atlantic faster than the Pilgrims’ 66 day journey — and that week told us UK debit card transactions had overtaken cash for the first time, fuelled by a 100% rise in contactless payments.
One excursion was a two-hour train ride away from the City to visit the coast. Wanting a coffee, I found this summer-only route had a tiny, temporary onboard concession; a staff member with a pod machine and a miniature fridge with soft drinks. One snag; card payments were the only option. Seeking to avoid a foreign transaction fee, I asked if there was any way around this (it was looking like £4 for a black coffee). The staff member told me for several reasons, including insurance, she wouldn’t be able to run the concession ‘if it wasn’t for taking cards’. Judging by the long line of fellow passengers, no one seemed to have a problem with contactless only. This formed a penny drop question. Are we simply less dependent on cash, or is this driven by a demand for a wider marketplace?
You don’t need a familiarity with behavioural science to understand how choices are designed for consumers. Nudge factors, the concept of manipulating choices to steer decisions, are used throughout governmental policy and consumer marketing. In England, we’ve been living with the 5p plastic bag charge since 2015. Separate to deals and discounts, hospitality is littered with nudges — from a hotel telling guests the amount of water it takes to wash their towels, to a schools’ caterer placing fruit at eye level.
Self-checkouts have led the public to expect less human interaction, with the key promise that contactless equals speed. This reframing has effectively crossed into anywhere a transaction can take place; taxis, car washes, mobile hairdressers and more.
Technology matches demand
For the customer that carries no cash, simply the option of a digital payment can draw revenue toward your business. Additional aspects like emailing receipts that offer feedback and rating options can extend a brand far beyond the initial interaction. This is regardless of you choosing the iPad-based hardware offered by Square, iZettle or SumUp, or apps promoted by Barclays and PayPal. For the merchant, this has the added benefit of providing more of a narrative to spending activity. Indeed, for the back of house, one provider promotes further gains; promising knowledge of customer visits, staff activity insights and easier management of tips.
What of the small businesses that rely on cashless payments, like the coffee seller on the train? I found these smartphone and tablet-based disruptors promote two central points of difference. Capped merchant fees, hovering around 1.5% means margins can be set steadily. This is versus one rate from a ‘traditional’ payments service that I found at 3.5% plus an additional flat fee. The other benefit is you typically own the hardware outright. This not only means a one-off payment but the ability to easily move operations to anywhere there’s internet access, as a business grows.
The future has arrived
Is cashless hospitality here to stay? The banking trade association UK Finance forecasts by 2027 cash will only figure in 16% of transactions. One English pub is perhaps ahead of the curve; claiming to be the world’s first entirely contactless. The Suffolk-based landlord told the press, as a food-led business most customers already paid by card, and he continues to save money even after the 1.5% transaction fee.
Moving to cashless simply mirrors the increasing automation found across the catering industry. Generated through nudges or not, as with all technologies scalable cost benefits and data features matched with a modest extension of recognisable assets — in this case, a smartphone and a bank account — means the prediction by UK Finance is not out of reach. We are continually moving toward more accurate data, industry-wide, enabling us to truly understand behaviours in the hospitality sector.
James Waldron is Content Manager at Zupa