01Mar, 2020

Multi-bank connectivity

Is cash dead? Or at least dying a long, slow and painful death?

Is cash dead?

“Have you got any cash on you?” It’s a phrase mothers would say to their kids as they sent them off for an outing with $10, $20 or $50 cash in hand for the day. In those days, cash was king and accepted everywhere.

Fast forward to 2020, and if you are a teenager heading off to the Sydney Cricket Ground (SCG) with friends to watch the footy or cricket, your $20 won’t go very far if you’re hungry or thirsty. Why? Because cash is (nearly) dead at the SCG.

And it’s not only food and drink that is cashless, sports fans are only able to pay with a credit card to park at the SCG.

While cashless is a growing trend in Australia and across Europe, cities in the US, in particular San Fransisco, Philadelphia, the state of New Jersey and more recently, New York are pushing back on the trend. Legally, businesses in these areas must accept cash as a form of payment. The concern being that by not taking cash, those without bank accounts or credit cards such the vulnerable and homeless are disadvantaged.  Interestingly, research from MasterCard found that 50% of all Americans carry less than US$20 cash and 9% indicated that they have stopped carrying cash altogether. The move towards cashless is growing, but it seems that the US may be slower to adapt than the rest of the world.

What is driving this change?                                                                                                       

The SCG is an example of a broader trend in hospitality, with a growing number of hospitality venues, both big and small, embracing cash only. Coopers Stadium in Adelaide went cashless on the 23rd September 2019, along with many small restaurant venues across Australia, including Sydney’s Fishbowl chain and Lune Croissanterie in Melbourne.

For venues, the move towards cashless has many benefits for both the customer and the merchant. These include:

  1. Faster transactions = more revenue

Australia has adopted tap-and-go technology faster than any other country on the planet. MasterCards 5th Digital Payments Study published in 2017 shows that 82% of Australians use tap-and-go payments every week. The main reasons being speed and convenience.

At sporting venues, customers don’t want to stand in a queue. They are there to watch their favourite sporting team, and cashless reduces the size of lines and increases the number of transactions the venue can process during the event. More purchases equate to more product sold, which increases the total revenue from food and beverage sales.

For smaller venues, including those with cheaper transactions such as coffee purchases, the ability to increase service speed can improve the customer experience. This, in turn, increases customer loyalty along with the number of customers they can serve in a day.

  1. Cashless increases basket size

Globally, the move towards cashless has led to the additional benefit of increased basket size – that is, customers are buying more when they pay by card and not cash.

There are many factors at play here. Firstly, paying by cash places a spending limit on the transaction. If you’ve only got $20 in your pocket to buy lunch, you’ll spend up to that amount. Paying by tap-and-go ups your limit to $100 without requiring a PIN, giving access to a larger total budget, which increases the probability of spending more.

Customers also pay more attention to price when paying with cash. In Germany, research shows that nearly half (49%) of consumers pay attention to price and tend to have higher bills when merchants accept cards.

  1. Easier to manage and reconcile

Accepting cash requires a lot more administration than cashless.  At the close of business day, takings need to be counted and checked against receipts and deposited into a bank account.

With cash, you also need to have additional change available and have it available to facilitate all transactions. This places a much higher administrative burden on accounting staff.

  1. Reduces the chance of theft

A cashless business minimises the potential of theft from light-fingered employees or from criminals who may target the business.  Cashless significantly limits the possibility of losing money from theft; after all, there is no cash register in a cashless business.

What are the risks in going cashless?

Reliance on technology to process transactions comes with inherent risk. System outages are commonplace and particularly challenging when a merchant relies on one bank to provide their payment network.

Statistics released by Australia’s Reserve Bank in 2019 show a concerning increase in the length and numbers of payment system outages compared to previous years. In 2018, the average length of disruptions in retail payments was 6.2 hours, compared to 3.9 hours in 2017 and 3.2 hours in 2016. When you overlay these statistics with the increased use of online payments, the potential for loss of sales is alarming, with cashless businesses unable to process transactions during this downtime. These risks can be mitigated when merchants don’t solely rely on one bank to process their online payments.

How multi-bank connectivity reduces the risk and cost of going cashless

Implementing a smart, flexible payment system with multi-bank connectivity is one of the critical ways of reducing risk. Reliance on one bank doesn’t give merchants the flexibility to switch over to another bank if one goes down.

Multi-bank connectivity provides merchants with a safety net if one bank experiences downtime. This ensures no transactions are lost and allows the merchant to reduce bottlenecks and credit inefficiencies that exist when dealing with a single bank.

Least-cost routing is an additional benefit that comes with multi-bank connectivity.  Least-cost routing is an initiative that provides merchants with the choice to determine how their debit transactions will be processed, allowing them to choose the cheapest option available.

Access to least-cost routing requires a flexible payment service that provides the merchant with the ability to select how transactions are processed. Unfortunately, many organisations have legacy payment systems that cannot choose between payment networks dynamically and as such, are unable to deliver the cost savings associated with least-cost routing.

How can IPSI help?

Implementing a reliable, secure online payments system that provides the flexibility to leverage multiple payment channels with multi-bank connectivity is where IPSI has a distinct advantage over its competitors.

If you’re interested and would like to discuss how we can help, and the options available please contact us at [email protected] or call 1300 975 630.

Related Articles

The benefits of mandatory data breach notification laws in Australia

Mandatory data breach notification laws would result in greater security for Australians and improved protection of their sensitive information. And i

Read More

Cost of data breach report (with Australian Statistics)

Ponemon Institute 2013 Cost of Data Breach report The 2013 Cost of Data Breach report published by the Ponemon Institute (sponsored by Symantec) revea

Read More

How to survive a data breach

In the past two years, LinkedIn, eHarmony, Twitter, Adobe and, most recently, Target have suffered data breaches that together exposed more than 120 m

Read More

Credit card data discovery tools lay the foundation for good data security

Card Holder Data (CHD) discovery tools are becoming essential in identifying none secure sensitive data locations. Since December 2013, a series of da

Read More