Missing a trick? The 9 billion cash transaction opportunity for eCommerce

By Piero Macari

Did you know cash is the 2nd biggest payment type for UK consumers and represents a quarter (23%) of all retail (online and store) transactions in 2019(1).

It’s no secret that debit and contactless card transactions overtook the use of cash in the UK in 2017. Accelerators like Covid-19 are driving more consumers to electronic payments at point of sale and therefore it is easy to assume payment cards is the only method to make retail payments both in store and online. But is this a correct assumption?

Rather than follow the headlines, the devil is always in the detail, this blog wants to test the waters to see if online retailers are missing an opportunity by not supporting cash payment within their eCommerce retail environment – is there an incremental market share to be gained by giving greater payment choice to consumers?

As the fact above states, cash is still a significant part of the economy, and according to the Bank of England there is double the amount of cash in circulation than there was 10 years ago(2). With eCommerce representing 19% of all retail sales in 2019 (as high as 33% in May 2020 during Covid times)(3) and the inability to pay with cash online, is there an opportunity to mirror the high street cash payment choice in a digital world?

The consumer group, Which? recently illustrated the size of cash users in the UK. They claim that there are 8 million consumers in the UK that would struggle in a cashless society(4) and 2.1million customers (up from 1.9 in 2018) who only use cash for their day to day spend(5).

There is also consumer sentiment and political pressure to support the cash economy. In March 2020 Rishi Sunank announced that the Government will protect the access to cash and the UK’s long term cash infrastructure.

Finally, there is evidence of a major eCommerce player tapping into the UK’s cash consumer market. That player has identified the ability to serve this cash segment with a product they call Amazon Top Up In Store...

Amazon Cash

So why do consumers use cash?

This is never an easy question to answer and the needs of cash are sometimes logical, sometimes emotional and sometimes cultural. The main needs can be clusters into the following groups:

The unbanked: Surprisingly, there are 1.3 million unbanked adults in the UK, of which 1/3 had bank accounts but consciously chose to close them, partially due to distrust of banks. The unbanked cannot access the digital economy and its benefit’s such as choice, convenience and price benefits of buying on line(6).

Budgeting: Cash is a simple way to make sure that consumers and households can live within their means. No overdraft penalties and no ease of impulse spending outside of their cash budget.

Privacy: Cash is anonymous and accepted everywhere physically. The power of data is understood by consumers and many would rather keep their spend behaviour private from governments and other parties.

Online fraud fears: Paying with your debit card (or potentially soon your Open Banking direct to account product) leaves many people in fear of fraud. In 2018, Mastercard stated this is the #1 reason that stops consumers buying online(7). Paying with cash gives a sense of control and security.

How do I solve the physical impossibility of accepting cash in a digital environment?

Like most things in life, there are many ways to peel an orange (or in normal English: many ways to solve a problem!).

Here are a few payment methods that can be used to facilitate the cash paying consumers in a digital environment.

Click and reserve: offers a great ability to reserve goods online and enable cash payment on pick-up. For this to be truly successful you will need a large retail network across the UK and great operations processes to meet order demands.

Prepaid cards: There are many prepaid players in the market, and you could co-brand your own. Once customers are signed up then they are digitally enabled. There is still a challenge in loading a prepaid product with cash and the loading fee is normally borne by the consumer making it an potentially expensive option.

Integration with cash-in networks: Possible to directly integrate with networks that accept cash. However this will likely need a lot of back office re-engineering both from an operations and financial reconciliation process.

Cash on delivery: There are players that enable an on behalf of cash on delivery service. This is great for consumers to inspect the goods before they pay. However the logistical challenges, account reconciliation and fees applicable should be properly assessed.

New technologies: The payments industry is going through disruptive change with new players serving different customer needs, such as cash. Some of these players have developed innovation that allow eCommerce retailers to easily manage existing workflows and give consumers a very simple cash payment experience.

Cash

Summary

UK Finance summarise the position of the 9 billion cash transactions in the UK economy well:

Rather than the UK becoming a cash-free society over the next decade, it is transforming to an economy where cash is less important than it once was but remains a payment method that continues to be valued and preferred by many(8).

There is a strong argument to say that giving choice of cash payment could open an incremental customer base for eCommerce retailers, especially those without a national physical presence. Kasssh firmly believes that using this kind of technology can easily enable many eCommerce retailers, with or without a nationwide store network, to give effortless cash payment options to these unserved customers. We welcome further discussion and debate on this opportunity and what it could mean for your business.  Feel free to reach out to info@kasssh.com or sign up at https://kasssh.com

By Piero Macari, Kasssh

Published 09/07/2020

[1] https://www.ukfinance.org.uk/system/files/UK-Payment-Markets-Report-2020-SUMMARY.pdf

[2] https://www.bankofengland.co.uk/knowledgebank/will-cash-die-out

[3] https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j4mc/drsi

[4] https://campaigns.which.co.uk/freedom-to-pay/

[5] https://www.ukfinance.org.uk/system/files/UK-Payment-Markets-Report-2020-SUMMARY.pdf

[6] https://publications.parliament.uk/pa/cm201719/cmselect/cmtreasy/1642/164205.htm

[7] Source: Mastercard ecommerce 2018

[8] https://www.ukfinance.org.uk/sites/default/files/uploads/pdf/UK-Finance-UK-Payment-Markets-Report-2019-SUMMARY.pdf

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