Across the globe, countries are waging a war on cash, with the likes of Sweden and China rapidly transitioning to digital currency as a primary form of payment. While digital currency was started by payment providers and banks to increase corporate profit, small businesses aren’t reaping the benefits. They’re pushed towards a completely digital society without knowledge of increasing swipe fees and processing rates, ultimately footing the bill for a digital revolution that does them more harm than good.
Digital is often seen as a safer and more streamlined payment process, but small business owners are misinformed and misguided by credit card companies whose goal is to increase their own profits. While large chains like Starbucks can make up for the processing fees with sheer sales volume when they go cashless, small businesses do not have that luxury.
However, digital transformation does not mean that a cashless society will happen overnight. Cash still accounts for more than 80 percent of the world’s transactions, so it is far from obsolete. If cash is still prevalent among the majority of the population, businesses need to maintain flexibility by accepting cash while also adopting strategies that will prepare them for an increase in credit card processing fees as consumers do make the switch to digital.
The Cashless Society: More Risk Than Reward
Wall Street is the biggest winner in a cashless society, with increasing swipe and processing fees from business owners bringing profits to banks and credit card companies. If the world turns away from cash, small businesses could potentially be at the mercy of the major financial institutions’ hidden merchant fees, further driving Main Street into debt and preventing economic growth.
Luckily some small businesses have seen relief that may lead to overarching changes in the payments industry.
For example, Visa and Mastercard, along with several big banks, recently came to a $6.2 billion settlement with merchants across the nation for violating antitrust laws and illegally inflating swipe fees. However, just as a cashless society won’t happen overnight, change to the payments industry will not suddenly appear either. To look out for their bottom line, small business owners need to make proactive, operational changes to protect themselves against processing fees from credit card companies and big banks, while adapting to an increasingly digital world.
Strategies to Increase the Small Business Owner’s Bottom Line
As the cashless society goes mainstream, merchants will continue to foot the bill. Certain preventative strategies will help small business owners avoid going into deep debt as a result of transaction and swipe fees and instead maintain or grow their bottom line.
A basic understanding of the payments industry is a good starting point for most business owners. To ensure the most transparency, they can implement strategic partnerships that work harder for small business. For example, a payment processor that runs on an interchange-plus pricing model will ensure that merchants are working with an equal partner that has clear margins to offer them the lowest rate possible for accepting credit cards. Business owners must educate themselves about this model in order to make an informed decision before entering into an agreement with a payment partner.
Additionally, cutting overhead expenses and regularly reviewing budgets will help manage unnecessary costs. Regular financial review allows merchants to look at which expenses are hurting their business the most. This will help business owners find efficiencies in daily operations, from credit card processing fees to inefficient technology. While it might seem like a no-brainer, it is often forgotten as business owners’ schedules quickly fill up with more pressing matters. Making a regular expense review a priority allows merchants to get ahead of any detrimental issues, ultimately saving the bottom line.
Cash Is Still King
The cashless society will be heavily debated for the foreseeable future, especially as more people embrace digital currency. However, business owners do have the ability to educate themselves about the current status quo of the payments industry so they understand what partnerships with major financial institutions might entail. It is important to keep in mind that cash is not yet obsolete – it still amounts to one-third of transactions in the U.S. alone, and is a savior for small businesses that fall prey to high swipe and processing fees.
Digital transformation will ultimately affect every aspect of daily life, and merchants need to adopt defensive strategies to protect the businesses they’ve worked hard to build. Understanding the pitfalls of a cashless society will allow small business owners to advocate for themselves and push for a more transparent payments market. Utilizing a partner that views them as an equal will allow merchants to better advocate for themselves and strengthen their bottom line.
About Austin Mac Nab:
Austin Mac Nab is a Managing Partner at VizyPay, a company revolutionizing the payments industry by offering a transparent credit card processing model that focuses on powerful payments solutions. With over 14 years of experience in the bankcard industry, Mac Nab has set out to change the way business owners make pricing and payment decisions. With a passion to build a company that makes a difference for small to medium size businesses, Mac Nab and the Vizypay team are here to solve the problems in the payments industry. It’s by transforming the industry through a credit card processing model that focuses on powerful solutions, real human customer support and simple payments services that VizyPay has created a transparent payments market for businesses across the United States.