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Cashless transactions have revolutionized the whole world in a short span of time. Some of the most recent trends indicate that digital money will soon take the place of physical cash. Utilizing mobile phones or other technologies to make payments instead of the traditional payment system has increased day by day since demonetization.
During the Pandemic situation, the 4 largest banks in the US have increased the use of digital payments from 63% to 72%. It is also a matter of concern that ATMs and Banks might also become obsolete because of these cashless payment systems.
What Is Cashless Payment System?
Cashless payments are made or accepted without using any type of hard cash. You can easily transfer funds using debit cards, credit cards, or any other form of online payment through mobile phones, websites, or digital devices. According to the Capgemini report, the highest growth rate of cashless transactions recorded from 2018-2019 is 708.5 billion transactions.
With 243.6 billion non-cash transactions, Asia-Pacific has eclipsed Europe and North America to take the lead in 2019. In the report of Statista, it is projected that transaction value by this segment will reach US$6,682,332m in 2021. The reason behind this growth is the increasing use of smartphones and the booming of E-commerce sites.
Types Of Cashless Payment Systems
During the global pandemic, most Banks are making the switch to cashless payments, as they want to reduce direct contact with customers. There are many types of cashless payments that have been used for several years. Here, we have rounded up a few of them. Let’s check them out!
- Bank Cards: One of the most commonly used cashless payment methods is the banking cards that include reputed names like Master Card, Visa, American Express card, and many more. Users can use these for any form of digital payments, in the meantime, it’s secure and convenient as well.
- USSD: If you don’t use a smartphone tablet the unstructured supplementary service data (USSD) might be the right choice for you. It doesn’t require any internet connection like other cashless or digital payment services. Users have to dial specific code numbers and interact with a voice menu through the mobile screen. The customer’s mobile must have to be linked with the bank account or else the user can’t avail of the services.
- Mobile Wallet Apps: Because of the fast, secure, and convenient payment system mobile wallet apps are receiving immense popularity from the general people. It allows the users to send, receive, and deposit money plus helps to track all the transactions. Another important feature is that this sort of mobile wallet stores debit cards, credit cards, and rewards information. Some of the best well-known mobile wallet applications are Apple pay, Google pay, Samsung Pay, and many more.
- QR Codes: QR Codes mean quick response codes which is a type of machine-readable barcode matrix. To complete the transaction, the user needs to scan the two-dimensional QR code of the merchant service via mobile phone. Whether it is about shopping, movies or ads, it is almost used everywhere.
- Contactless Payments: Contactless payments are one of the secure payment methods for customers to purchase goods or services. Users can use debit cards, credit cards, or other payment devices which are purely based on RFID or NFC technology. It doesn’t need any signature or PIN which makes it extremely convenient. This payment method works by tapping a payment card or device near a point-of-sale terminal provided with RFID, NFC, and QR code technology.
- ECS: ECS Refers to electronic clearance service that is periodic or repetitive in nature. It is commonly used by institutions for making a bulk number of payments, monthly installments,s or paying for utility services. This electronic payment method offers bulk transactions of money from one bank to multiple banks or vice versa.
- Gift Cards or Vouchers: Gift cards or vouchers are a great handy way to go cashless and a perfect gift without any doubt. As the receiver can purchase anything with the voucher or gift card at any time. There are a number of shops, they give gift cards or vouchers to their regular customers for the purchase as well.
- PoS Terminals: PoS or Point of sale system is mainly used in physical retail locations to process the card payment. PoS terminal captures card data and transfers money from customers’ accounts to merchants in a secure way. To facilitate merchants’ operations and tasks modern PoS terminals integrate with ECR (electronic cash registers) and ePOS (electronic point of sale) systems.
Major Benefits of Cashless Payment System
Reduced costs and business risks: Nowadays People don’t carry cash if they don’t have to. As cashless payments reduce plenty of costs including costs of security, withdrawing cash from banks, and transporting. At the same time eliminate business risks like the robbery of cash, the counterfeiting of money, and many more.
- Add Value to the Business: Cashless payment system makes the whole purchasing process easier for both customers and merchandisers. With just one click it converts to the business website and encourage repeat purchase. As it offers a secured gateway, it helps to maximize trust and loyalty.
- Transaction Speed: One of the successful and well-known companies Sweetgreen and Salad chains found out that adopting a cashless payment system is a remarkable decision. It helps to process transactions more quickly than cash transactions. A quick payment process enhances customer satisfaction and leads to customer retention in the company.
- Seamless International Payment: Online payment is ruling worldwide because it saves time and effort at the same time. If anyone goes abroad, then these cashless payment systems remove the necessity of converting money to local currency. The transactions can be made using apps as per the country’s currency rates.
- Better Compilation of Economic Data: The process of gathering data to track people’s transactions is a very time-consuming process for the government. It is costly and inefficient compared to the conduct of cashless payments. Such a process allows organizations to track the movement of money and also detect illegal transactions if any.
- An Efficient Tool to Fight Corruption: The biggest solution to fighting corruption is making traceable digital payments. Using cash leaves no paper trail. Money laundering, and making certain investments and purchases are other ways of making the movement of illicit cash untraceable. But to prevent corruption, cashless payment systems record, detect, and keep track of every transaction and income from any source.
- Eliminating the Middleman: When a private company is involved in a cash transaction there is a cost occurring and that means money loses its actual value. But, when we enter into a cashless society, these types of middlemen don’t exist, which leads to saving processing costs.
With the improvement of cutting-edge technologies, the cashless payment system helps to make the money transaction process more transparent and secure worldwide. Major improvement also happens because of fin-tech advancement. Though, having a fully cashless society is quite a difficult dream to come true.