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What is Cashless Payment System: Benefits and Types

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, 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 phone, website, or digital device. 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 System

During the global pandemic most of the 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. Customer’s mobile must have to be linked with the bank account or else the user can’t avail the services.
  • Mobile Wallet Apps: Because of the fast, secure, and convenient payment system the 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.
Types of cashless payments
  • Contactless Payments: Contactless payments is one of the secure payment methods for the 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 that 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 installment 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 the 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 card payment. PoS terminal captures card data and transfers money from customers’ accounts to merchants in a secured 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 robbery of cash, counterfeit of money and many more.

  • Add Value to the Business: Cashless payment system makes the whole purchasing process easier for both customer 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 the cash transaction. Quick payment process enhances customer satisfaction and leads to customer retention to the company.
Benefits of Cashless Payment System
  • Seamless International Payment: Online payment is ruling worldwide because it saves time and effort at the same time. If anyone goes aboard, then these cashless payment systems remove the necessity of converting money to the 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, 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 the processing cost.

With the improvement of cutting-edge technologies, the cashless payment system helps to make the money transaction process more transparent and secure world-wide. Major improvement also happens because of fin-tech advancement. Though, having a fully cashless society is quite a difficult dream to come true.

David Martin
David Martin
David Martin is a financial expert working for a New York-based business consultancy firm. He has been monitoring a number of businesses and startups closely and guiding them for more than a decade now. Besides the regular job, he is passionate about blogging as he wants to be an effective finfluencer. With his deep understanding of business analytics, David Martin aims to assist young entrepreneurs in growing and building their brands.

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