26th July, 2018

Why going cashless isn’t just about tech, but consumer attitudes

Cash-only businesses aren’t just inconvenient, they’re viewed with suspicion by more than half of the population – despite whether the businesses have shifty intentions or not.

That’s the call from the ATO, which recently commissioned research group Colmar Burton to investigate peoples’ attitudes towards cash-only businesses.

Two thirds of respondents believed that business owners who operate a cash-only basis are likely to pay less tax than a similar business that takes electronic payments.

They viewed cash-only businesses being unfairly advantaged over those that take electronic payments, which are less able to hide transaction data from the ATO.

“Consumers are twice as likely to associate ‘cash only’ as negative rather than positive,” said the ATO’s Assistant Commissioner, Matthew Bambrick.

“While the majority of businesses are run by honest Australians who want to do the right thing, being cash-only may have a direct impact on reputation.”

Bambrick said while cash was legal tender, businesses should look at integrating electronic payments because of their convenience.

“As well as the benefits to reputation and potential cost savings, electronic payment methods make it easier for businesses to keep good records and get their tax and super obligations right,” he said.

The latest research commissioned by the ATO signals which way the wind is blowing and evidence that ongoing discussions about the black economy are influencing public perceptions.

What is the “black economy”?

The black economy refers to economic activity that takes place outside the legal and tax framework of the country.

It ultimately relies on untraceable transactions that allow businesses and individuals to not pay their fair share of tax – because it’s easier to hide cash payments.

This means that less tax can be collected, resulting in less money for public spending on things like hospitals, roads and schools.

The total size of the “black economy” has been put at $32 billion a year, with a tax gap (the tax due to go to government coffers) of $5.8 billion.

Some estimates put that figure even higher. That’s why over the past couple of years the federal government has turned its attention to the black economy.

For example, in the latest budget, the Government outlined (among other measures) a plan to outlaw cash payments of more than $10,000.

READ: Why the cashless society is coming

But what will make cash-only businesses become a thing of the past has nothing to do with a government crackdown – it’ll be consumer attitudes.

The cost of (in)convenience

While the ATO research’s big headline was around people finding cash-only businesses suspicious, the other main point is that cash-only businesses are seen as inconvenient.

In fact, “inconvenient” was brought up as one of the top words that respondents associated with cash-only businesses.

You only need to head to a café in the morning to see this perception in action.

When you pay for your coffee, often the person behind the counter will reach for the eftpos machine automatically, as they assume most people will simply want to tap and go, using either their card, or increasingly, their smartphones.

READ: How consumers are driving changes in payments

It’s also more convenient for the business.

Businesses interviewed by Colmar Burton said they viewed efficiency (58 percent), less hassle (48 percent) and better security (44 percent) as the main benefits of introducing electronic payments.

For totally cashless businesses, they view the main benefit as efficiency – but a good relationship with the ATO doesn’t hurt.

The founder of Melbourne-based Cannings Butchers, Sam Canning, previously told The Pulse that by going cashless, the business built a better relationship with regulators.

“Going cashless has forced us to be completely by the book. That’s one of the best things I’ve ever done,” said Canning.

“All of our sales have been put into the system and it’s all there for the bank to see. Because of that, my borrowing capacity has increased.”

He also said the ATO appreciated the transparency of a cashless business.

“As you get bigger, you want to have that relationship [with the ATO],” said Canning.

“As a small business you can’t see past the short term of the potential tax savings. Having a good relationship with the ATO has been one of the main benefits for us.”

The fact the ATO is commissioning research on attitudes towards cash-only businesses certainly demonstrates that point.

Both regulator and consumer attitudes point towards a future where electronic payments are the norm and cash payments become a thing of the past – it’s those who can jump aboard the trend early who will reap the benefits.

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