The Complete Guide to Understanding Cashless Payments

While we’re unsure if the society is heading towards becoming a cashless society, projections suggest that cashless transactions are indeed a popular choice for alternative payment methods across the world. 

While various e-wallets have made it easy for cashless payments, the biggest driver for the growing popularity of cashless payments is its convenience. 

As the cashless mode of payment is growing popular across the world, the scenario in UAE is no different. The total transaction value in the Digital Payments market is projected to grow at an annual growth rate of 8.02%, resulting in a projected total amount of USD 39.13 billion by 2027. 

In this guide, we will dive deep into understanding what cashless payment is and if it’s worth integrating into your business. 

What are cashless payments? 

In its strictest sense, cashless payments refer to transactions made without cash. Cashless payments are now a payment mode offered by a merchant at the point of sale that can occur either online or at a physical store. This is owing to new technologies like digital wallets, contactless payments, and mobile payment systems as well as the traditional credit, debit and bank transfer payments. 

Historically, cashless payments were made via cheques or money orders. But they took much longer to be processed on both the consumer and business front. 

What are the different cashless payments? 

Owing to technology, there are several different types of cashless payment modes available to businesses and consumers. Some of them include: 

1. Debit and credit cards

Debit and credit cards are among the oldest and most popular cashless payment options. Usually, the customer has to provide a verification PIN or signature for the transaction to happen. 

Additionally, one can digitise the card by saving and verifying the card details in digital wallets like Apple Pay and Google Pay. 

While on a credit card, the shopper has to settle the bill by the end of the month, for a debit card, a direct deduction happens from the account. Credit and debit card holders can also pay using another card verification option known as the CVV. Almost all top banks in the UAE offer credit and debit cards, including Emirates NBD and First Abu Dhabi Bank (FAB).

Additionally, prepaid and gift cards are becoming a favored choice for controlled spending and thoughtful gifts. These cards, preloaded with a set amount of funds, offer the same convenience and wide acceptance as debit and credit cards, providing a flexible and secure payment option.

2. Online Banking

Online banking has transformed the way consumers and businesses handle transactions. It offers a broad spectrum of cashless payment options. This method allows customers to log into their bank accounts online and conduct various financial operations. 

1. Instant Bank Transfers: Customers can instantly transfer money directly from their bank accounts to merchants or other individuals. While some banks may charge a nominal fee, the transaction is usually processed immediately, providing a quick and efficient payment solution.

2. Mobile Transfers: With mobile banking apps, users can quickly transfer funds, pay bills, or even split expenses with friends, all from their mobile devices. The convenience and speed of mobile transfers have made them a favorite among users who value efficiency and accessibility.

3. Online Payment Gateways: These platforms facilitate online transactions between merchants and customers. When a customer makes a purchase, the payment gateway securely processes the payment, transferring funds from the customer's account to the merchant's. They often offer additional features like fraud prevention, encryption, and the ability to handle various payment methods, including credit/debit cards and e-wallets.

3. Digital Wallets

In recent times, digital wallets have become a cornerstone of cashless transactions. Digital wallets like PayBy and Alipay+ offer a secure and convenient alternative to traditional methods. 

These wallets work by linking directly to a user's bank account, securely storing credit or debit card information, or securely store cash with them. When making a purchase, they turn up as an option in payment gateways facilitating a smooth and quick transaction.

4. QR Code Payments

Another convenient and rapidly growing cashless payment method is QR code payments. This innovative solution involves scanning a quick response (QR) code using a smartphone to initiate a transaction. It's a contactless payment method that has gained immense popularity due to its simplicity and speed. Users open their payment app, scan the code displayed by the merchant, and confirm the payment. 

This method has become widely accepted in the UAE, with many local businesses and large retailers adopting it to offer a quick and secure checkout process. 

5. Cheque and Demand Draft

Though part of the more traditional spectrum of cashless payments, cheques and demand drafts hold their ground for certain types of transactions. A cheque directs a bank to pay a specified amount from one's account to another party. 

It's favored for large transactions due to its traceability and legal standing. A demand draft is a bank-issued payment made on demand, noted for its security as funds are prepaid. 

How do businesses benefit from cashless payments? 

As smartphones are becoming easy and accessible and digital wallets are gaining prevalence, cashless payments are taking over cash payments. Merchants are now offering various cashless payment methods to make it a seamless shopping experience for customers. 

On the other hand, research suggests that customers tend to spend more when they have cashless payment options. This happens because it's easy to part with money when it isn't tangible. But when we hold the physical money, it actually feels difficult to give it up.

Here are some of the key benefits of cashless payments we have observed: 

1. Improve security

With no physical cash to be maintained in cash drawers, businesses also reduce the risk of theft at their physical locations. There is also less room for fraud as every transaction is recorded in detail with documents like invoices and digital receipts. 

2. Enhance the customer experience

Cashless payments make the transactional experience for customers much more convenient. Rather than shoppers having to withdraw cash every time they need to shop your products or services, they can simply choose an online payment mode. 

3. Improve business efficiency

Paying digitally or with a credit/debit card is typically much faster than tending cash. As a result, speedier transactions help boost operational efficiency, freeing up both time and resources to focus on other essential areas of the business.

4. Monitor cash flow

Accepting cashless payments makes it easier to monitor incoming and outgoing money. Rather than having to manually go through your register at the end of the business day to record takings, cashless payment solutions automate the entire process. Never lose sight of your cash flow! 

5. Address customer demand

Owing to the pandemic, the need for contactless transactions is increasing by the day. Customers from all walks of life are choosing cashless payment modes over physical cash transactions. Setting up cashless payments can help your business capture this demand to deliver great experiences. 

In fact, The National News reports that cash is no longer king in UAE as it is rapidly getting replaced by digital payment modes. They state that almost two thirds of people in the UAE, or 64 per cent, expect the country to become fully cashless by 2030.  

7. Accept international payments 

The good thing about cashless payments is that they make international transactions much easier too. No matter what currency you use, a cashless payment solution can enable the transaction all without the hassle of currency exchange every time a consumer is traveling or placing an order from an overseas location. 

How do customers benefit from cashless payments? 

Customers prefer cashless payments because it can be done instantly. This is particularly helpful for shoppers who shop on the go. Cashless payments eliminate the need to go to the bank, withdraw money, or stand in long queues at the banks. 

Since there is no need to count the cash, the checkout is always faster. It's also easy to keep track of one's expenditure as every transaction is logged digitally. 

Customers are in more control of their expenditures as one can set a limit to expenditures, and once you are near the limit, reminders pop up on your phone. 

Customers are no longer in fear of losing their cash or getting robbed with cashless payment mode. 

Are cashless payments secure? 

Cashless payments use various security measures to make every transaction safe. For example, for credit card or debit card payments, the user has to input their PIN or password. 

There are also token-based transaction systems to keep it safe. The mobile payment system also offers various security measures. Some of the important security standards include:

• Authentication: customers need to input a PIN or a passcode to authenticate any transaction. Additionally, 3D Secure Technology is used as a two-factor authentication. This ensures that no third party can bypass and get unauthorized access.
• Encryption: Every transaction is safeguarded with encryption technology to prevent unauthorized access.
• Geoblocking: Geoblocking is a cashless payment security system that blocks payment methods in certain countries to prevent fraud.
• Privacy policy: All data (for example, personal data) collected during the transaction are kept private and not disclosed to any third party without permission. 

How much do cashless payment solutions cost businesses? 

A cashless payments solution like PayBy offers comprehensive products to enable digital transactions for businesses of all sizes. 

It offers simple pricing with no setup fees and one of the lowest transaction charges in the industry, giving you more control over your finances. 

• Standard: Get access to all the PayBy payment solutions at one simple price - 2.50% + 1 AED for UAE cards, 2.80% + 1 AED for international cards and 1.5% + 1 AED for AliPay+
• One-time fees for POS: PayBy also offers point of sale solutions at a one-time fee of AED 800 for the physical device. 

For more details, check out the pricing of our cashless payment solutions here. 

PayBy also offers custom packages for businesses with revenue over AED 500k per month. Contact us. 

What is the future of cashless payments? 

As cashless payment is becoming widely accepted across the world, a cashless society looks to be the next logical step. 

A report by the Standard Chartered Bank forecasts that the UAE is evolving as a cashless society and is expected to go completely cashless by 2030. 

Further, as new payment technology continues adding new payment options like QR codes, near-field communication (NFC), and other contractless technologies, consumers find it easier to complete a transaction with their smartphones and wearables. 

Once AI is applied to payments, it will become easier to make cashless payments. 

Along with the emergence of new technologies, the government is also coming up with new initiatives to promote cashless payments and reduce the cost and risk associated with cash transactions. 

Different countries are taking initiatives to come up with new digital wallets, infrastructure, and mobile payments to boost cashless payments. Needless to say all these will have an impact on the traditional banking system.

In the near future, more collaborations between banks and fintechs are expected to emerge to adapt to the changing landscape of cashless payments.

Finally, the increasing popularity of cashless payments is going to change the way consumers manage their personal finances. The coming days surely look promising for cashless payments. 

Integrating cashless payments is no longer difficult

Cashless payments are the future of all transactions. 

The good news is that it is no longer difficult to get started with cashless payments with solutions like PayBy. 

Catering to different industries and businesses of all scales, PayBy enables cashless payments with the following solutions: 

• Online Payment Gateway - Our global payment processing platform enables you to process debit and credit card payments online. It integrates seamlessly with your website or mobile application to offer easy payment solutions to customers by including local payment methods. 
• Paylink - Create a shareable payment link or button that can be embedded on web pages, emails and other digital collaterals, for customers to click and make payments of a fixed or custom amount. 
• Payable Invoice - Create and share invoices with customers in minutes via email or SMS with the ability to click and pay via online payment options.
• QR Code Payments - Create a custom QR code for your business to let customers scan and pay for orders placed online and offline. 
• Recurring Payments - Easy to use subscription-payment processing service to simplify recurring payments for customers with auto-debit feature. 
• In-App Payments - Integrate your brand’s mobile app with PayBy In-App payment solutions to enable online payments for users. 
• Pay with Wallet - Give customers the ability to pay for orders with a multitude of supported wallets like Botim, PayBy, and AliPay+. 
• Point of Sale - PayBy offers two point of sale devices. Smart POS enables purchases and refunds alongwith the ability to trace daily transactions, and is suited for fast-scaling businesses. Smart BOX is specially designed for small and medium-sized businesses and enables receiving/ refunding money. 

PayBy payment solutions integrate seamlessly with popular content management systems (CMS) and other business tools, making getting started even simpler. 

Want to know more about cashless payments or how it benefits your business growth? 

Book a demo with us today.