Should your business go cashless? Pros, cons and costs

In an increasingly digital economy, many UK small businesses — especially those that deal directly with customers — are rethinking how they take payments. With contactless card payments, digital wallets, and QR codes now commonplace, the idea of going completely cashless may seem like a logical next step.

But is it the right move for your business? While going cash-free offers clear benefits for some, it’s important to contemplate the potential downsides too, especially around customer inclusivity and costs.

The case for cashless

1. Faster transactions and efficiency

One of the main advantages of going cashless is speed. Card and mobile payments are typically faster than handling physical notes and coins, which can reduce queue times. This is something that will particularly benefit high-footfall businesses like coffee shops, market stalls, or hair salons.

2. Lower risk of theft

Removing cash from premises can reduce the risk of theft, both from break-ins and internal shrinkage. It also removes the need for regular trips to the bank to deposit takings, something that can be time-consuming, especially if your nearest branch isn’t conveniently located.

3. Streamlined accounting and tax compliance

Card payments leave a digital trail, which can make it easier to track income, reconcile transactions, and prepare for tax season. Many point-of-sale (POS) systems can even integrate directly with accounting software.

4. Changing consumer behaviour

Consumer preference is evolving rapidly. UK-issued debit and credit cards were used to make 31.4 billion transactions in 2024* (both here and abroad) – up from 30.2 billion transactions in 2023. Mobile payments and digital wallets are also growing fast. For some demographics — particularly younger customers — cash is becoming increasingly irrelevant.

Acknowledging the downsides

1. Excluding certain customers

Not everyone is ready or able to go cash-free, while some people simply don’t want to do it. Older generations, those on lower incomes, or customers without access to digital banking may still rely on cash for their day-to-day spending. Removing that option risks alienating a portion of your customer base.

2. Transaction fees can add up

Card payments aren't free. Payment processors typically charge transaction fees — often between 1–3% — on every sale. Over time, especially for low-margin businesses, these costs can stack up. Some POS providers also charge monthly fees or require hardware purchases, so be sure to factor in the full cost of digital payment infrastructure.

3. Outages can happen

Going 100% cashless also makes your business very reliant on technology. This means that, if your card machine goes down, your Wi-Fi fails, or there's a problem at your payment provider, you could be left unable to trade. Keeping a cash option can serve as a useful backup.

4. Customer tips and staff preferences

Some staff may prefer cash tips as they’re immediate and don’t rely on payroll deductions or card tip processing fees. Going cashless can also potentially impact how tips are distributed, which may affect employee satisfaction.

The hybrid approach

For many small businesses, the ideal solution — for the time being at least — is probably going to be a hybrid model, offering both card and cash payments.

Of course, it’s important to analyse your business’ transaction data before making any decisions. This can help guide whether a full transition makes sense, or whether retaining flexibility is the best move.

The bottom line

Every business has its own quirks and nuances, so there’s never going to be a definitive one-size-fits-all answer. 

For some small businesses, especially those with younger customer bases or high transaction volumes, going cash-free may improve efficiency and reduce risk. For others, particularly those serving older or more vulnerable communities, maintaining cash options could be essential.

Weigh up your customer demographics, transaction volumes, and infrastructure costs. Maybe you could trial a card-first model or ask your customers for feedback. Ultimately, the best approach is the one that supports your business goals, while keeping your customers’ needs front and centre.

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*https://www.ukfinance.org.uk/news-and-insight/press-release/ps1-trillion-worth-uk-card-transactions-in-2024