In this episode of Pricing College – we discuss what impact a cashless society will have on pricing.


Will it mean less focus on budgets and costs, will people spend more or less – and what businesses and industries stand to benefit.




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[00:00] Introduction

[01:05] The value of cashless society

[02:41] Aidan ask the question, in the cashless society, do people stop seeing it as money? 

[03:28] In a cashless society, people tend to be more irrational buyers and businesses like that. 

[05:58] Moving into a cashless society also means moving to a subscription model based society, a locked-in ecosystem.

[07:54] Some people value their privacy and do not want to be tracked, for this very reason they prepare to pay on the cash. 

[09:37] The value drivers of different generations

[12:50] Segmentation and pricing are critical to the cashless society. Companies do need to develop their strategies.





In today’s episode, we want to discuss the movement to a cashless society.


What that will mean for business, for consumers, for value and all things pricing related.


There’s definitely a trend for using less cash nowadays. People seem to prefer just paying tapping and going, using their cards, much more than cash.


Before people would carry much more cash in their wallets. And I suppose businesses, small businesses, in particular. I’m thinking like cafes would be much more set up for that sort of cash-based sort of society. But things are definitely changing.


I think obviously, using cash was something we’re just used to.


Workers would get their payment often on a Friday evening. They get the money in cash that goes to the office and pick up their cash.


Anybody working in the hospitality trade obviously received their money in a small envelope. Whether their tax was paid or was not was a different question.


But I think certainly over recent years and probably accelerated. To some extent by the whole COVID restrictions and fear of touching things. That has done it has increased.


And, what I sometimes think about when I’m using the tap and go.

  1. What are the benefits?
  2. What are the negatives?
  3. And, what is the value?


Clearly, there’s a value in not having to go to the bank, to the ATM to pick up cash. So it saves you that time. It saves you that effort. And so, probably that’s why people like it.



I think the cashless society is really tapping in on that value driver of convenience.


People nowadays love convenience. Everything has to be simple, easy. People assume that paying with a card is easy. It’s easy for them.


But there’s a whole range of financial structures underpinning that transaction, which is rather complex and actually is very difficult to develop. To be able to build that sort of cashless society and also monitor.


One thing, I think, certainly from the customer perspective, do people stop seeing it as money?


We’ve covered this in some of the previous podcasts. I think we covered it on the menu pricing. Where if the menu doesn’t have a dollar sign people, people don’t really see it as money.


I noticed clearly, we always talk about people paying for stuff with credit cards depending on the never. It’s almost seen as not real money. When you have real tangible cash in your pocket and we touched on this in a previous episode about the music industry.


When you have a tangible thing in your pocket. Maybe you see it as more. Maybe you spend a bit less. And, maybe you look after those pennies and dollars. Again, that’s just perspective. But yeah, be interested to see what Joanna thinks about that topic.


There’s always this sort of psychological implication from using cash and or different types of things to buy whatever you want.


I suppose because cash is very tangible. It’s in your hand. It’s there. You may monitor it more closely. You count up the cents, then dollars and maybe you have more of a budget in mind.


When when you’re paying with a card. It’s just a piece of plastic people do tend to tap and go. We often see people literally not even asking on those terminal payments. People just tap.


They don’t even look at how much they’re tapping on the screen. It literally just tap. Now it’s gone to tapping with your watch one of those iPhone watches, scanning with your phone.


It’s just becoming more like money. It’s just becoming more and more impersonal. Businesses like that. They don’t want people to think about what they’re spending.


Because what happens when people think about what they’re spending. They become more logical in their mindset. People spend more when they’re in that irrational mindset.


I think we talked about that with that Daniel Kahneman the irrational buyer.


That’s exactly when people buy more like impulse buys. Impulse buys tend to be more expensive buys. So if you’re spending with that mindset, then you’re going to be spending more on higher-margin products.


I’ve noticed this, I was in a bar recently. When you asked for a beer they don’t even tell you the price anymore. It’s almost like just to give you the machine you tap it, and people generally don’t seem to even ask.


So there’s a trust aspect there. You must be trusting the place you’re in, but it does create issues.


The second thing I’d say is probably in older times, last year I mean. People would have had a budget in their minds for that night. They might have gone to the bank, they might have taken out, $100 $200 whatever it was. That was their budget for that evening.


You think when you’re in an environment whether it’s a restaurant, certainly in the evening scenario. You think of the casino, you think of gambling. There are dangerous implications for that.


Whereby 10 years ago, when the money wasn’t in your pocket, you had to leave and go to a bank, etc. And those natural control on how much you could spend. Now the only control is what your credit card says.


What does a Cashless Society mean for Pricing


I think there’ll be a trend now as more businesses get set up for more of that cashless society.


For instance,  massive supermarkets at this point in time are testing and trialling that just tap and go payment terminals right at the end. So they initially set up with no tap and go.


You could literally just walk out of the store and then people didn’t really like that. They wanted something that they could tap and go almost like the tubes.


So they felt like people could visibly see them paying. They weren’t like stealing anything. So they actually wanted a tap and go poll. But initially, that idea was not to have that at all and supermarket. So that’s been tested and tried now.


Now, why are they doing that?


Well, if you have everything online and it goes straight into business analytics, business intelligence systems. They can basically track your spending, what you buy, purchasing.


Also, they’ll lead you to more of a sort of subscription type of payment revenue model. Rather than coming in when you want to. They gonna try and like bring in some kind of subscription model to keep you lock you into that.


So let’s say we keep with this, supermarket theme to a particular supermarket chain. So you always get your groceries at that particular place. And you’re sort of locked into that ecosystem.


So I think when we move into a more cashless society, we’ll also be moving to more of a subscription-based society.


A lot of our money, our budgeting will just come out of our account. So I think from a consumer perspective, we’ve got a really like more on top of budgeting than ever before.


But as Aidan was saying, we’re probably less inclined to do so. Because it’s not tangible to us yet and it’s very new.


I think on the topic of supermarkets I read this week. Some of the newer style stores that I think Woolworths and Coles had in the CBD in Sydney were trying to trial a tap and go only no cash had to withdraw completely from that and are now accepting cash again.


And the reason was abuse from potential customers. In all societies in all populations, there are early adopters, there is the middle ground and then there are people who don’t want that.


There’s a very large audience of people who want to pay with cash for various reasons. Whether they’re not used to tap and go. They’re older people. Or they’re also privacy-minded.


And like anything else, like we see with vaccinations or anything that people feel as being fast-tracked or pushed along on them. There’s also a certain percentage of the population who push against that.


So I would argue that you’re seeing more people wanting to pay in cash, and a certain population holding on to cash.


And let’s be honest, there are always transactions that people want privacy on what they’re doing. They don’t want to be tracked, whether it’s as simple and innocent as buying somebody a birthday present.


Not wanting their husband or wife to see that on the credit card bill. That’s an innocent version of that I can think of. But you look at a huge amount of transactions that happened globally that are in cash. That will want to be the remaining cash.


Whether they’re legal or illegal, there’s an awful lot of activities that people will want not to be tracked and not to appear on their Amex bill at the end of the month.


What does a Cashless Society mean for Pricing


I think this is a perfect example of segmentation and the interjection of major global trends being that cashless society.


There’s always going to be as Aidan was saying maybe it’s a generational difference.


You’ve got the younger people that do value that convenience.

  1. They don’t mind the information being used to track them.
  2. They think that’s a great thing too because that adds convenience.
  3. And they also don’t mind getting that convenience though I’m not sure if that’d be willing to pay a price premium.


But over time with a subscription model, I do predict that prices probably will go up once you’re locked into a system. Whether that’s if we go back to that supermarket example.


Across a basket of goods because I’ll have all of that data. Then it’s much easier to optimise based on consumption patterns. Because consumption patterns by each individual will be tracked with that sort of subscription cashless society model.


But then equally there are people with different value drivers that do respect privacy. Having the freedom of choice in a different way.


I think both of those value drivers are equally important. It has to be thought about in business model transformations. Because we’re not fully there on one trend, was really at that crux weed, we don’t know.


So a lot of businesses are still contemplating how they can balance those different needs sets. Even though we’re rapidly progressing towards digital and everything’s online.


There is still a large majority proportion of the world’s population, that maybe don’t value that as much as Harvard Business Review would like us to believe.


I think the regional practices in every country are very different.


Like one thing I’ll say, anybody, who’s been to the United States for any period of time will know the importance of having small dollar bills and different things like that for it for tipping. We’re a culture of tipping is so ingrained.


I would think the idea of cash Dango in the United States would be much less than in a maybe a country like well, like Sweden or Denmark. Or one of those nations where there’s just not a tipping culture. And there’s potentially more of a regulated market with less not illegal activity, but let’s call it less regulated activities.


I think that also we’d have to look at in previous times, you could often get a discount for paying in cash. And maybe you’d have to pay a slight surcharge for paying with cards, whether debit cards or credit cards.


Even in Australia, it’s still quite common in many certainly the smaller locations to pay a surcharge of a couple of per cent maybe for using an Amex card or even some of the more obscure ones like diners cards or JCB cards and these sort of things.


I could see a day when previously is seen as a privilege or seen as a value add. People might actually pay a small premium of 1% or 2% to use cash. I think that’s actually something that potentially could happen.


What does a Cashless Society mean for Pricing


I suppose that my final point on that would be, it’s quite likely if you do move to a cashless society that there will be more surcharges and fees attached.


Often hidden to a certain extent like with everything. There’ll be a website page direct into another page with all the like terms and conditions of a particular subscription or purchase. And with that will come fees.


Research clearly shows that people, businesses do not like hidden fees.


I think that probably be tested again and again as we move forward. People who continually try adding those fees. I know banks keep doing it even though the research says the customers don’t like it, that is still done.


So it’s obviously quite profitable to do so even though you might lose customers as a consequence. So obviously, those calculations have already been made and banks still do it. It obviously is very profitable to them.


There’ll be those sorts of things to consider segmentation business model adaption. I know quite clearly from consulting businesses, cost structures, as well as the revenue and price management systems, aren’t really set up for a cashless society. At the same time, we do see business leaders thinking in that way.


However, segmentation even in its most traditional form is still very ambiguous in a lot of companies and something that people really don’t consider as much as they should.


Segmentation and pricing are critical to this cashless society equation.


So, I think there’s a lot of work, especially in terms of internal capability, systems and strategies that need to be developed to actually operationalise this type of concept.


Surely from an operational perspective, I think it could have implications that people don’t really haven’t thought about yet. And it could go either way.


One example I can think of is the Reject Shop, which is a major chain in Australia of I suppose discounted items, home domestic items. Items such as sweets lollies, home cleaning materials, those sorts of things.


My understanding is they were suffering in recent years through competition from less regulated cash accepting businesses. Where potentially there was a bit of suggestion that maybe these companies weren’t paying full tax and all that sort of stuff. That’s potentially just a defence mechanism.


But if you move to a cashless society, not paying tax, not Reg, following through with all the accounting etc. It makes a much more even playing field and decreases that the black market or the less regulated market sector.


So potentially it could get a bit more power to the larger corporations to the bigger companies who have better banking systems in place. Have a potentially lower margin to pay to the bank companies.


There have more than happy to move towards it because it reduces the costs of handling cash, reduces the likelihood of theft.


So, there are actual operating costs that potentially will decrease.


For example, remember when I was a teenager, working in a supermarket. One day I was asked to drop cash down to the bank, in actual bags of cash, which with due respect was quite dangerous.


But I suppose the days of stealing from supermarkets stealing from shops to stairs, maybe are over in many regards. But there are implications from this cashless society that could change the potential strength of some companies versus others, and we won’t really know what those are.


I think there’ll be a lot of learning a lot of tests and trials will be required before, during and after all of this sort of change happens.


And yeah, look, it’d be exciting to see…

  1. How do consumption patterns change?
  2. How do people come about knowing the different companies?
  3. And why do they choose certain companies over others when they make their purchases?


But I suppose exciting trends to come but there’s a lot of work that needs to be done to ensure that that can be done safely and can be you can fully operationalise that from a cost and demand perspective. 



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