The Evolution of Cashless Transactions

For many years, our society functioned around cash — physical, legal tender (in the form of bills and coins) that allowed people to use their physical currency to purchase goods or services. However, over the past several decades, we've been shifting away from being a cashed-based society and towards being a cashless one.

This does not mean that we don't still swap currency for goods or services. Instead, however, the exchange happens without any physical money. Now, there are digital ways that we are able to make purchases and collect the money we are owed. This has not only impacted the speed at which we are able to do business — but also the types of financial technologies that are being developed, and how quickly they are being created.

To learn more about the evolution of our cashless society, read on. You can learn more about how we began to move away from physical money, what cashless options exist now, what that means for the future of our capitalistic society, and how an invoice factoring company may just be the key to cashless success for many businesses.

The History of Cashless Transactions: The Invention of The Wire

Cashless transactions became popularized in society when wire transfers become a possibility. With a wire transfer, one person could tell their bank to immediately wire money to another person's bank account using a telegraph company (like Western Union). They would give money to the telegraph company, and using codes and messaging, the telegraph company would manage to wire the money to another person's bank. 

The Creation of Credit and Debit Card Systems

Cashless payments evolved with the introduction of the credit system in America and the invention of the credit card (originally called a cheque guarantee card). Essentially, these plastic cards contained a person's bank details, and it would allow a person to make a purchase without cash in hand — then have their bank settle the transaction later (the bank would either use cash it had on hand from the customer or obtain payment from the customer).

This system evolved into the Debit Card/ATM system as we know it, as well as the credit card system, where people could make purchases and compile debt with money they did not have, then pay back the debt over time, with the lender (credit card company) earning interest on the money they could not pay back immediately.

Advanced Digital Payment Technology

Today, cashless payments have moved from plastic cards to simple online transactions. Not only can you simply use the numbers on your credit or debit cards to make the same kinds of transactions without a physical card, but you can also tap devices like your cellphone which are created with mobile payment technology, and these devices can simply complete credit and debit card payments for you. Today, many people also use online wiring services like PayPal or Zelle that are hooked up to your bank account and move money for you, at essentially no cost for the service. 

A Move to Cryptocurrency

The latest development in our cashless society is cryptocurrency. A move away from the traditional banking system, Cryptocurrency operates on a blockchain where every transaction is recorded on a public ledger (which keeps details of people making the transactions anonymous). Cryptocurrency is an attempt to decentralize finance and to take it out of the hands of banks and put it into the hands of the people.

The Benefits and Drawbacks of Cashless Transactions for Businesses

Ultimately, consumers want to engage in cashless transactions. This means they can do business online and buy from companies located geographically far from where they are — and it also means in the COVID-19 era that they can make less contact with people and exchange fewer germs. Contactless payments mean that businesses can allow customers to make large purchases for things they don't yet have the money for, but can pay over time (and they can even charge interests on these deferred payment options).

There are drawbacks of cashless transactions for businesses, however, and one of the most important is that it can be an easy way to interrupt cash flow and create financial hardship for your business. Allowing people to buy from your company on credit puts a lot of trust in the consumer. It means that that customer actually has to pay for their purchase as promised. If you send an invoice and it does not get paid, it can be a severe financial blow to your company, and it can even stop you from operating if you're not able to bring in enough cash to cover your inventory, operating costs, or staff.

A solution every business should consider is an invoice factoring company. The invoice factoring company can allow you to take cashless payments while ensuring you don't run out of money due to this decision.

The Invoice Factoring Company: How to Help with the Challenges of Cashless Transactions

If you want to use cashless transactions at your company, you may also want to look into partnering with a factoring company that can help with collecting invoices. If your business is struggling financially, and you have allowed many people to make purchases on credit that they are now not repaying, considering invoice factoring may be a smart financial decision for your organization.

With an invoice factoring company, you can sell your unpaid invoices for some cash upfront. The invoice factoring company now takes over the invoice and attempts to collect what is owed from your customer. While you collect less money than you would have collected on the invoice yourself, you may get paid the cash you desperately need — which will allow you to continue operating into the future.

With the Help of an Invoice Factoring Company, Cashless is the Way of the Future

If you want to be a relevant business that can thrive today, don't shy away from cashless payments, and don't be afraid to use invoice factoring. Just make sure you have a factoring company that can help if you get in trouble.

When you end up with too many unpaid invoices, how do you handle them? How have you been helped by invoice factoring? Let us know in the comments since we love to know more about how getting help collecting unpaid invoices can be an essential resource for any business.