A few years ago, brick-and-mortar stores only dealt with cash. They took cash from their customers, kept paper records, and submitted the cash directly to the company's bank account. It won't be wrong to say that they had simpler work as it didn't involve any technical checks and balances.
As of now, more and more people pay using credit or debit cards, even when visiting the store in person. A lot of people generally avoid keeping cash on them and thus, wherever they go, they swipe the card and make the payment. Apart from that, websites have become quite common.
Almost all brick-and-mortar stores now have websites as the Covid-19 pandemic has shaped the idea of shopping.
Most people now prefer shopping online as it's more convenient than visiting a store in person. They make online payments and get the goods delivered to their doorstep. All these things have significantly affected how companies operate. It has especially affected the accounting and financial departments of businesses.
The Evolution of Payment Methods
As mentioned earlier, the Covid-19 pandemic has introduced the world to a new reality. More and more people are now using electronic means to make payments and the cash business is significantly down.
These electronic means include digital banking platforms, credit and debit cards as well as various web-based payment systems, including PayPal, Samsung Pay, and Apple Pay.
Apart from that, cryptocurrency is also taking over the world where people are converting their physical money into digital coins. There are multiple payment methods now and businesses have also started realizing it.
All the large retail chains and designer brands now accept both credit and debit card payments as well as other web-based payment methods, including PayPal and Apple Pay.
Moreover, they now have websites where you can purchase things and make online payments. Although the first credit card was introduced in 1914 in the form of a loyalty card by Western Union, the credit card system has become extremely common in the last 20 years. And post-Covid-19 pandemic, 7 in 10 people now have credit and debit cards. The same goes for digital payments.
Initially introduced in 1990, now every bank has its own web and mobile application. It allows its customers to transfer and receive money online. Of course, it's more convenient as the online transfer takes no more than a minute and the amount reaches the recipient's account instantly. With the ease of handling money and making payments, these digital payment methods are rapidly taking over physical currency.
How Does the Evolution of Payment Methods Affect the Accounting and Financial Departments?
Needless to say, the evolution of payment methods has significantly affected the accounting and finance departments of various businesses out there. According to a survey by the Institute of Chartered Accountants in England and Wales (ICAEW), credit card payments have increased from €15.7 million to €31.6 million in 10 years, and it's estimated to be €52.5 million by 2024.
It is further said that many new changes will be seen in the coming years, such as:
- New payment options: There's no stopping at the credit and debit card payments and online bank transfers through bank applications as new payment options will be introduced in the coming years. Cryptocurrency will also expand as the concept of physical currency is dying and soon, digital money is said to take over.
- Smartphones will be used as digital wallets: Smartphones will soon be used as digital wallets. With all these banking applications, people will soon use their smartphones as electronic devices to handle money.
- Faster payments: The existing payment options will be polished as these platforms will start handling money in quicker and faster ways. Near-field communication will be improved, and wireless payments would become a trend. In this way, anything that now takes a minute or two would be done in less than a few seconds.
The accounting and financial departments are rapidly growing as well as they're adapting to all these changes. Though it's quite helpful for businesses as electronic payments are transparent and the chances of scams are minimal to zero. Similarly, analyzing data has become easier as everything is already in the digital records. Chances of mistakes have also been reduced due to all the records being available online.