Small businesses with limited resources are vulnerable to the adverse effects of a cashless economy. This is due to increased transactional costs, insufficient technological expertise, and reduced customer access ( Rahman, Ismail, & Bahri, 2020 ; Santana, 2019 ). Conversely, potential advantages of a cashless economy for small businesses include improved financial tracking, operational efficiency, and enhanced security ( Deora, 2018 ; Priyono, Moin, & Putri, 2020 ; Santana, 2019 ). The gap in exploring the challenges and opportunities for small businesses leaves policymakers and stakeholders with insufficient insights to address these needs. These gaps in the literature also provide a fascinating area for further research.

The concept of a cashless society has become more prominent recently, accompanied by certain advantages and disadvantages from different perspectives concerning businesses and customers. On one hand, cashless transactions enhance business efficiency, reduce cash handling risks, and offer better financial transparency. They also provide customers with convenience, speed, and better access to digital services ( Busse, 2023 ). However, the transition to cashless systems brings problems, such as cybersecurity risks, privacy concerns, and exclusion of people and businesses unable to adopt digital payment methods ( Umar, Musalli, & Yusuf, 2023 ).

The effects a cashless society has on small businesses are multilayered. Small businesses’ financial and technological resources are usually minimal, so investing in digital payment infrastructure is challenging. Additionally, transactional fees related to digital payments could reduce already-thin profit margins. Other technological barriers, such as lack of access to reliable internet or digital literacy, further worsen small businesses’ challenges. Moreover, the digital divide—or the gap between those with access to digital technologies and those without—can decrease customer access for firms relying on a local or underserved population that prefers or needs to make cash-based transactions ( Berkimbayeva , 2019 ).

Conversely, some gains could be realized if small businesses are willing to go cashless. Cashless systems facilitate better financial record-keeping, improve cash flow management, and reduce risks of theft and counterfeit money. These advantages indicate that exploring avenues to assist small businesses in transitioning to cashless payment systems will help them seize the opportunities while addressing the challenges.

Despite the growing interest in the implications of a cashless society, there is a notable lack of studies focused on its impact on small businesses that employ between 1 to 20 individuals. The reviewed literature predominantly addresses broader economic or societal effects, often overlooking the specific needs and vulnerabilities of small enterprises. This significant research gap highlights the necessity to explore how small businesses adapt to the transition toward cashless systems, the challenges they encounter, and the strategies they employ for adjustment. This paper aims to address this gap by considering the following research questions: 1) What overall benefits and challenges do small businesses experience within cashless societies? 2) In what ways do cashless payment systems enhance transaction efficiency for small businesses? 3) How does customer satisfaction differ based on the type of cashless payment system utilized (e.g., mobile wallets, credit/debit cards, QR codes)? 4) How do small businesses manage the costs associated with operating in cashless environments to sustain profitability? 5) Is there a significant correlation between the adoption of cashless payment systems and increased sales for small businesses? 6) What key technological challenges do small businesses face when transitioning to cashless transactions? 7) How do existing laws and regulations regarding cashless transactions affect the operations and growth of small businesses?

The remainder of this paper is structured as follows: Section 2 reviews the literature for gap identification and hypotheses development. Section 3 outlines the research methodology employed in the study. Section 4 presents the research, the results, and analysis, also discussing empirical findings and their implications. Finally, Section 5 concludes the study by summarising key insights, addressing limitations, and offering recommendations for small businesses and future research.

The concept of money as a medium of exchange has evolved significantly over time. The use of coins, one of the earliest forms of currency, is said to have originated in China around 1000 BC ( The History of Money, 2023 ). Paper money, widely accepted as legal tender approximately 300 years ago, further transformed monetary transactions ( Chakravorti, Chakravorti, & Mazzotta, 2016 ). However, the advent of cashless transactions—payments without physical cash—has transcended traditional norms of economic exchange ( Duignan, 2023 ; Halldenius & Petersén, 2024 ; Khando, Islam, & Gao, 2022 ; McRea, 2024 ). The first wave of less-cash transactions can be traced to the introduction of bank checks and, later, credit cards in the 1950s. With the introduction of the Diner’s Club Card and American Express Card during this period, providers could charge transactional fees for customers and businesses ( Encyclopedia Brittanica, Experian, & The Federal Reserve Bank, 2019 ).

Over time, technological advancement developed these cashless systems into what has come to be called a “cashless society.” A cashless society refers to a system where money dealings and transactions occur without using physical cash but with cards such as debit and credit cards, electronic money transfers, cryptocurrency, mobile wallets, and platforms such as PayPal ( Duignan, 2023 ). Although a completely cashless society is yet to be realised, the increasing use of these methods underscores the movement toward global digital payments. This movement is promoted by increased financial technology, improved smartphone access, and consumer demand for convenience. The road to a cashless economy is paved with several opportunities and challenges for small businesses ( Kireyev, 2017 ).

The literature review highlighted that the concept of a cashless society is one of the critical issues influencing economies, institutions, and individuals ( ANZ, 2024 ; Asamoah, 2021 ; Berkimbayeva, 2019 ). Research on this topic remains fragmented, with recent studies exploring various dimensions of this phenomenon. This literature review synthesised data from 87 peer-reviewed journal articles, theses, government reports, and related material published between 2017 and 2024. The review identified gaps in existing research, emphasizing the need for further studies on the definition, benefits, drawbacks, prerequisites, and implications of a cashless society.

The study tests the following hypothesis:

Primary Hypothesis:

Small businesses operating in cashless societies are better off.

This hypothesis suggests that small businesses benefit from transitioning to or operating in societies where digital payment systems replace cash transactions. The hypothesis implies that the advantages of going cashless—such as improved efficiency, customer satisfaction, and potential sales growth—outweigh any challenges like transaction costs or technological barriers.

Sub-Hypotheses:

Hypothesis 1: Cashless societies increase transaction efficiency for small businesses.

This hypothesis posits that cashless transactions save time and effort compared to handling cash. For example, businesses no longer need to count cash, manage change, or travel to the bank for deposits. Digital payments can also streamline record-keeping, improving financial tracking and accuracy.

Hypothesis 2: Cashless societies increase customer satisfaction.

This hypothesis assumes that customers prefer the convenience and speed of cashless payment options. Cashless transactions eliminate the need to carry cash, ensure smoother checkout processes, and may also offer added benefits like reward points or digital receipts.

Hypothesis 3: Cashless societies do not increase costs associated with cashless transactions.

This hypothesis addresses concerns about fees or charges linked to cashless payments (e.g., credit card transaction fees or payment processor charges). These costs either remain negligible or are offset by the benefits of going cashless, such as increased sales or operational efficiency.

Hypothesis 4: Cashless societies increase sales.

This hypothesis asserts that businesses see higher sales when offering cashless payment options. Customers might spend more when using credit/debit cards or digital wallets than cash, as they are less constrained by the physical limits of their money.

Hypothesis 5: Small businesses are technologically prepared for cashless transactions.

This hypothesis assumes that small businesses have access to and are equipped with the necessary infrastructure for cashless transactions, such as point-of-sale systems, card readers, or mobile payment solutions. It also implies that business owners are knowledgeable about using these technologies.

Hypothesis 6: Laws governing cashless transactions support small businesses.

This hypothesis suggests that cashless societies’ legal and regulatory environment is favorable to small businesses. Policies may ensure fair transaction fees, protect businesses from fraud, and promote the accessibility of cashless payment systems for smaller enterprises.

The results are presented in three sections. The first section presents the responses to three demographic questions: 1) What is your industry? 2) What method of cashless payments is mainly used by your customers? And 3) What percentage of your business transactions are cashless per day? These vital questions still need to be addressed in the current literature. The vitality of information on the type of industry lies in contextual relevance, ensuring that the information is relevant and applicable to specific sectors. Knowing the method of cashless payments is mainly used by customers aids the business in managing the cost of cashless payments, and it can improve the efficiency of the operations. Understating the percentage of business transactions that are cashless per day can provide insight into customer preferences and the trend toward cashless transactions.

The second section presents the responses to the open-ended question of what challenges businesses have faced in transitioning to cashless transactions. This essential information can assist businesses in making informed decisions in operating in cashless societies.

The third section presents the quantitative analysis and results. The nonparametric Mann-Whitney Rank test was used through SPSS to analyse the quantitative data. In addition to the Mann-Whitney Rank test, Cronbach’s test was performed to check the reliability and validity of the questionnaires as a research instrument.

The word cloud shown in Figure 1 was generated for the responses to the industry-type question. A word cloud is a visual representation of the frequency and/or importance of the words. The large and bold words signify the frequency of the words used in responses.

The word cloud indicates that the participants in this research belong to various industries. Education, technology, finance, and construction are prominent industries in the participants’ responses in this research. These findings may not be generalised to a broader population of small businesses due to the study’s limitations discussed in conclusion section. However, according to the word-cloud, the traditional industry, such as education, and the contemporary industry, such as technology, are both dealing with cashless societies.

Figure 2 shows the frequency of different payment methods used by customers. Debit and credit cards are the most popular methods of cashless payments, followed by bank transfers and other methods. The cryptocurrency method is the least used method of cashless payments. The results indicate that consumers prefer to use proven forms of cashless payments, such as debit and credit cards, instead of newer forms, such as cryptocurrency.

Figure 3 shows the percentage distribution of cashless payments per day made by customers. The percentage range of cashless payments made by customers grows, demonstrating the trend towards adoption of cashless payments.

The question of the challenges faced by businesses in adopting cashless payments is a central focus of this study. Responses from small business owners align with the pros and cons of cashless payments identified in the literature. For instance, businesses report issues such as transaction costs, technical difficulties in processing cashless payments, customer preferences for using cash, and cybersecurity concerns ( Chattopadhyay, Gulati, & Bose, 2018 ; Kitamura & Kitamura, 2022 ; Noman et al., 2023 ; Pritchard, 2022 ; Rivera, 2019 ).

While cashless transactions can reduce costs by eliminating the handling of physical currency, transitioning to such systems also improves security and operational efficiency while providing greater convenience for both businesses and consumers ( Deora, 2018 ; Ekpeyong, 2023 ; Kitamura & Kitamura, 2022 ; Noman et al., 2023 ; Pritchard, 2022 ; Rahman, Ismail, Bahri, & Rahman, 2022 ; Santana, 2019 ; Thoughtlab, 2018 ).

A Cronbach’s alpha test was conducted to assess the reliability and validity of the questionnaire used as a research instrument. The results, shown in Table 1 , indicate a Cronbach’s alpha of 0.877, which exceeds the acceptable threshold of 0.70, confirming that the survey instrument is reliable and valid ( Tavakol & Dennick, 2011 ).

For H3, the significant value (p = .001) is less than a significant (α) level of .05, then alternative hypothesis 1 is accepted, as shown in the following table. This means that the benefits of transitioning to cashless for small businesses may outweigh any additional costs. However, this finding requires careful interpretation. While the statistical analysis supports the claim that cashless societies do not increase costs, the qualitative data highlights “high fees” as one of the most prominent challenges identified by small business owners. This apparent contradiction suggests that, although direct transaction fees are a burden, participants may perceive the broader benefits of cashless adoption—such as operational efficiency, faster transactions, improved security, and increased customer satisfaction—as sufficient to compensate for these costs. In other words, the net effect of going cashless is experienced as positive overall, even though the specific issue of high transaction fees remains a significant concern. Addressing this nuance is important, as it indicates that businesses evaluate costs not in isolation but relative to the perceived advantages gained from the transition. For H4, the significant value (p = .001) is less than a significant (α) level of .05, the alternative hypothesis 1 is accepted, as shown in the following table. This suggests that consumer spending is likely to surge due to the convenience of cashless transactions, potentially boosting the revenue of small businesses and paving the way for a prosperous future.

For H5, the significant value (p = .001) is less than a significant (α) level of .05, then the alternative hypothesis 1 is accepted as shown in the following table. This indicates that many small businesses are already equipped with the necessary technology to facilitate cashless transactions, underscoring the industry’s preparedness for the transition and its potential for swift adoption.

For H6, the significant value (p = .001) is less than a significant (α) level of .05, then alternative hypothesis 1 is accepted, as shown in the following table. This means that laws governing cashless transactions are in place and actively support small businesses, providing a secure legal framework for the transition.

Table 4 summarizes the main hypothesis. Based on the above test, the alternative hypothesis is accepted. This finding indicates that in a cashless society, small businesses will benefit from increased business efficiency, customer satisfaction, increased revenue, and government support while maintaining manageable costs.

To gain insight into the challenges small businesses face in transitioning to cashless transactions, the participants were asked to describe their challenges.

A noteworthy finding in this study is the discrepancy between the quantitative and qualitative results. On the one hand, all six quantitative hypotheses were supported, reinforcing the idea that cashless transactions enhance efficiency, revenue, satisfaction, and preparedness. On the other hand, the majority of qualitative comments 28 out of 37 were negative, stressing high transaction fees, technical barriers, and integration challenges.

One explanation for this divergence is the nature of structured versus open-ended questioning. In structured survey items, participants are more likely to agree with general statements about efficiency, convenience, and satisfaction, particularly as these reflect perceived long-term benefits. However, when asked to describe their experiences in their own words, participants focused more on the immediate, tangible difficulties they encounter in daily operations. This suggests that while business owners recognize the theoretical advantages of cashless systems, the practical challenges weigh more heavily on their lived experiences.

This duality highlights the complexity of transitioning to cashless systems. Small businesses may conceptually affirm the benefits but remain constrained by real-world barriers that hinder their ability to fully realize those benefits. The implication is that policymakers and financial service providers must not only promote the macro-level advantages of cashless economies but also directly address micro-level operational issues, such as transaction costs, infrastructure support, and system integration, to align business owners’ perceptions with their lived realities.

This study was designed to determine the effect of a cashless society on the operation of small businesses, as small businesses play a vital role in contributing to the gross domestic product (GDP). The findings suggest that in a cashless society, small businesses can have the advantages of operational efficiency, higher customer satisfaction resulting from convenient cashless payments, increased revenue resulting from increased volume of transactions, government support, and keeping additional costs under control. These results suggest that small businesses operating in cashless societies are better off. The empirical findings in this study provide a new understanding of how small business owners perceive cashless societies. The most important limitation of this study is that it covered small businesses in the context of physical existence, not online. This research has thrown up many questions that need further investigation. For example, how do cashless societies impact the operation of medium to large and online businesses?

This study concludes with the following recommendations for Small Businesses:

Adopt Cashless Payment Systems: Small business owners should prioritize integrating cashless payment systems to enhance operational efficiency and meet customer expectations for convenience.

Leverage Government Support: Businesses should actively seek out and utilize government incentives, grants, and training programs to support the transition to cashless operations.

Monitor Financial Performance: Regularly assess the impact of cashless transactions on revenue and operational costs to identify areas for further optimization.

For Small Businesses:

For Policymakers and Governments:

For Technology Providers:

For Researchers:

Conduct further studies to understand the challenges and opportunities cashless societies present to online businesses, medium-sized businesses, and large enterprises.

Investigate the socio-economic impacts of cashless transitions in different regional and cultural contexts to develop more inclusive policies and strategies.

Explore customer perspectives to complement this study’s business-focused findings and offer a more comprehensive understanding of cashless societies.

These recommendations aim to guide key stakeholders in maximizing the benefits of cashless societies for small businesses while addressing potential challenges.