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The cashless retail revolution has been overestimated

The cashless retail revolution has been overestimated
[Photo: Sharon McCutcheon/Unsplash]

More and more people are ditching cash in favor of cards and digital payments, but that doesn’t mean cash it out of the picture, according to a new report from financial tech company Square.

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Plastic is driving the move toward cashlessness. Between 2015 and 2019, the percentage of consumers who use cash on transactions under $20 dropped from 46% to 37%, according to Square’s data. Part of the drift away from cash may be because merchants are removing card minimums. Half of consumers are whipping out a card for purchases as low as $4.50. Of course, Square’s user base is likely to skew cashless, anyway. The company’s signature innovation, when it founded 10 years ago, was a smartphone-ready credit card reader. It’s worth noting that only a fifth of Square merchants are cash-only.

Still, while more people than ever appear to be using plastic or digital payments to shop, merchants are far from going cashless. In a Square-commissioned poll surveying 1,000 small businesses, Wakefield Research found that 83% said they will always accept cash. A May memo from the federal reserve bank of Atlanta notes that a fully cashless future is unlikely: “A complete transition to cashless stores would be extremely difficult in any country (if not impossible), particularly because cash use at the point-of-sale remains strong in most countries.”

[Square]
In the last few years, several storefront businesses decided to snub cash in order to make their operations even more efficient. In 2017, fast-casual spots like Dig In, Dos Toros, Shake Shack, and salad slinger Sweetgreen all opted to go cashless. The following year, Amazon’s Go store debuted as cashier-less and app-driven. The reasoning was, in part, that getting rid of cash would lead to faster sales, fewer lines, and less concern about robberies.

But these companies left something out of their calculation. Refusing to deal with cash meant discriminating against people without bank accounts. Roughly 14.1 million Americans did not have bank accounts in 2017, according to the Federal Deposit Insurance Corporation survey on unbanked and underbanked households.

The backlash to cash-free stores was swift. Several cities and states have either proposed or implemented bans on stores that don’t accept cash. Philadelphia, San Francisco, and New Jersey have recently passed legislation that cracks down on cashless stores. Meanwhile, Massachusetts has long required businesses to accept cash. Even more places are considering similar legislation. New York City, Washington, D.C., and Chicago have all proposed rules that would force stores to take cash.

In May, two federal bills were submitted in Congress to curb cashlessness. Representative David Cicilline (D-RI) introduced the Cash Always Should be Honored bill, and Representative Donald Payne (D-NJ) introduced the Payment Choice Act.

Businesses that once were inclined to go all-in on electronic payments are backing down. Shake Shack walked back its policy on refusing cash less than a year after its first electronic payment-only location. In April, Sweetgreen acknowledged the exclusionary nature of only accepting plastic and digital payments in a reversal on its cashless stance. “To accomplish our mission, everyone in the community needs to have access to real food,” the company said in its statement. Amazon, too, has opened up a new Go store that accepts cash.

The cashless revolution, it seems, has ended before it began.

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