A few early adopters — mostly restaurants — have gone cashless, but many merchants have concluded that cash must remain on their menu of payment options.
The stated benefits of going cashless include eliminating the hassle of dealing in small change and speeding up transaction times. It’s a strategy favored by some restaurants including Bluestone Lane, an Australian-style cafe; and sweetgreen, the national salad chain.
But industry experts say the cashless move isn’t practical for most retailers for a variety of reasons. One major sticking point is that some customers won't stop paying cash.
“Certain underbanked customers have to use cash; they don’t have other alternatives. Other customers feel more financially responsible if they use cash as opposed to digital payments,” said Wei Ke, a partner at Simon-Kucher & Partners, a management consulting firm.
This reality led to Shake Shack’s decision to abandon previously announced plans for fully cashless restaurants.
“Some of the things we’ve clearly seen is that our guests do often want to pay with cash,” Randy Garutti, Shake Shack's chief executive, said on its May 3 earnings conference call. “In the first rollout at Astor Place, we did not accept cash at all. And there are people who have told us very clearly ‘We want to pay with cash,’ ” he said.
Uber is another example of a company that has loosened its prohibition of cash. The ride-sharing company started as a purely digital play—users could pay only through an app. Now, in a number of cities around the world, riders can pay their Uber driver using cash. The company’s stated goal is to give more options to customers who otherwise might not have access to their services or who prefer to pay in cash.
Amazon has also shifted from a purely digital strategy. The retailing giant now allows consumers to pay for goods with cash through a service it began offering in 2017. Users simply add cash to their Amazon Balance using a unique bar code or mobile phone number at participating convenience, grocery and drugstores. Amazon and Coinstar also announced a partnership in May to allow customers to add cash to their accounts at some Coinstar kiosks.
Despite the recent experimentation with cashless stores, many retailers aren’t interested in giving up more money to credit card companies; often they’d rather accept cash over credit cards due to high swipe fees.
“The last thing most retailers would want is to have them take a slice of all their sales,” said J. Craig Shearman, a spokesman for the National Retail Federation. “Credit card swipe fees are over $70 billion a year already and turning away cash would only make the problem worse."
Another concern for some merchants is what happens if the technology fails. In that case, retailers risk losing substantial business by not accepting cash, observers say.
“There is a fundamental question of the robustness of the payments infrastructure,” says Guillaume Lepecq, director general of the International Currency Association. “Just about every day we read about the glitches and breakdowns and issues related to various digital payment structures.”
Consider, for instance, the glitch BP ran into in early July where its fuel stations across the U.K. were unable to accept card payments—a problem which lasted around three hours before the issue was resolved.
Card networks are also vulnerable to outages. For instance, at the beginning of June, Visa experienced an outage that prevented some transactions in Europe from being processed. The daylong outage also affected some Mastercard and American Express transactions that were sent over the Visa network, and Mastercard suffered its own short-lived European outage in July.
A similar hiccup occurred in Zimbabwe at the beginning of July where EcoCash’s mobile payments system ground to a halt for two days, causing major payment-related issues in the country. And Britain’s TSB continues to face fallout over a botched IT upgrade this year that caused weeks of disruption for customers and major headaches for the bank.
For U.S. merchants, the growing threat of state legislation is another reason to shy away from cashless operations. There is no federal law on the matter, but some states are starting to take matters into their own hands. In Massachusetts, retail establishments have to take cash, thanks to a law that’s been on the books since 1978. Restaurants, however, are a murky area under the law and it’s unclear whether the state will test the law’s limits through enforcement.
Meanwhile, lawmakers in Washington, D.C., recently introduced a bill that would require retailers to accept cash, in response to a growing number of restaurants in the area deciding to go cashless. And in May, New York State Assembly Member Richard N. Gottfried introduced a similar bill that would require merchants to accept cash as payment for goods. That bill was referred to the Assembly’s consumer affairs and protection committee on May 10, but the New York State Legislative Session ended with the bill still in committee. Gottfried, a Democrat who is running uncontested for re-election, says he plans to reintroduce the bill in 2019, when the new Assembly convenes.
Chicago introduced an ordinance last year to prohibit area stores and eateries from being cashless, though a vote on the measure was reportedly postponed indefinitely.
Globally, there are also efforts afoot to promote cash. For instance, the International Currency Association started an ongoing “Cash Matters” campaign last year in response to cashless policies, primarily in Europe.
For Mike Laven, chief executive of Currencycloud, a cross-border payments company, these are just bumps in the road and eventually a noncash economy will prevail, though it may take a long time, he said. “You don’t get to a zero-cash economy right away,” he said.
He expects that with mobile apps like Venmo and Zelle gaining prominence, cash will continue to diminish in importance—especially as digitally savvy users move in the cashless direction. There will be holdouts and it will take time, but cashless is “a mostly unstoppable movement in one direction. You’ll start to find it rarer and rarer,” Laven said.