Considering going cashless? Here’s what you need to consider first.

Published August 17, 2020

The idea of going totally cashless can seem like a great idea to a retailer. It can make stores more efficient by eliminating all cash handling and management. And it can speed up transactions, reducing the amount of time shoppers have to wait in line and increasing the amount of transactions a store can put through.

If you look at a cashless store in the age of COVID-19, on the surface it makes sense. Cashless can feel safer for everyone—eliminating a currency exchange and limiting physical interaction between shoppers and cashiers. Also, with businesses temporarily closing during the pandemic, the circulation of coins has dropped and the U.S. Mint decreased their staffing. The result? A coin shortage. As businesses have started to reopen, the influx of coin demand has exceeded availability.

So, all signs point to cashless, right? Not so fast. Let’s look at some other data first.

Understanding your store’s transactions

If you’re considering taking your enterprise cashless and haven’t examined your stores’ transaction data, it could be a mistake. Oftentimes, retailers think their cash transactions are at a much lower number than they really are. But a survey conducted by the Federal Reserve found:

  • 26 percent of transactions in 2019 were cash transactions
  • Where transactions were under $10, 49 percent were cash transactions

These figures will obviously vary for your stores. Still, understanding your transactional data is critical:

  • What percentage of transactions are cash? It’s more important to look at the number of transactions rather than the sum of the transactions’ value.
  • What’s the average value of your cash transactions?

If you’re running grocery or c-stores that frequently experience a lunch-time rush for prepared foods, for example, those may be more likely to be cash purchases. If you know this data about your stores, you’re likely to understand that by going cashless, you run the risk of losing some of that lunch-time rush. 

Some areas of the U.S. are banning cashless stores

There’s an increase in new shopping and payment methods, like curbside pickup, grocery delivery and contactless payments. Retailers are trying to reduce as much physical interaction between their employees and their customers as possible to keep both parties safe. You might think there are no laws that prohibit cashless stores; indeed, federal law does not require that private businesses accept U.S. currency or coins as payment. 

But down at the state level, things change. Before 2019, only one state, Massachusetts, prohibited retailers from going cashless. Now, over 21 cities, like Philadelphia and San Francisco, have implemented cashless retail bans. According to Tazra Mitchell, Policy Director at DC Fiscal Policy Institute, “a cashless economy is not an inclusive economy.”

So, according to the National Law Review, before converting to a cashless model, “retailers should consult with an attorney to confirm that local and state laws do not ban discrimination against cash payments.”

Going cashless can shut some consumers out

According to a report by the Federal Reserve, 22 percent of American adults—roughly 63 million people—are unbanked or underbanked. What do those terms mean?

  • Unbanked people have no bank account at all and rely on services like payday loans, check cashing services and money orders.
  • Underbanked people have a bank account, but still rely on alternative services like those mentioned above

A cashless society can contribute to increasing the digital divide, or the gap between those who have access to computers and internet and those that don’t. A broad assumption that your shoppers are able to digitally manage their money on debit cards, credit cards or mobile payments may be an erroneous one.

Martin Chorzempa, a researcher at the Peterson Institute for International Economics stated “Alarm bells go off in my head because the impact of going cashless is highly unequal. Eliminating the ability to use cash means you have to pay more fees to pay for reloadable cards and low-income people already find it expensive to live as is.”

So while it might appear that the pandemic has accelerated a move to a cashless society, it may not be the right move for your retail business. A better alternative may include offering touchless transaction options, including touchless self-checkout, mobile in-aisle shopping or mobile payments. It’s important to offer your consumers choice and flexibility in all areas of their interactions with you. As always, use data you have from the connected devices in your stores and technology platforms to continuously understand your customers’ behaviors so you know exactly the kind of experience to deliver.

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