Is It Time to Say Goodbye to Accepting Cash?

Alfonso Serrano

Alfonso Serrano

Business Columnist at Fundera
Alfonso Serrano is a Brooklyn-based writer. He has served as a senior editor at Al Jazeera America, TIME.com and Conde Nast Portfolio, among other publications. His writing and commentary have appeared in The Guardian, National Public Radio, The Chicago Tribune, and Pacific News Service.
Alfonso Serrano

Could cash no longer be king?

The assault on physical currency that began in the 1950s and 1960s with the introduction of credit cards is now a full-scale onslaught against banknotes, as smartphones and other forms of mobile technology increasingly muscle in on the global payment process.

Current trends and technology advances for processing payments point to cash’s dominance becoming a distant memory some day. Does that mean your business should join the cashless bandwagon?

Multiplying by the Day: The Trend Away from Cash

Consumer card payments eclipsed cash payments for the first time in 2016, with card transactions reaching $23.1 trillion globally, according to market research firm Euromonitor International. And British data firm Retail Banking Research says there were 471 cashless payments made worldwide in 2015, an increase of 52 percent since 2011.

The United States, meanwhile, is reaching a tipping point as it quickly barrels toward becoming a cashless society, according to a MasterCard study, which adds that the continued use of cash in this country is a result of consumer habits. The study points to new technologies as a major driver of changing payment trends.

In a statement released with the study, Kevin Stanton, president of MasterCard Advisors, said: “While each nation’s journey is unique and requires an understanding of local realities, the benefits that come with a more cashless society are universal: more convenience for consumers, better efficiencies for governments, higher productivity for businesses, and greater financial inclusion for society as a whole by bringing more citizens into the economic mainstream.”

New technologies are also driving change among small businesses, which traditionally have lacked a comprehensive framework to cash out. But electronic devices and mobile payment companies like Square are quickly restructuring entrenched consumer habits. Customers, analysts say, are increasingly using mobile technology to pay for everything—from coffee to baby sitters to parking garages—thanks to the availability of branded apps and P2P payment apps like Venmo.

Should You Follow SweetGreen’s Cashless Lead?

SweetGreen, the Los Angeles-based salad chain, recently announced that in 2017, almost all of its 64 locations will eliminate cash transactions. Instead, the chain will only accept payment through credit cards or its app, in a move that SweetGreen’s owners say will speed up transactions and reduce the threat of theft. The chain’s break from cash mirrors that of restaurants and retail outlets across the country, as mobile technology like Apple Pay, Android Pay, and Samsung Pay become more prevalent.

But SweetGreen’s drive toward plastic payment offers a cautionary tale. The chain will not be able to discard cash payments in Massachusetts, where that practice is illegal. The state law, experts say, prohibits outlets from discriminating against cash customers, especially poor consumers who may not have easy access to credit or debit cards.

It’s not the only knock against cashlessness. For one, studies show that consumers tend to overspend when buying items without cash. And banks charge customers for every cashless transaction, adding up to billions in fees annually. In 2009, U.S. banks made $16.2 billion from debit intercharge fees, according to the Federal Reserve.

A Persisting Issue for Cash-Only Holdouts

Security issues have also dogged mobile payment systems. In 2015 Apple Pay was blindsided by a series of fraudulent transactions, as hackers used stolen credit card data and entered the information into phones to make purchases. Although Apple dismissed fraud worries as overblown, the case highlights the pitfalls of patchy consumer protections that leave consumers exposed.

In a 2015 study, research firm Javelin Strategy & Research found that cyber criminals had stolen $16 billion from 12.7 million U.S. consumers the previous year, with most victims falling prey to credit card and mobile device fraud. The study, which warned that there is a new identity fraud victim every two seconds, said that fraudsters were narrowing their target on smartphones and tablets given their increasing prevalence among consumer transactions.

And cash still dominates underground economies worldwide. In the U.S. alone, the underground economy—a system characterized by underemployed workers earning cash under the table and underreporting earned income—totaled roughly $2 trillion in 2012, according to economists.

Although typically associated with shady activity, the underground economy that thrived as the country began to emerge from the Great Recession witnessed cash fuel everything from the service to entertainment industries. Nannies and hairdressers manage to eke out a living in this system, but so do IT technicians and food establishments and construction workers.

Yes, cash may be jeopardized by the relentless barrage of technology, but don’t expect it to disappear anytime soon.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Alfonso Serrano

Alfonso Serrano

Business Columnist at Fundera
Alfonso Serrano is a Brooklyn-based writer. He has served as a senior editor at Al Jazeera America, TIME.com and Conde Nast Portfolio, among other publications. His writing and commentary have appeared in The Guardian, National Public Radio, The Chicago Tribune, and Pacific News Service.
Alfonso Serrano

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