Allpoint Blog

The Great Debate Continues: Cashless vs. Choice

Was it coincidence that within days of each other, two major U.S. news publications, the Wall Street Journal and The New York Times Magazine, published pieces that asked, respectively, why we don’t “ditch” and “trash” cash? Maybe so. 

Regardless, it’s impossible to remain silent on the gist of these articles.  Once again, the future of cash is predicted to be short, despite recent surveys concluding that consumers and businesses alike favor a choice in payments and that cash remains king.  

The Journal article contended that reducing crime is a key driver to a cashless society and that technology advances enable small and large businesses to stop accepting cash. It cited a small café and coffee shop in Brooklyn and a New York restaurant chain that stopped taking cash to prevent armed robberies. The Times Magazine piece also argued that currency is involved far too often in crime.

Certainly, arguments can be made against using cash for certain consumer transactions, such as buying a car or an airline ticket. It’s also not surprising that retailers, especially small businesses, fear robbers demanding their cash. Still, no evidence exists that a cashless society is in the cards, if ever. Consumers say they want or need choice when it comes to payments, and many retailers – an Intuit study suggests over half the nation’s 27 million small businesses – don’t even accept credit cards for various reasons.  

Let’s consider first the use of cash by consumers. PYMNTS.com’s Global Cash Index™ recently reported on cash use in the Americas.  One of the findings is that cash use for payments in the Americas including the U.S. is expected to grow 14 percent between 2015 and 2020 with cash’s share of all payments rising slightly by 0.3 percent. The index, sponsored by Cardtronics, considers the total number of payments made with cash and cash use as a percent of gross domestic output.

Other studies published toward the end of 2016, including one by the Federal Reserve, conclude that cash is far from dead or even dying. Cardtronics’ 2016 Health of Cash study and the State of Cash: Preliminary Findings from the 2015 Diary of Consumer Payment Choice by the Federal Reserve had these common findings: Cash is the most frequently used form of payment; it’s used in a wide variety of situations; and it dominates small-value payments.

The Cardtronics study found that a “new norm” defines today’s payments environment as consumers demand options. Over 90 percent of 1,006 consumers surveyed like the ability to pay with a variety of methods, with 55 percent using at least three different payment methods a month. Further, consumers use cash the most in this fragmented payments landscape, at 89 percent – far above the percentages for debit and credit cards and store mobile apps. 

The Federal Reserve Study found that 32 percent of consumer transactions were made with cash, outranking debit and credit cards, checks and other payment methods such as mobile wallets. Both studies found that a sizeable majority of people use cash for low-expense items and other forms of payment for more expensive items. The Federal Reserve study also concluded that consumers use cash “for small-value transactions out of convenience, not merchant-specific pressures.”

As for retailers, while a few “No Cash” signs may appear in window fronts, the vast majority of businesses accept cash or checks. Besides the Intuit study that estimated 55 percent of small businesses don’t accept credit cards, another survey of 1,000 small-business owners found that 72 percent prefer cash or checks over credit cards.  

Simplicity explains why. Card payments – especially the new EMV chip-enabled credit and debit cards – still take more time to process than cash.  Plus, credit card fees can range from 1.5 percent to 3.5 percent depending on the card issuer. That doesn’t count the 20-to-30-cent charge per transaction, a monthly fee to a merchant services provider and the cost of card readers.

With cash, businesses don’t have to wait at least two business days for payment from the card issuer. Cash also can’t be hacked, it’s dependable and it allows businesses to serve the estimated eight percent of the U.S. population who are underbanked and without a credit or debit card.

As for the Journal and Times Magazine articles, the comments from many readers tended to discount the idea of a cashless society, “The cashless society will arrive the week after the paperless bathroom,” wrote one Journal reader. “Hello! Have you ever heard of credit card fraud? This is rampant,” penned another. And a Times Magazine reader from Texas wrote: “Cash is Liberty!” Even Christopher Mimms said in his Journal column: “It is very likely cash will always be with us in some form or another.”

The 91 percent of consumers who told Cardtronics that they like the ability to pay with a variety of methods – in other words, they want to have a choice – will be glad to hear that.

Tom Pierce
Chief Marketing Officer

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