- Cashless business was a polarizing invention of retail.
- They were praised as innovative and convenient, and mocked as an inequality in sowing.
- Fears about the exclusionary nature of cashless transactions have led to a number of legal bans against them.
- Alex Bau, director of data and policy analysis for the Federal Reserve's Cash Product Office, said that retailers today seem more interested in "meeting customers where they are" when it comes to payment options.
- You can find more stories on the Business Insider homepage.
It can rightly be said that cashless retail stores have seen a slight rise and fall on the surface.
Cashless stores may have been a futuristic innovation, but in recent years they have started a backlash against inequality rather than a retail revolution.
But that doesn't mean that cashless technology was a flash in the pan. Retailers are still interested in cashless options to cut costs and meet consumer needs, even if a completely cashless environment remains elusive and unrealistic.
The cashless game
Around four years ago, a cashless retail experience seemed in sight. There were still significant doubts about a cashless future, but by 2017 the FDIC had determined that cash was only 30% of all payments Harvard Business Review,
A few big names came to the fore to take over the cashless coat.
Sweetgreen, a salad chain that introduced a cashless model early on, also reset its goals. In 2016, co-founder Jonathan Neman told Business Insider that the company's cashless approach was working to "make things easier".
In January 2018, the first Amazon Go store was opened, offering its customers a completely cashless and cashless experience. Amazon reportedly planned to open thousands of these cashless stores. Of course, Amazon's disruption to payment methods was a one-way street. In September 2019, the online retail giant partnered with Western Union to enable more cash-dependent customers to shop online with cash.
But the dark side of the cashless trend would soon be fully visible.
In 2018 Bank Respondents 1,164 people who had made a payment in the past month to weigh up the differences between cash uses by different groups. It was found that 65% of the people who stated that they used cash primarily without bank account, 25% earned less than $ 25,000 a year and 20% were minorities.
"Non-acceptance of cash could potentially marginalize those who have limited access to the financial system or mobile technology devices," wrote researchers at the Congressional Research Service, a public policy think tank run by the Library of Congres, 2019 report,
Retailers who opted for cashless trading effectively denied service to consumers without access to banks, poor households and minorities.
Major cities in the United States have started targeting cashless businesses. New York City. Philadelphia, San Francisco and the state of New Jersey are all only cash transactions, which means that retailers must accept cash from paying customers. NPR reported that Washington, DC, weighed a similar bill.
The results of the change in legislation against cashless transactions were fairly definitive. Amazon Go has discontinued its exclusively cashless model and is currently accepting cash at all locations. Sweetgreen reportedly accepted cash at all locations in late 2019.
"Meet the customer where he is"
Alex Bau, director of data and policy analysis for the Federal Reserve System's Cash Product Office, spoke to Business Insider about the cashless trend.
"We continue to see interest in retailers or merchants who manage or reduce cash-related costs," said Bau. "We haven't necessarily heard of an increase in the number of cashless companies, but the cost factor is always in our heads."
The Federal Reserve Bank of San Francisco released one Note in August 2019 entitled "Cash Me If You Can: Impact of Cashless Companies on Retailers, Consumers and Cash Consumption". It was about a number of advantages and disadvantages associated with the cashless. Benefits of a cashless approach included lower cash handling costs, theft vaccinations, and faster consumer transactions.
On the other hand, the note noted that cashless companies promoted total financial exclusion, made life difficult for cash-preference consumers, and were tied to retailers who charge credit card fees.
The 2019 report The Congressional Research Service added that cash provides financial security and guaranteed privacy protection for those who are unwilling to open bank accounts.
Bau said cash is the preferred payment method for events like snowstorms when there is a possibility that the power will fail or a payment network may crash.
According to Bau, whether or not cashless money is saved or not – given the fees charged by card companies – usually depends on the retailer and how "rationalized" his operation is.
Given the legislative backlash and mixed results that come from cashless use, it seems retailers are at a fork in the way of payment. But that doesn't mean that cashless technology will be dumped soon. The 2019 report The Congressional Research Service found that "the hegemony of cash as a payment system has apparently come to an end as electronic payment systems have become more popular and the ubiquity of cash acceptance for personal purchases also appears precarious."
Cashless options in stores still offer an opportunity for retailers to explore. Bau said that in his office's conversations with retailers and retailers, companies typically try to best accommodate customers.
"Generally, retailers want to meet customers where they are for a payment option," said Bau.
While a cashless society may not be feasible at the moment, for some companies the strategy seems to be to adopt cashless technology while maintaining the ability to accept cash.
But that doesn't mean that cash will soon disappear.
Indeed, cashless transactions are just the latest version of payment options that have emerged throughout financial history. In the beginning there was cash. Then the check showed up, followed by the introduction of the debit card and its cousin, the credit card.
Bau said that the popularity of certain "payment instruments" may increase or decrease, but rarely fades completely. The same applies to cash, even if retailers weigh a more omnichannel payment approach.
"When we talk to retailers, they don't necessarily see cash as a means of payment for outgoing consumers," he said.