- A recent Square report shows increased consumer demand for cashless payments and acceptance by merchants.
- In April, 23.2% of Square vendors were cashless, up from just 5.4% in February.
By the peak of the pandemic in April, 23.2% of Square sellers were cashless (defined as 95% or more of transactions electronic), down from just 5.4% in February, according to Square Making Change report.
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Although easing restrictions and reopenings have stabilized cashlessness, the pandemic has had a lasting impact: by August, over 12% of businesses were cashless – more than double what it was before the pandemic.
Cash's share of total transactions among Square sellers decreased seven percentage points to just a third by August 2020, likely due to three factors:
- Card Payments: During the pandemic, customers turned away from cash payments to limit physical contact growing Card usage. This could have led merchants, especially small businesses, to turn on card acceptance for the first time or stop taking cash in full for a period of time.
- Contactless payments: More than the half of U.S. adults surveyed by Mastercard said they use some form of contactless payment, which could include the following contactless cards or mobile wallets. This has increased adoption: Square saw the percentage of Square sellers accepting contactless payments increasing by 6.6 percentage points from February to July this year, with that number reaching 70% by August. With the pandemic serving as a catalyst for contactless usage, the continued interest in mobile wallets is likely to continue to turn customers away from cash.
- Ecommerce: Temporary store closings and stay-at-home measures contributed to a surge in e-commerce during the pandemic: e-commerce sales increased 44.4% year-over-year in the second quarter of 2020 versus the 13.9% year-over-year increase in the second quarter of 2019, according to the US Census Bureau. Merchants customized by adding online stores. 40% of Square sellers are now offering ecommerce which will help them grow sales as ongoing uncertainty continues to fuel online retail.
A rise in cashless payments means digital payment providers must find ways to accommodate businesses that want to meet consumer needs. To keep pace with consumer needs, POS hardware and software providers must continue to find ways to offer merchants cashless payment solutions so that they can attract new customers and keep existing customers loyal.
These vendors can help merchants adapt to the decline in cash by offering affordable acceptability solutions, especially for small businesses struggling with cash, and widening the acceptance of payment methods by "Buy Now, Pay Later" (BNPL) or other tools provide. You can also examine sectors with high potential but low penetration such as parking and transit to keep exploring new business areas and differentiating their offerings from those of new entrants and other competitors.
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