The Cashless Myth

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You step outside to your local grocery store to pick up a few things. As you load up your bread, farm fresh eggs, quinoa, and rotisserie chicken, you can’t help but notice the high number of smart watches and phones being used at the checkout terminals to purchase groceries. On your way home, you stop into your local coffee shop for your favorite nitro-infused cold brew. As you’re waiting in line the patron directly in front of you is politely told his cash cannot be accepted at this establishment. The patron cancels his large pumpkin spiced latte in a disappointed manner before leaving the coffee shop. Cash is completely dead. The outstanding value of cash in circulation has dropped to a mere 1% of total GDP. This is the economic reality for the country of Sweden, where a cashless society is rapidly becoming a new norm for its citizens. Countries such as Japan, China, India, and Malaysia are embracing a cashless economy with open arms. In the United States, the war on cash has not garnered the same impact as its international counterparts.

“Numbers Don’t Lie, Check the Scoreboard”

Main stream media has glorified the “death of cash” as a full force consumer driven trend. However, recent data suggests contradictory momentum to the U.S. war on cash. According to The 2017 Diary of Consumer Payment Choices, cash is still the most popular method of payment, accounting for 35.6% of all customer payment transactions. But the dirty little secret can be discovered by looking at one glaring statistic. According to the Federal Reserve, cash demand will not stop growing, most recently reflecting a positive 7.4% annual rate. Despite a technological disruption full court press, the war on cash has a long uphill road to climb, if it ever does arrive.

“Just Say No”

It is very tempting to partake in the cashless fad, even more so for small businesses. The peer pressure of escaping your cash handling reality into a cashless wonderland sounds too good to be true, because it is. You may be trying to convince yourself that you can simply save money by not accepting money, and thus not having to pay for the handling of money. Look no further than the Shake Shack experiment as a recent pitfall to avoid the cashless temptation. Consumer backlash forced Shake Shack to abandon their cashless business model. Cash paying consumers quickly took to social media to voice complaints about feeling excluded. “In the first rollout at Astor Place, we did not accept cash at all, and there are people who have told us very clearly ‘we want to pay with cash,’’ Shake Shack CEO Randy Garutti told stock market analysts of the decision. “So in this next phase, we’re going to go ahead and have cashiers as well as kiosks.”

A backlash to the cashless movement is quickly catching momentum. NYC recently proposed legislation that would ban cashless business practices. Cashless businesses would be fined $250 for the first offense and $500 for each offense afterward under the new law. Similar bills have been introduced this year in the cities of Washington D.C. and Philadelphia. And just this week, the state of New Jersey advanced a bill that would prohibit cashless businesses. Cash just will not die.

“Cash is for the marginalized”

“There are hundreds and thousands of New Yorkers who may have no permanent address or home, and many New Yorkers who are underbanked, either because of poverty or because they lack documentation,” New York City Councilmember Ritchie Torres conveyed to in Grub Street during an interview on Tuesday. “Requiring a card is erecting a barrier for low-income New Yorkers—period.” There are over 14 million adults without a bank account, and 49 million underbanked adults, according to the 2017 FDIC National Survey of Unbanked and Underbanked Households. The same report noted that Black and Hispanic households are substantially more likely to operate outside the banking system. 

“Cashlessness seems benign,” Torres noted, “but when you reflect on it, the insidious racism that underlies a cashless business model becomes clear. In some ways, making a card a requirement for consumption is analogous to making identification a requirement for voting. The effect is the same: It disempowers communities of color.

My experience with cash is somewhat personal. My great grandmother used cash as her main source of payment. She was always in great standing with her banks and saved money as if she were going to live through another Great Depression. She rarely carried a credit card and never wrote a check. Utility payments, tax payments, mortgage payments, would always be paid with U.S.P.S. money orders. Anything she would purchase in person would only be paid for in cash. My great grandmother maintained strict financial discipline her entire life. These financial safeguards empowered her to achieve upwards economic mobility. She purchased her own home and continuously increased her savings balance year over year until she passed at the young age of 93. The acceptance of cash is essential if we are to ever progress our world into a community that is inclusive for all walks of life.

“There’s a better way”

Rather than enforce a cashless policy, which inherits numerous future headwinds, why not simply automate the cash handling process and be done with your cash handling pain points? The end of cash should be decided by your customers. By automating cash handling, businesses are able to minimize cash cost to a fraction of the cost. And after the system pays for itself within twelve-eighteen months, businesses will realize a pretty hefty uplift to their bottom lines. In an era where one tweet can wreck complete volatility on your investments, why not invest in a sure thing? Yes, there’s nothing sexy about counting cash. But with cash demand still growing, one can expect cash to play an active role throughout business operations for the near future with no end in sight. All it takes is one legislation bill, one data breach, one Federal interest rate increase, one system failure, one angry customer to stuff your cashless operations in its tracks.