“Going cashless” is a fraught topic. Many see cash as outdated and benefitting only criminals. And let’s face it, the stuff is downright filthy.

A Jason Statham-worthy 2009 robbery (the subject of an upcoming Netflix film) in Sweden motivated that country to put itself on an accelerated path toward cashlessness. Sweden’s cash utilization rate is among the lowest in the world. The county is even on a path toward creating its own digital currency, the e-krona.

However, there are cashless critics. Many see the push to eliminate cash in class terms. Cash is a medium for those without banking relationships, smartphones, or credit cards. Therefore, going cashless discriminates against the poor, this argument goes. Some U.S. states and municipalities have even passed laws restricting merchants’ ability to refuse cash.

All the noise about the future of cash was in the air well before COVID-19. As with so many other trends like work from home and meal delivery, the pandemic may be shaving years off the cashless adoption curve. More on this below.

Of course, going cashless has multiple implications for local. The emergence of a new contactless payments ecosystem, for example, is certainly a corollary to the elimination of cash.

We’re seeing more examples of technology helping consumers pay for goods and services while minimizing or eliminating human contact. Another cashless signal came with Starbucks’ decision to shut down 400 stores and replace many of them with order ahead only locations. My Localogy colleague Mike Boland has been writing extensively about “order ahead” technology.

Will Future Merchants Make Change?

Localogy’s own Modern Commerce Monitor Wave V-II, conducted amid the crisis, showed that small businesses were willing to adopt new technologies and change up their processes in order to adapt. While the survey doesn’t directly address cash vs cashless, it signals a willingness to make big changes on the assumption that many of them will be permanent.

A recent report from Square analyzed merchant payment data to find out how the pandemic is impacting cash acceptance. The findings are interesting.

Square issues its first “Making Change” report in May 2019, and found a growing affinity for cashless transactions amount merchants. The company ran the data again this spring, during the pandemic’s peak (at least what we thought was its peak). The idea was to see if COVID-19 has brought us closer to cashless.

The short answer appears to be yes. Square found that the number of cashless business grew from 8% on March 1 to 31% on April 23. Looking at specific categories, the numbers reflect some variation but overall a major shift from in-person transactions that may involve cash to contactless transactions that rarely if ever do.

It’s important to note that Square’s definition of a cashless business is not a business that refuses to accept cash. It defines a cashless business as one that takes in 95% or more of its revenue via credit cards, online payment, or some other non-cash payment method.

Source: Square, “Making Change” 2020
Is Cashless New Normal, or Now Normal?

The big question raised by Square data is, how much of this is permanent? The picture here is a little mixed. Square found that 69% of businesses say the crisis will accelerate the adoption of cashless transactions in the United States.

Also, the predicted timeline to a cashless society has accelerated. Last year, businesses said on average that a cashless future is 19 years away. This year, the consensus was 13 years.

However, the number of businesses who themselves say they will refuse to accept cash in the future is and will remain small. In fact, 85% of businesses say they will never completely stop accepting cash. Currently, only 3% of businesses report that they refuse to accept cash today, according to Square.

We suspect most businesses will follow the market and go mostly cashless, gradually and by default. But most will never refuse to accept it outright. Every business has its own set of issues and quirks. And cash will likely become a niche form of payment over time.

Larisa Olsen, owner of Chantilly Lace Lingerie in Wilmette, Illinois, tells us cash transactions are a very small portion of her sales. But it plays an important role.

“Sometimes women pay a part in cash so their husbands won’t see how much they’re spending,” she told us.

As for the physical safety of money in the COVID era, Larisa, who is very safety conscious regarding the virus, was unconcerned.

“With hand sanitizer, I feel pretty good about things,” she said. “The virus is mainly transmitted through the air.”

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