The conversation surrounding cashless businesses in the United States has been creating an uproar in the business world since 2018. While it may be convenient for some people to pay with a card or wave their phone, an estimated 22% (63 million) adults in America are either unbanked or underbanked. And 52% of Gen Z respondents recently reported they preferred using cash to other payment methods.
With all the talk about moving to a cashless society, lets take a look at the true cost of operating a cashless business.
The War on Cash is about Profits
For years card companies such as Visa and Mastercard have been pushing the idea of a cashless society and it shouldn’t come as a surprise. It’s in their interest that consumers rely on their product for all their transactions. Why? Fees.
Processing costs in the U.S. range between 1.5-3% of the total purchase, according to Bankrate.com. While that may not seem like a lot, these fees yielded a profit of $51 billion in 2020 for the card networks. These fees can impact a merchant’s bottom line, not to mention the cost of goods and services customers purchase.
Offering consumers the option to pay in cash can have a positive impact on profits by reducing card processing fees.
Customer Privacy
On top of the transaction fees retailers pay, card processing companies also make money by selling transactional data. While a customer’s personal data may be safe when they make a purchase with a card, their personal date is packaged and sold to a myriad of companies to assess buying trends and produce targeted advertising.
For privacy conscious customers, not offering a cash option is a deterrent to shopping in your business.
Cash as a Budgeting Tool
Cash is used for a huge number of reasons. For some consumers it’s about privacy, others they may simply like the idea of having cash in their pocket or purse. And for others it’s about reducing their costs and avoiding credit card interest fees.
For a growing population, including a huge percentage of Gen Z consumers, using cash is about staying on budget - especially with inflation at an all time high. Because cash is tangible, a person on a tight budget can see how little or how much they have to spend and it helps them make better buying choices, in addition to savings money by not incurring overdraft fees.
Businesses that do not offer a variety of payment options may be turning away customers using cash to make ends meet in an economy where everything costs more.
Cash Reliant Customers
For most customers how they pay is a personal choice, but for close to a quarter of the U.S. population cash may be their only option. While politicians like to tout that America is the richest country in the world, according to a 2019 report by the Federal Reserve an estimated 63 million adults are either unbanked or underbanked.
Six percent of Americans are considered unbanked and do not have a bank account, while 16% are underbanked. While underbanked households have a bank or credit union account, they tend to rely on cash to pay and use alternative financial services. These individuals also tend to be minorities with lower incomes.
For businesses located in lower income areas, not accepting cash could result in turning away the most vulnerable in our society who rely on notes and coins to buy products and services.
When it all Goes Wrong…
Natural disasters such as hurricanes, tornados, blizzards, earthquakes, floods and wildfires are on the rise globally. In fact, the prevalence of natural disasters have increased by 10 times over the last 30 years.
When the power goes out, cash is the only payment method a business can accept. And it becomes an essential lifeline to those caught up in a disaster. In fact, FEMA’s recommendations for hurricane preparedness include cash.
In the case of a power failure or emergency, not accepting cash could spell disaster for businesses that don’t accept cash.
Accepting credit and debit cards is convenient for both businesses and consumers. But the cost of going cashless far outweighs the benefits in terms of costs to the business, customer loyalty and continued operations in the case of a natural disaster or a power outage.
Give your customers an easy way to obtain cash with an ATM in your business. Contact us to find if you qualify for a no cost hassle-free, turn-key ATM!