Pros and cons of cashless business
- 1 Pros and cons of cashless business
- 1.1 Cashless business trend sweeps US cities
- 1.2 Advantages of going cashless for small businesses
- 1.3 Disadvantages of going cashless for small businesses
- 1.4 Discrimination and legal concerns in cashless businesses
- 1.5 You can accept cash while encouraging plastic
Pros and cons of cashless business
Should your business go cashless? In this guest post from Lendio, look at the pros and cons.
Credit cards are more popular than ever, mobile wallets like Apple Pay and Samsung Pay are growing, and entire countries — such as Sweden, which aims to become a cashless society — are using Use plastic and try to get rid of the world of paper money. But in the United States, where the FDIC reports that 8.4 million households are unbanked and another 24 million are short of banks, the cashless revolution may not be near.
While the use of cash is declining in the US, more than 70% of Americans still make purchases with cash weekly, the Pew Research Center reports. That, of course, leaves a third of the population in need of cash anymore, and that number is likely to grow. With this trend towards plastic and digital, it can be tempting to tailor your business accordingly.
There are many benefits to going all-cash, but is it the right choice for your retail business?
Cashless business trend sweeps US cities
Several trendy eateries serving the younger crowd in major US cities have gone cashless, including the popular dessert chain Milk Bar and Chicago-based Epic Burger. Amazon recently introduced Amazon Go, a cashless buy-and-go supermarket chain where you can avoid the checkout process altogether by charging whatever you put in your shopping cart to your Amazon account. mine.
While businesses can fall on both sides of the cashless debate, one clear winner is driving the movement: credit card companies, which can earn between 1% and 4% every time a customer swipes a plastic card. Visa launched the Cashless Challenge in 2017, awarding 50 businesses $10,000 for making the transition to cashless.
Advantages of going cashless for small businesses
The chain isn’t the only business moving to a cashless system. Even small businesses benefit in a few key ways.
1. Save time and money
While businesses pay a fee for each credit card transaction, they also have to pay an employee extra time to accept cash. From tallying cash at the end of the day to going to the bank regularly and possibly paying deposit fees, these overtime hours add up. When Sweetgreen, a salad shop chain, initially went cashless, they released a statement explaining that a large part of the decision came from their desire to scale and the fact that they spent about two hours each days to manage cash at each store.
2. Increase payment efficiency
A single swipe or tap of a credit card makes the transaction much faster than cashing out and handing out change. For businesses with long queues during peak times, going cashless can dramatically speed up the checkout process and limit those lines, making customers more likely to stop and make a purchase. .
3. Risk reduction
Keeping cash in the register puts your business at risk of theft and robbery. A Baltimore-based coffee shop went cashless in 2017 after facing five armed robberies in just four months. Furthermore, Statistic Brain and CNBC report that employee theft costs American businesses $50 billion a year. By not accepting cash, you’re also keeping employees from skimming your profits from the register.
4. Improved accounting
Imagine never having to go back through the books to find out why the registry was missing at the end of the day. Going cashless allows you to track every transaction easily and leads to more accurate accounting, which increases your efficiency and profitability.
Disadvantages of going cashless for small businesses
There are some obvious limitations to deciding not to accept cash at your business, as evidenced by Shake Shack overturning their cashless decision. Sweetgreen, an early adopter of cashless business, recently made the decision to accept cash again due to controversies surrounding the cashless business. Here are some reasons why your business might not want to use cash.
1. Pay extra credit card fee
With credit card fees as high as 3 percent or 4 percent on every purchase, business owners spend a small amount on credit card transactions every year. This fee is why many independent businesses still only use cash or charge customers for using their credit cards. Other businesses are forced to include credit card fees in their rates, which could mean losing some customers to competitors.
2. You may lose customers
Shake Shack, a popular NYC-based burger chain, tried going cashless but scrapped the plan in 2018 after a series of customer complaints. Many children, the elderly, and others who are often unbanked or have low banks are prohibited from making purchases at your business if you are cashless. Other customers may feel alienated from the decision to no longer accept cash, which could lead to negative publicity or even a boycott of your business. Customers who simply prefer to pay with cash, perhaps for privacy or data security reasons, or don’t carry a card, will also be forced to shop elsewhere. Some clients rely entirely on cash for budgeting purposes, like personal finance expert Dave Ramsey’s envelope method for recommended budgeting. Consider if you really want to send the message that all those people can’t shop with you.
3. There is no way to accept payments if your system crashes
Having your credit card system crash in the middle of the day is stressful enough, even if you only accept cash until it’s back up and running. However, if your business is cashless, you won’t be able to accept any form of payment under these circumstances.
Discrimination and legal concerns in cashless businesses
Preferably the ethical issues surrounding the cashless trend. Many customers and legislators consider this practice discriminatory, and in some cities and states even illegal.
Philadelphia became the first major U.S. city to ban cashless operations in a new law requiring stores to accept cash starting July 2019. New Jersey also passed a bill banning cashless transactions. cashless stores earlier this year, and Massachusetts has had such a law on books for decades.
While New York City is home to an increasing number of cashless restaurants, at the time of this writing, NYC Councilmember Ritchie Torres is also pushing for the city to ban these restaurants. He proposed a similar bill in the fall of 2018. In an op-ed video for NowThis News, Torres argued that US bills were printed with the statement, “This bill is legal tender. for all public and private debts” is justified, and refusing to accept them constitutes unlawful discrimination under the Civil Rights Act.
This concern seems particularly understandable in NYC, where the percentage of unbanked and unbanked households is 36% lower, well above the national average. 27.7% of American households as a whole fall into one of those two categories, with 7.7% of them unbanked, meaning they don’t have a bank account.
Why doesn’t someone have a bank account? There are several common reasons.
For starters, most checking accounts require a minimum open deposit, and they may also come with monthly maintenance fees and requirements to maintain a minimum monthly balance, this is beyond the reach of many Americans living in poverty. They also require a form of government-issued identification and residential address that homeless Americans do not have. Undocumented individuals also cannot open a bank account. Finally, some consumers may be barred from opening a checking account due to a negative banking history. Most banks will check your banking history and reject any candidate who has evidence of mismanagement in previous bank accounts, usually by overdraft and no accrual fees. accumulated.
In short, the unbanked and the underbanked tend to be the poorest in the country, which is why Torres describes promoting cashless transactions in his video as “empowering.” for America’s most vulnerable communities”.
You can accept cash while encouraging plastic
With a large portion of the US population still relying on or preferring cash, it’s hard to justify going completely cashless. If you’re tempted by the time-saving benefits but worried about potential drawbacks, consider continuing to accept cash but encouraging customers to pay by card if they can.
You can do this by installing cashless kiosks to speed up the ordering process or maintain a cashless location, as Shake Shack did. Another tactic is to implement a reward or points program for customers who pay by card.
We may one day reach a completely cashless society. But for now, it looks like the US still has a lot of work to do — especially when it comes to serving limited banks — before we can embrace a cashless future.