Cash acceptance has created growing expenses for retailers in recent years. These rising costs are largely related to current economic trends, including labor expenses, increased theft, and boosted bank fees for cash deposits. Minimum wage hikes in 25 states are driving up staffing costs – making it even more expensive to count registers and transport deposits. Meanwhile, retailers report 53% more theft losses annually and banks continue to raise business account rates for cash deposits.
It’s enough of a headache to have some retailers seriously considering eliminating cash transactions altogether. But that’s not such a great idea. Here are three ways not accepting cash is bad for convenience, grocery, and other retailers.
Cash Transactions Still Cost Less
Going cashless is unlikely to save retailers the money they think it might. Card networks are continuing to raise their rates, leaving merchants with little recourse. Visa and Mastercard both raised their fees just last year – taking an even larger percentage of each purchase.
Despite the rising costs of cash, it is still less expensive than other payments. The average credit card transaction costs around $2. The standard cash transaction? $0.30. And there aren’t many options to offset those alternative payment expenses. Even where it’s legal to cash discount or pass fees on to the consumer, the amount you can charge or pass on is set by the card networks. And Visa reduced the maximum on that in April, from 4% to 3%.
You Could Alienate Valued Customers
Nearly 60% of consumers prefer cash for in-person payments, according to a recent study from the Federal Reserve. Not offering the option of cash could risk losing regular store visitors– especially those Gen Z leveraging cash budgeting. But what about the 19% of Americans who are unbanked or underbanked? Those are potential customers who rely primarily on cash and now can’t shop in your store. Refusing legal U.S. tender means immediately alienating over 75 million possible customers. Even those with cards may permanently boycott a retailer after one cash refusal.
Not Accepting Cash Could Be Illegal
Depending on the state or city, it might be against the law to not accept cash. There are currently 14 States and at least 6 major cities that have made it illegal for a retailer to not accept U.S. currency as payment. Cities like San Francisco, Washington D.C., and Philadelphia are just a few major locals that have passed laws in an attempt to promote financial inclusion.
Another 15 States have legislation in consideration to take similar action. However, a Federal law may push “cashless bans” nationally. The Payment Choice Act has been introduced in the House and a related bill is in review with the Senate Committee on Banking, Housing, and Urban Affairs. Both versions of the law propose Federal cash acceptance mandates.
There Are Better Solutions for Your Cash Woes
Rather than creating potential legal issues, alienating customers, or giving card networks even more leverage over (and bigger chunks of) retail profits, merchants concerned about rising cash handling costs should investigate new methods for cash management.
New technology provides the opportunity for retailers to reduce or eliminate many of their cash-related expenses and risks. Systems like Cash Depot’s BANK IN A BOX provide fully automated cash counting, reporting, and bank deposits via ACH – directly addressing labor and bank fee concerns. And, when it comes to addressing security and theft, the BANK IN A BOX system includes robust activity tracking and user controls all while reducing the risk of robbery by recycling cash out-of-store.
Retailers who continue to offer a wide range of payments, including cash, create an inclusive and convenient experience for customers. Kicking cash to the curb might seem like an easy solution to address criminal activity and cash cost concerns in the short term. But choosing a new solution that improves operations and offers more convenience for consumers? It’s a win for everyone that will keep customers coming back.
TLDR: Retailers looking to kill cash transactions to save money could risk losing customers and more. Instead, retailers can reduce cash costs by implementing robust cash automation and management systems like BANK IN A BOX.
