Cash Me If You Can

Cash Me If You Can:

The Impacts of Cashless Businesses on Retailers, Consumers, and Cash Use

Claire Wang August 2019

The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Federal Reserve System.

Cash Me If You Can: The Impacts of Cashless Businesses of Retailers, Consumers, and Cash Use

Table of Contents

Introduction...................................................................................................................................................... 3 Controlling Operational Costs Makes it Attractive for Businesses to Go Cashless ........................................... 3

Cashless businesses no longer have cash handling costs .......................................................................... 4 There are fewer opportunities for theft .................................................................................................... 4 Transactions are faster .............................................................................................................................. 5 Cashless Savings Come at the Cost of Financial Exclusion ................................................................................ 6 Some consumers are denied goods and services ...................................................................................... 6 Other consumers may trust or only have access to cash .......................................................................... 6 Businesses become vulnerable to card companies' fees........................................................................... 7 The Rise of Cashless Businesses and their Impact on Cash .............................................................................. 7 The Current Legal Landscape on Cashless Businesses.................................................................................... 10 Conclusion ...................................................................................................................................................... 11 Acknowledgements ........................................................................................................................................ 12

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Cash Me If You Can: The Impacts of Cashless Businesses of Retailers, Consumers, and Cash Use

Introduction

In recent years, numerous businesses have made headlines for refusing to accept cash as a form of payment. These businesses span a variety of industries, including airlines, eateries, sports stadiums, and general merchandise stores. This phenomenon is not just limited to a few cities, either. Cashless businesses have popped up across the country, including places like New York, Atlanta, and Chicago (Figure 1).

Figure 1: Sample of Cashless Businesses across the United States

Note: In May 2019, San Francisco banned cashless businesses in the city.

This paper explores the impacts of businesses going cashless from various angles: the incentives and benefits for the retailer, the cost to consumers, the potential impact on cash use, and the legal implications and current laws around the subject.

Controlling Operational Costs Makes it Attractive for Businesses to Go Cashless

Much has been written already about why a business may consider going cashless, and most of these incentives are driven by cost and time savings.

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Cash Me If You Can: The Impacts of Cashless Businesses of Retailers, Consumers, and Cash Use

Cashless businesses no longer have cash handling costs

Small- and medium-sized businesses are reported to pay tens of billions of dollars annually on cash handling expenses.1 Eliminating cash payments eliminates the costs associated with handling and transporting cash. Cashless businesses no longer need to pay banks fees to deposit and process cash and coin, nor do they need to pay for armored carriers to transport money to and from the bank.2 Additionally, these businesses no longer need to pay for employees to count and manage register balances throughout the day, enabling employees to spend more time helping customers instead. Given the fixed costs associated with accepting cash, it may be simpler and even more cost-effective for some businesses to not accept cash at all.

There are fewer opportunities for theft

Not having cash on store premises also reduces opportunities for both internal and external robberies. Internally, businesses face a constant battle with employee theft, or "shrinkage." The 2015 Retail Fraud Survey estimates that U.S. retailers lose $60 billion per year to shrinkage,3 though cash is just a portion of this loss, and the National Retail Federation's 2018 Security Survey estimates the average dollar loss per dishonest employee to be $1,203.4 Externally, cash-intensive businesses can be targets for robberies. Nearly a quarter of U.S. robberies (26 percent) took place at some type of retailer--either a gas station, convenience store, or other commercial residence (Figure 2).5 When businesses forego cash on their premises, there may be fewer opportunities and incentives for internal and external theft.

1 Southern California Public Radio. Why more and more LA businesses are refusing your cash. April 2018. 2 Vox. Why cashless retailers put low-income people at even more of a disadvantage. November 2018. 3 Forbes. New report identifies U.S. retailers lose $60 billion a year, employee theft top concern. October 2015. 4 National Retail Federation. National Retail Security Survey. 2018. 5 Federal Bureau of Investigation. 2017 Crime in the United States.

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Cash Me If You Can: The Impacts of Cashless Businesses of Retailers, Consumers, and Cash Use

Figure 2: 2017 U.S. Robbery Locations Source: Federal Bureau of Investigation

Bank, 2%

Gas or service station, 3%

Convenience store, 7%

Street/highway, 37%

Building of commerce,

16%

Residence, 16%

Miscellaneous, 20%

Transactions are faster

Counting cash can take time, both for the customer and the employee. Several businesses that have gone cashless have cited benefits like faster transactions and increased store throughput. Atlanta's Mercedes-Benz Stadium found that its transition to exclusively card and mobile payment transactions not only reduced end-of-day reconciliation time but also resulted in quicker transaction times and lower wait times for customers.6 Salad chains Tender Greens and Sweetgreen found similar benefits from going cashless: Tender Greens estimates that cash transactions are four to five seconds slower than card transactions,7 and Sweetgreen found that its cashless locations processed 5 to 15 percent more transactions per hour.8 Particularly in high-volume businesses, these faster transaction times can translate to increased customer satisfaction, fewer opportunities for error in making change, and increased revenue.

By going cashless, businesses can decrease costs, reduce opportunities for theft, and offer customers a faster, more streamlined transaction experience.

6 Mercedes Benz Stadium Payments FAQ. 7 SCPR. Why more and more LA businesses are refusing your cash. April 2018. 8 New York Times. Where a suitcase full of cash won't buy you lunch. July 2016.

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