Will Paying With Actual Money Soon Become a Thing of the Past?

Why businesses are embracing the cashless trend, and what's at stake when they do

The cashless movement is largely coastal and urban, and confined to restaurants and takeout places, at least for now.
Illustration: Miguel Montaner

In his nearly 30 years in the restaurant business, having done every job from waiter to regional director, Michael Ryan has learned a good deal about running a profitable house. His operational savvy helped make a success of legendary New York City names like Shaw’s Crab House and Blue Water Grill. Meanwhile, his watchful eye took note of many liabilities: the time it took to count the register drawers at night, for example, or the fivers and ten spots that would sometimes disappear into employees’ pockets as they worked behind the bar.

Which is why both locations of his latest concept, Filipino taqueria Flip Sigi, do not accept cash.

Before the restaurant adopted e-payments exclusively, “the manager was spending 20 hours a week counting cash, going to the bank and signing off on everybody’s [drawer],” Ryan says. If an employee’s count came up short, they’d be held to account for the shortage. That, Ryan says, “builds up animosity—and that takes its toll.” Today, with no cash in sight, Ryan’s manager can concentrate solely on running the restaurant, and endless cash-outs are yesterday’s problem. “We close at 11 and we’re out by 11:15,” Ryan says.

Though the cashless movement is largely coastal and urban—and confined, for now, to restaurants and takeout places—a growing number of businesses in America’s major cities are turning a cold shoulder to greenbacks.

At its 75 locations spread between Los Angeles and eastern seaboard cities like Philadelphia and Boston, artisanal salad shop Sweetgreen began going cashless in 2017. So did taqueria Dos Toros, with 20 locations in New York and Chicago. The influential fast-casual restaurant Tender Greens, with 27 units dotting the California coast, went cashless early in 2018. Situated in New York and Boston, locavore lunch spot Dig Inn stopped accepting cash at locations where 8 percent or fewer of the transactions were in cash, and Starbucks has been testing a cashless system at a Seattle location since last year. New York-based Union Square Hospitality Group currently has four concepts that no longer take cash—“and we have others on the way,” founder and CEO Danny Meyer promised on the company’s website.

Across the country, mom-and-pop restaurants have also joined in, some of them spurred by Visa’s 2017 “Cashless Challenge,” which handed out $10,000 prizes to 50 operators with the best stories of how eschewing paper money has helped their businesses. (Winners included Houston’s Peli Peli Kitchen and an Austin, Texas, Mexican food truck called Alli.)

“We observed about a year and a half ago that there was a front edge of this movement [of] small businesses eliminating cash altogether,” explains Visa’s chief product officer, Jack Forestell. “We thought that was an interesting choice.”

While credit cards have been around since the 1950s, only recently have plastic and mobile payment technology together threatened to drive paper money to extinction. The growing wave of urbanization, the combined $300 billion spending power of millennials and Gen Z (two groups inherently comfortable with electronic transactions), and the rise of apps like Apple Pay and Google Wallet have coalesced to make cashless the next big thing.

In 2016, a Gallup poll showed that Americans were steadily abandoning cash as they moved toward electronic payment methods. While in 2011, 36 percent of Americans said they conducted all or most of their transaction in cash, by 2016 that number had fallen to 24 percent. According to TSYS’s 2017 Consumer Payment Study, close to half (44 percent) of consumers opt for debit cards at transaction time, and the Federal Reserve’s 2018 Payments Study found that between 2016 and 2017, chip-authenticated card payments grew in volume by 19 percent.

Going completely cashless comes with a multitude of additional, and by now well-publicized, gains. It boosts efficiency by speeding transaction times. “Without handling cash and making change,” Meyer has written, “we can serve more guests in far less time.” The absence of cash also curbs employee theft and makes for a safer working environment. “You’ll not have an armed robbery for credit-card receipts,” notes Melissa Wilson, principal at restaurant consultancy Technomic. “And you don’t have to worry about the managers going to the bank at night.”

Other benefits are less visible but no less significant. In 2016, Sweetgreen (which did not respond to requests for comment for this story) told the Boston Globe that going cashless saved 100,000 driving miles for armored cars and eliminated 500 pounds of paperwork—and that was just for its Massachusetts locations.

The vanguard of the cashless trend is undoubtedly Amazon Go—the grocery stores that use computer vision, AI and machine learning to let shoppers stroll out the door with nary a stop at the register. But any retailer that already accepts plastic can theoretically go cashless tomorrow. “Once you’re equipped to accept electronic payments [like] credit, debit and prepaid, there’s nothing else you need to do,” says Forestell.

The logical next step, then, would be for every establishment to go cashless. Yet the fact that an overwhelming majority have yet to do so points to the underside of the trend.

At a time when every brick-and-mortar retailer is locked in a death struggle with ecommerce competitors, none can afford to lose a single customer—and few relish the idea of turning away those patrons who prefer to pay with cash.

Or have to pay with it. According to data from the Federal Deposit Insurance Corp. (FDIC), 6.5 percent of American households have no bank account. And while that number might seem modest, it represents over 14 million adults—consumers with jobs, incomes and occasions to shop. Another 22.7 million households have no access to mainstream credit, so paying with an app or a card is not an option.

This so-called “unbanked” and “underbanked” population doesn’t just represent a lot of money that might be left on the table; it also tends to disproportionately include communities of color. For example, while only 3 percent of white Americans lack bank accounts, according to the FDIC, the figure rises to 14 percent of Latinos and nearly 17 percent for blacks. It follows that establishments that refuse cash stand to lose more than a few transactions—they run the risk of appearing discriminatory.

If Ritchie Torres has his way, they’ll even be in violation of the law. Last year, the New York City councilman introduced a bill that, if passed, would prohibit New York City businesses from going cashless.

“Since the Civil Rights Act, there’s been this longstanding acceptance that private businesses are a public accommodation—they have an obligation to treat everyone equally,” Torres says. “So long as I have the money to pay, on what basis should you be able to deny me the ability to do so?”

Torres’ bill is scheduled for a February hearing, with a vote expected to come later in the year.

Even removing civil rights from the debate still leaves businesses with the elemental problem of turning away cash-bearing patrons. Ryan admits he was “hesitant about how customers would feel” about his cashless plan, but he went ahead because Flip Sigi’s clientele are overwhelmingly young professionals and “none of them carry cash anyway,” he says.

“You have to manage the cost of turning people away against the advantage of making life more convenient for other customers,” notes brand strategy consultant David Deal.

For many businesses, the concerns surrounding going cashless have outweighed the potential benefits. Starbucks is often cited as a pioneer of electronic payments (its mobile pay app debuted in 2009), but of its 15,000 stores in the United States, the number to have gone fully cashless to date stands at … one.

“The store is in an office building and was selected as a test because it was the preferred method of payment for a majority of customers at this location,” says a Starbucks spokesperson. “We have no updates to share on future rollout plans beyond this single location,” she adds.

Last year, the popular Shake Shack chain scrapped its plans to go cashless. When the restaurant eliminated cashiers—forcing patrons to pay via a mobile app or at self-service kiosks—there was a mild revolt. “Some of the things we’ve clearly seen,” CEO Randy Garutti told analysts, “is that our guests do often want to pay with cash.”

“Want” is the key word there. Because consumers who favor cash aren’t solely the ones who can’t afford traditional banking services; they simply prefer cash—for its simplicity, its anonymity or maybe just because it’s what they’re used to. After all, it’s not like cash is dead. A survey by Cardtronics last year found that four in five consumers “could not imagine a world without cash,” and that 73 percent of consumers regularly use it—even though they have other payment options at hand.

“If you make [a business] cashless, the people you hurt a lot, potentially, are your most loyal customers,” says sales consultant and speaker Kevin Kelly. “As in, older people. They’re more likely to be carriers of cash—[and] they’re more loyal than other age groups.”

Kelly adds that the race to go cashless might well have deeper consequences that retailers aren’t considering—namely, that while speeding customers out the door, merchants are shaving seconds off the kind of face-to-face interactions on which brand loyalties are built. “Face time, in today’s society and in my opinion, is pure gold,” he says.

Retail consultant David Allison, who has conducted extensive research into customer preferences, says that as technology quickens the pace of life and reduces opportunities for in-person human contact, the drift toward a cashless economy runs the risk of deepening already prevalent feelings of social alienation. “People who are suddenly faced with a cashless society—who do they care about? The data is saying they’re going to be freaking out,” he says, “because they’re not getting that sense of belonging they crave.”

This story first appeared in the Feb. 4, 2019, issue of Adweek magazine. Click here to subscribe.

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