The growth of cashless retail is creating a new tension between merchants seeking greater efficiency and consumers who still rely on cash. For businesses, eliminating cash can reduce handling costs, speed up transactions, simplify operations, and potentially reduce losses. For consumers, however, a cashless store can create an unexpected barrier to making even an everyday purchase.
The issue is particularly significant for consumers who are unbanked or underbanked and may not have convenient access to credit cards, debit cards, or other electronic payment methods. Other consumers simply prefer cash because it helps them manage spending and avoid debt. As more merchants experiment with cashless operations and cashierless stores, policymakers may increasingly have to consider whether businesses should be required to continue accepting physical currency. Existing laws in states such as Massachusetts demonstrate that the debate over cashless retail could ultimately become a regulatory issue as well as a payments issue.
There has been some more backlash from consumers who want to pay for things with cash but encounter merchants who are migrating to a cashless operations as reported in USA Today. Consumers use cash because they want to or because that is their only readily available form of payment:
On a recent summer day, as Steffen Kaplan strolled down a New York City street looking for lunch, he grew frustrated: The first three places he looked at were cashless, which meant his dollar bills were no good.
Kaplan avoids using credit cards to prevent overspending. “It’s a great formula for staying out of debt,” he says.
But it was not a great formula for satisfying his hunger. And the more he thought about it, the more frustrated he grew that eateries were declining to accept cash.
“I don’t think it’s cool that you walk into a place and can’t buy anything,” says Kaplan, a social media visual consultant.
You can appreciate the merchants’ point of view that accepting cash can take time, costs money and occasionally goes missing. But denying consumers the opportunity to pay with cash, particularly unbanked populations with less access to or at least adoption of electronic payments, may be asking for regulators to step in to settle the matter. The state of Massachusetts has a law on the books stating:
Section 10A. No retail establishment offering goods and services for sale shall discriminate against a cash buyer by requiring the use of credit by a buyer in order to purchase such goods and services. All such retail establishments must accept legal tender when offered as payment by the buyer.
We will have to watch if this state law gets tested or if it adopted by other states. It would certainly put a crimp in Amazon’s plans to launch thousands of cashier – less stores.
Cashless retail offers merchants compelling operational advantages, but those benefits must be weighed against the potential consequences for consumers. Eliminating cash can streamline checkout, reduce the expense and security concerns associated with handling physical currency, and support increasingly automated retail environments. Yet a payment strategy designed around efficiency can also exclude customers who either cannot or do not want to use electronic payments.
That distinction is important because cash remains more than simply another payment option. For some consumers, particularly those without traditional banking relationships, it may be the most accessible way to participate in everyday commerce. For others, using cash is a deliberate budgeting strategy that provides greater control over spending and helps prevent reliance on credit.
As more retailers consider cashless operations, consumer resistance could attract greater attention from lawmakers and regulators. Massachusetts’ requirement that retail establishments accept legal tender illustrates one possible regulatory response to concerns that cashless businesses discriminate against cash-paying customers.
The emergence of cashierless stores could make this debate even more consequential. Retailers pursuing highly automated models may prefer digital payments because they integrate naturally into the technology supporting those stores. However, widespread adoption could be complicated if additional jurisdictions establish cash acceptance requirements.
Ultimately, the future of cashless retail may depend on whether merchants can capture the efficiencies of digital payments without excluding consumers. As payment technology advances, accessibility and consumer choice are likely to remain important considerations alongside speed, convenience, and operating costs.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
