Is cash dying in retail stores? As time passes, fewer of our favourite stores accept cash payments, but is giving up cash really the best option for retail businesses?
In this blog, we’ll examine why some retailers are dropping the cash drawers in favour of cards and contactless payment methods and list the pros and cons of accepting cash in retail so that you can make the best decision for your brick-and-mortar store.
Digital Payment Trends in North America
As payment technology and software have improved, so has the adoption of contactless payments. Today, most people have a digital wallet on their mobile phone through Apple Pay or Google Pay, and these apps have seen an even greater rise in popularity after the world shifted further towards “contactless” payments, delivery, and pickup in response to the COVID-19 pandemic.
Digging through your pockets or purse to pay with cash starts to seem like a chore when the alternative is swiping your smartwatch across a terminal and waiting for a “ding,” after all.
There has also been a rise in governmental and business incentives for going cashless in recent years, as these types of payments are more secure than cash, as they often require a biometric scan (such as a fingerprint or face) or a password/PIN to complete the transaction.
That said, issues surrounding access to services for certain groups of individuals, such as the homeless, in cashless-only establishments can be seen as problematic, with activists pushing for businesses to continue accepting cash so that the less fortunate don’t lose access to products and services.
With 25.3% of young Canadians aged 18 - 34 stating that they prefer to pay with a mobile wallet and a prediction by Moneris that we’ll see a 70% drop in cash transactions by 2030, we’re clearly on the path toward throwing our paper money out in favour of digital payments–whether it’s a universally good thing or not.
The Benefits of Accepting Cash Payments
When considering going cashless as an omnichannel/retail business, we must first discuss what you might miss out on if you drop cash payments. Here are the benefits of accepting cash in our increasingly cashless world.
Accessibility for All Customers
Not accepting cash payments can create accessibility challenges for some customers, particularly those who are unbanked or underbanked. Many people don’t have access to credit cards or digital payment methods, and some may not own smartphones or the necessary technology to facilitate mobile payments.
By going cashless, retailers inadvertently exclude these groups, potentially creating a barrier for customers who rely on cash as their primary payment method. This lack of accessibility can negatively impact customer inclusivity and limit a retailer’s reach to certain demographics. If you want to be perceived as a progressive business, going fully cashless may not be the right approach for you.
Customer Preference and Anonymity
In the same vein as accessibility for all, customer preferences may limit your ability to access the largest customer base possible, as some individuals simply prefer to pay with cash.
Whether it's staying safe from data breaches, the need to visualize their money for budgeting reasons, or simply wanting to keep their spending habits private, carrying cash eliminates the digital footprint, ensuring the most privacy as you shop. With everyone from big marketplaces to credit card companies selling aggregated spending data, the desire to shop anonymously has never been higher for the more privacy-focused.
No Processing Fees
Card processing fees add up and can easily eat into a business's profit margins. By accepting either cash and card payments or cash only, retailers can save money or eliminate these fees entirely.
This equates to more money in the bank, which businesses can invest in for better customer service, improved shopping experiences, product development/research, or overall growth.
Lower Risk
Compared to credit card fraud, cash is much lower risk. The Bank of Canada estimates that 15,300 counterfeits circulated among the public in 2022, which pales in comparison to the rising rate of credit card fraud.
Recent data show that 13% of all Canadians were victims of credit card fraud in the first half of 2024. That means that by using cash, consumers and merchants both avoid the complications (and losses) of fraud chargebacks, as they are much more likely to be victims of credit card fraud than to encounter fake bills in their everyday lives.
Convenience
Cash is ready to use immediately. For the consumer, it’s in hand at the point of purchase; for the merchant, the funds are available as soon as a deposit is made at the bank. In fact, 14% of Americans still use cash for all or almost all of their purchases.
Reliability
For consumers weary of protecting themselves from credit card fraud and online theft, cash avoids that arena altogether. Simply put, a $50 bill can’t be hacked. In addition, without a digital component, any theft risk is limited to the cash in hand, not one's entire life savings.
The Drawbacks of Accepting Cash Payments
Sure, accepting cash has benefits, but for every “pro,” there’s also a “con.” Here are some drawbacks retailers may encounter when choosing to accept cash in-store.
Operational Inefficiencies
Handling cash can be more time-consuming due to the need for manual counting and making bank deposits.
Retail stores also have increased labour costs associated with cash management, as staff must count/manage cash and perform reconciliations. If your business needs it, the cost of hiring cash management/transport services, such as Garda, can also be so high that it's self-defeating in many situations.
Security Concerns
Keeping cash on the premises introduces risks of theft, robbery, or internal fraud. Additional investments are required for safes, armoured transport, or insurance if a business wishes to protect its cash in the best possible way.
Untrustworthy hires can also easily steal cash if left unattended in-store. Pocketing cash instead of entering the transaction into the cash register is a common trick that can be avoided entirely if you accept nothing but payments made by mobile app or card.
Limited Scalability for Ecommerce/Omnichannel Businesses
When integrating retail and online systems, cash payments can complicate inventory management and financial reporting. Scaling operations to handle increased sales volume or expanding geographically becomes more difficult, as businesses must set up infrastructure to manage cash in each physical location, adding logistical and security burdens for every new store.
There is also a level of difficulty in offering loyalty programs, as cash transactions make it harder to link purchases to online customer accounts in physical stores, limiting your ability to offer personalized rewards or loyalty programs.
This, however, can be addressed by selecting Shopify POS as your point of sale system, as it allows you to access your online customer profiles in-store, enabling you to track all purchases regardless of where the customer chooses to shop with you.
Slower Checkout Process
Cash transactions can slow down the checkout experience compared to faster digital methods like contactless payments, resulting in longer lines and decreased customer satisfaction. Cash must first be pulled out of a bag or wallet, counted once by the shopper and once by the cashier, entered into the register, and then the change must be counted and handed over.
Contactless payments, on the other hand, take seconds to complete.
Limited Record Keeping
Cash payments can lead to inaccurate records or loss of transaction data, which complicates accounting and financial reporting. Distractions while counting cash can create small discrepancies that can add up rather quickly. Cash can also simply get lost – bills and coins falling into the cracks or getting lost inside drawers can also compromise a store’s financial records.
Should Your Business Go Cashless?
Whether you’ve been in the retail industry for a while or you’re an ecommerce merchant looking to branch out. The decision to go cashless is a subjective one. First, consider your target demographic. Are you serving communities or regions where cash remains a dominant payment method? Weigh the importance of cash in your specific customer base. Is your customer demographic young and technologically savvy, or do they skew older? This will greatly affect your decision to go cashless.
Next, examine your transaction costs in relation to customer satisfaction. Analyze the cost savings from eliminating cash versus a potential loss of customers, customer expectations, and potential backlash from going cashless.
Finally, there are the technological considerations and the investment(s) you may need to make. Does your business have the infrastructure to go fully digital? Transitioning to a fully digital payment system involves adopting reliable POS systems, digital wallets, and other payment platforms. It also demands investments in security measures to protect sensitive financial data from breaches and fraud. These systems must be compatible across all online, mobile, and in-store channels for seamless transactions. Businesses must evaluate whether they can support the hardware, software, and ongoing maintenance to ensure smooth digital payment processing.
Conclusion
The decision to accept or phase out cash payments depends heavily on your customer base, operational needs, and long-term business goals. While adopting a cashless system can streamline operations, improve security, and reduce fees, it may also alienate customers who rely on cash, thereby limiting accessibility and inclusivity.
Cash management in a retail store also presents some operational inefficiencies and security risks; however, it ensures access for all customers. Businesses need to weigh the pros and cons, considering the infrastructure and investment required to support a fully digital payment system, before making the leap to a cashless operation.
As a Shopify Plus Partner agency, we at Blue Badger can help you in your efforts to go cashless or improve your in-store experience with tools like the Shopify POS. Get in touch with us today to learn more about how we can unify the online and in-store aspects of your ecommerce business.
