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Updated Jan 30, 2024

Cashless Society Pros and Cons: Are Digital Payments Really Killing Cash?

Cash-free transactions are becoming common, but the road to a cash-free society is long.

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Mona Bushnell, Business Operations Insider and Senior Writer
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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As many businesses, regions and countries move toward a cash-free existence, a cashless society seems more real than ever. But even as many operations worldwide become less reliant on cash transactions ― and more accepting of cash-free payment options ― a cashless society isn’t quite a reality ― yet. 

Editor’s note: Looking for a POS system for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

We’ll examine the current state of digital payments, share what business owners should know about the pros and cons of going cash-free and explain how to stay competitive in an increasingly cashless society.

Did You Know?Did you know
Arguments for eliminating the penny may be another step toward a cashless society.

Pros and cons of a cashless society for consumers

Cashless options carry distinct benefits and drawbacks. Here are some pros and cons customers weigh as they navigate cashless options.

Cashless society pros

  • Cashless payment options reduce the potential for violent crime: Carrying cash comes with inherent security risks. Many people prefer not to carry large sums to protect themselves.
  • Cashless payments create touchless transactions: Near-field communication mobile payments and other digital payment methods are touchless options that many people prefer. This is particularly true in a post-pandemic society where people have gotten used to health and safety measures.
  • Cashless payments are easier to track and tabulate: Tracking business expenses can be challenging with paper receipts of cash purchases. In contrast, digital payments post to accounts and provide a clear spending record.
  • Cashless transactions are fast. In-person cashless transactions speed checkout significantly. There’s no waiting while a salesperson counts change.
  • Cashless transactions make international payments easier: Cashless transactions make traveling much easier. There’s less need to exchange currency for purchases. 

Cashless society cons

  • Cashless options may create privacy concerns: The same tracking perks some people love pose privacy concerns to others. Digital records provide less anonymity.
  • Many cashless options require a bank account: Most digital payment options require access to a bank account or credit card, excluding people without access to financial products.
  • Cashless accounts can be hacked or broken into: If a hacker infiltrates a digital payment account, private financial information can be stolen and connected accounts can be compromised.
  • It’s harder to visualize spend with cashless payments: It’s easy to lose track of how much you’re spending ― and on what ― with digital payment methods. Segmented cash expenses are a tried-and-true money management method.
  • Digital payment providers may charge fees: Some consumers aren’t interested in exchanging convenience for credit card processing fees and other digital payment charges. 
TipTip
Some businesses lower their credit card processing fees by adding a surcharge to customer purchases to help absorb these expenses.

Types of cashless payments

Cash and credit card alternatives are growing more popular, especially in specific regions and industries. For this reason, staying informed about digital payment options is wise. 

Consider the following popular digital payment options: 

  • Store-specific apps: Stores like Starbucks and McDonald’s incentivize customers to use their store-specific mobile apps with easy online ordering and customer loyalty programs. Consumers “reload” these apps by linking them to a bank account or credit card. 
  • Apple Pay: Apple’s cashless payment app, Apple Pay, is widely accepted at national chains like Whole Foods, Target, Walt Disney World and many smaller retailers and restaurants. Apple Pay works on mobile devices, such as iPhones and Apple Watches (it doesn’t work on Android devices). Apple Pay works with existing banks and credit card companies to process payments.
  • Google Pay: Google Pay is available on Android and Apple devices and works similarly to Apple Pay. Many in-person and online vendors accept Google Pay transactions, including Bloomingdales, Stop & Shop and Trader Joe’s. Google Pay works with existing banks to process payments as well as services like PayPal and Visa Checkout.
  • Samsung Pay: Samsung Pay is another mobile wallet payment option that links to consumer credit cards, bank accounts and credit unions for online or in-person payments. Samsung Pay also partners with retailers, such as Kohl’s, Sephora and Lowe’s.
  • PayPal: Tap and pay is available for in-store purchases via the PayPal app and works like the other digital wallets on our list. PayPal is available on Apple and Android devices. It also offers cash-back rewards with select stores, including Adidas and Ulta. 
  • Venmo: The Venmo mobile app connects to a consumer’s or business’ bank account to send and receive payments. The app first gained popularity as a peer-to-peer payment method. However, Venmo for business usage is growing. Customers can scan a quick response code and pay a business directly from the app, making Venmo incredibly convenient for business transactions. Venmo payments are becoming more common at larger retailers, such as Walmart and Macy’s. 
Key TakeawayKey takeaway
Other secure instant payment methods growing in popularity include Zelle for business and Facebook Pay.

Bans and backlash against cash-free businesses

Most establishments that accept digital payment methods also accept cash. There’s little backlash against offering digital payments. However, there is sometimes opposition to businesses that don’t accept cash, and instead, accept credit cards and digital payment methods only.

Businesses that don’t accept cash are often seen as discriminatory against people with lower incomes, recent immigrants or those who ― for other reasons ― may not have access to credit and traditional banking.

Cash-free businesses even face legislation. In 2019, Philadelphia became the first city in the U.S. to ban cash-free businesses. In 2020, New York City followed suit and Seattle and Detroit may be next. 

Even if your city doesn’t pass an outright ban on cash-free establishments, as a business owner, you should consider the ramifications of participating in an increasingly fraught practice and evaluate whether accepting both cash and digital payments is worthwhile.  

Benefits of accepting digital payments  

Accepting digital payments ― along with cash ― offers significant benefits to business owners, workers and customers:

  • Digital payments offer faster service: Tap-and-go app payments are fast to process for customers and employees, meaning quicker service that benefits everyone.
  • Digital payments reduce employee theft: Digital payments reduce employee fraud, making it harder for unscrupulous team members to steal from your business.
  • Digital payments can improve a business’ image: Offering digital payment options shows that your company is a forward-thinking business. Customers understand you’re ahead of the curve.
  • Digital payments help businesses stay competitive: Tap-and-go payments and a wide variety of digital payment options may help you stand out from the competition.
TipTip
The best point-of-sale (POS) systems can make accepting various payment options easy while also helping you track sales and manage your overall business.

The history and future of cash-free societies

The concept of a cashless society isn’t new. However, the path to digital-only payments is long. It took decades for store credit systems to be replaced by charge cards and finally, credit cards and cash survived all that. It wasn’t until 1979 that the first national department store (JCPenney) accepted Visa or Mastercard and it was years longer before accepting credit became common at small businesses.

While it may be true that cash will eventually be phased out in favor of digital payments, if credit cards haven’t been able to kill off cash, it’s doubtful that digital transactions will become ubiquitous or exclusive anytime soon, at least not in the U.S.

Key TakeawayKey takeaway
Check out Borrow: The American Way of Debt by Louis Hyman. The book chronicles the evolution from barter to credit and provides excellent reading for entrepreneurs and small business owners who want more context on how payments (and consumer debt) have changed over the years.

The future of cashless business in the U.S.

According to Pew Research, the number of Americans using cashless payments for most of their transactions continues to trend upward ― but some consumers still rely on cash. Three out of 10 Americans with an income of less than $30,000 annually say they use cash for most purchases. 

Small businesses tend to be cautious and skeptical about tech adoption. Businesses that serve a diverse clientele ― in terms of age, income and resident status ― are less likely to go cash-free, as doing so would hurt their bottom line. Additionally, some thriving small businesses don’t have websites and don’t accept credit cards and many successful restaurants don’t use POS or mobile POS systems

Still, small businesses must balance serving their customers’ needs as they explore the future to increase their bottom line. For example, according to a 2021 Xero report, early technology adoption can boost revenue by 120 percent. 

Small business owners who resist new technology like cashless payment methods risk losing customers and profits. Being left behind makes it difficult to attract and retain top talent and causes more inconvenience than exploring cashless payment technology to satisfy a wide array of customers.

Are digital payments really killing cash? 

While cash may be dropping in the ranks of customers’ preferred payment methods, it doesn’t seem to be disappearing entirely. Businesses that offer cashless payment options may see an increase in revenue, but providing a cash payment option is still essential. Small and medium-sized businesses that prioritize early adoption of the latest technologies while ensuring their products are available to all will go farthest in the changing landscape. 

Natalie Hamingson contributed to this article.

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Mona Bushnell, Business Operations Insider and Senior Writer
Mona Bushnell advises aspiring entrepreneurs and small business owners on what it takes to operate a business on a day-to-day basis. Bushnell has firsthand experience as an IT technician, software administrator and scheduling manager, which are all critical roles in an increasingly digital business world. Based on her nearly 20 years in the trenches, she produces learning materials on a range of business topics. Bushnell, who has collaborated with a variety of independently owned boutique businesses to increase their visibility and profit, is also known for covering business trends and events, testing emerging technology (both software and hardware) and has even teamed up with CEOs on communications needs. Her guidance can be found in leading business publications like Forbes and Investopedia.
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