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Some businesses are following consumers to cashless transactions

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Many businesses follow consumers to cashless transactions
Some businesses have started to follow the consumer trend of going cashless, not accepting cash for transactions.
Tom Weber | MPR News file

What's in your wallet? Any greenbacks? A lot of people carry little or no cash these days. They know they can pay for just about anything anywhere with a credit or debit card. And now, some businesses are deciding to go cashless, too.  

Among those in the vanguard is Indochino, a custom clothing store at the Mall of America in Bloomington, Minn. Your cash is no good there. You'd better bring your plastic.

Indochino started out as an online retailer that didn't, of course, take cash. And the company stuck with that strategy when it started opening brick-and-mortar stores.

Jeremy Thao, assistant showroom manager at Indochino
Jeremy Thao, assistant showroom manager at Indochino at the Mall of America, Bloomington, Minn.
Martin Moylan | MPR News

Assistant Showroom Manager Jeremy Thao said most customers are in their 20s and 30s and accustomed to paying with plastic. Even though credit card companies siphon off a few percentage points of each sale, Thao said there are a lot of advantages for the business. For starters, there's no cash to secure and daily audits are much easier and faster. 

"Moving forward I think a lot of people will start moving into cashless," he said. "For the most part, going cashless is more beneficial than it is a detriment."

To be sure, cashless merchants are still relatively rare. But there's a cashless creep going on. At least two other stores at the mall — Bonobos and Casper Mattress — are cashless.  Delta Air Lines won't take cash at major airports or accept greenbacks for food or drink during flights. And Revolution Hall, a cashless food court, opened at Rosedale Center. Some people have grumbled about the food court no accepting cash. 

Revolution Hall would not agree to an interview but said going cashless makes for a safer and cleaner operation, while speeding up customer service. And customers who only have cash can buy gift cards to pay with. 

At this point, a merchant can catch a lot of grief for going cashless. Some people don't think it's a good idea — or fair. Saed Wadi found that out last summer. He's a co-owner of World Street Kitchen and Milkjam Creamery in Minneapolis.  When he opened a seasonal second location in the city last summer, he figured he could get away with taking only payment cards. He didn't want to be bothered counting cash and making deposits. After all, only about 13 percent of his sales are in cash. 

But he caught some criticism.

"Some guests were not happy that we were not accepting cash," he said. "They were concerned, 'what if kids wanted to come and buy ice cream or hot dogs and they don't have a credit card?'"

This summer, Wadi will take cash at the second operation. Meanwhile, he's heard some gripes from customers unhappy that he doesn't yet accept payment via smartphones, with Apple or Google Pay.

Visa and its peers have made it easy for consumers to use cards for everything from light rail rides and parking meters to hospital and tax bills. Now Visa is encouraging some merchants to give up on cash — which, of course, would mean more revenue for the company. 

"The long-term future is going to be a cashless one," said Jack Forestell, chief product officer for Visa. 

He said businesses are now just experimenting with going cashless.

"A small number of a first-mover businesses are realizing that the vast majority of their consumers are opting for electronic payments," he said. Forestell argues plastic is better for business, too, offering greater safety, security, efficiency and other benefits. 

A recent San Francisco Federal Reserve Bank survey found that cards account for nearly half of consumer payments, while cash accounts for less than a third. 

But Shaun O'Brien, a senior policy consultant at the bank, said it's too early to count out cash. "More than half of the adult population uses cash daily.  And more than 80 percent carry cash, even if they don't necessarily use it."

The survey found that nearly three quarters of Americans prefer to pay for things with credit or debit cards. 

But there's a complex calculation for individual businesses trying to figure out what's best for them. A merchant must consider many factors, from bank fees and labor costs to theft and the potential for plastic to get customers to spend more freely.

Generally, it's cheaper for merchants to take cash than plastic. "There is no perfect data but on average it's assumed that the cost of handling cash is about one percent of the transaction value, whereas the average cost of accepting credit cards is two percent. And some studies say it's even more, maybe up to three percent," said Joanna Stavins, a senior economist and policy advisor at the Federal Reserve Bank of Boston. 

People who pay in cash subsidize credit card users. That's because everyone pays the same prices, whether they use cash or cards. But people with reward cards really make out, if they pay off their account balances monthly. They collect cash rebates, airline miles and other perks.  

A study by the Boston Federal Reserve Bank in 2010 concluded that this system takes money out of the pockets of low-income households and rewards the well-to-do.

"The highest income households receive over $800 every year," said Stavins who worked on the report. "This is the result of the fact that high-income households predominantly use credit cards and low-income households use cash."

There's Massachusetts appears to be the only state that's done so.

Given the popularity of plastic among younger and more affluent people, there will be a slow, but steady march in the U.S. toward merchants going cashless, said Jerry Sheldon, vice president of technology at IHL Group, a Tennessee-based retail and hospitality industry consulting firm.

But for individual businesses, he said, the decision to go cashless will depend on the customer.  "It really boils down to your clientele," he said. "How they like to buy."