With the lack of circulation of cash during the coronavirus, many businesses around the world have posted notices asking for customers to use either exact change or credit cards. Because we’re stuck at home, we aren’t spending our nickels, dimes, and pennies at restaurants, shops, toll booths, and parking meters, the country is seeing a lack of circulating cash. The U.S. Mint even shut down several facilities for a period in May, due to health concerns, but now is back to printing cash and minting coins. In addition, some folks are less likely to use cash due to fear of spreading the coronavirus through hand-to-hand contact. This all has added up to a national coin shortage that has not much of an end in sight.
Who Gets Hurt By a Lack of Cash?
Well, the ones who rely on cash for 100% of their transactions are the same people who get left behind when cash is less available. Lower-income workers (typically those making less than $25,000/year) who, for example, use coin-operated laundromats, are hurt when rolls of quarters are rationed at check-cashing businesses or you can’t get a few coins back with a cup of coffee at a fast-food restaurant. They can’t “just go to their bank” for cash, either, as there are over 8 million Americans who are “unbanked.”
The “unbanked” are those who “because of fees and other financial hurdles, they have no checking, savings, or money market account,” notes Molly Olmstead at Slate. “So those Americans might struggle to pay for essential services without change on hand. They also might find it more stressful to round up or donate their change, should stores ask for it.”
“Most unbanked are white, native-born Americans, but many immigrants, legal and illegal, are also unbanked,” writes Lucas Downey at Investopedia. “Older people who survived the Great Depression may have a deep distrust of all financial institutions and therefore do not use them; the same can be true for recent immigrants who experienced banking crises in their countries of origin.”
“Extremely poor individuals may also have no need for the banking system as they try to survive their day-to-day lives, and they may indeed find that they are unable to maintain minimum balances, afford account fees, or arrange for transportation to and from bank branches during banking hours,” adds Downey.
Why Many Small Businesses Choose Cash Over Credit Cards
You might have seen signs up at gas stations or coffee shops limiting credit card transactions to certain minimum purchases, like $5 or $10. This is because the retailer gets charged a certain fee by the credit card companies for each transaction (usually 1-4%), along with other transactional charges by the payment processor, the bank, and others — and while this doesn’t seem like much, it adds up and can start to hurt the businesses’ bottom line.
Plus, it’s hard for retailers to figure out just how much they’ll pay per sale with credit cards, since so much factors into the fee structure depending on the card used, the state it’s used in, and payment network fees, which can range widely. This roundup by The Motley Fool offers some insight into the wide range of fees and charges that go along with credit card charges — and it’s quite more complex than simply accepting cash.
What’s Changing in the World of Loose Change?
While many small and medium-sized businesses are struggling to keep their doors open due to a drop in customer foot traffic, they’re also making shifts in the way they think about payments.
- Data from PYMNTS.com notes that 60% of U.S. and Canadian businesses have increased their online B2B card payment volumes in the last 6 months during the pandemic.
- Some chains, like convenience store WaWa, are acting more like banks by offering to exchange customer’s rolled change for paper money (plus a hot dog or drink bonus for $5 worth of change).
- Others like grocery chain Kroger, are giving change back to customers on a debit-style card for use in-store later.
- A few banks are even offering a “bonus” to customers who bring in change for deposit or exchange, to incentivize folks to clean out those piggy banks and sock drawers full of coins.
What’s also changing (pun intended) is the increase in use of electronic point-of-sale terminals to accept credit and debit cards at small businesses. You might have already encountered these at your local coffee shop or a boutique or even a hand-held payment at your salon. POS systems like Square and Shopify have been making electronic payments possible on websites as well as via in-person on smartphones for a while now. Even Quickbooks has jumped into the POS market in a way that links sales to its own accounting software. Others, like Vend and ShopKeep, have gained popularity recently.
COVID-19 has only increased the changeover to electronic payment processing. Going “cashless” used to be a sign of high tech exclusivity, like at retail Apple Stores, some of which have notoriously started operating sans cash payments for products or services. But now a cashless enterprise might be around the corner at your local bar or coffee shop, at the laundromat or a clothing boutique. This year, Square reported an increase in electronic-only transactions in April 2020 of 23.2%, up from February’s modest 5.4% report of cashless sellers using the square system.
“Though easing restrictions and reopenings have stabilized cashlessness, the pandemic has left a lasting impact: By August, over 12% of businesses remained cashless—more than double pre-pandemic levels,” notes Adriana Nunez at Business Insider.
How to Make the Change to an Electronic POS System
Fit Small Business has a recently-updated run-down of the benefits to various POS systems, including which ones are the best for using quickly (Square) and which are good for businesses who also like to use a customer loyalty program (Vend) or those who want to sell online as well as in-person (Shopify) or those with multiple locations to wrangle who like an iPad experience for transactions (Revel).
The bottom line for a merchant’s bottom line is that some amount of research and comparison of various POS options should definitely be taken before jumping into one system or another. Owners might talk to others in their market about what they like (or don’t) with various systems, and what they wished they’d used if they could change. Still, more time should be used discussing how staff will be trained, and how user-friendly a POS will be to the least-technologically proficient on the team. It might be worth it to make the transition sooner, rather than later for some merchants. After all, sales of the future could be cashless, no matter how long COVID-19 sticks around.