By the Brinks Team,
Disadvantages of Businesses Going Cashless
Swipe. Tap. Sign. Done. It’s that easy: paying for goods these days can usually be done in a combination of these steps or less. With the popularity of electronic payment methods among shoppers, it may seem like there’s not a strong need for businesses to accept cash. But cash still has important advantages that are hard to beat. Here are some benefits of businesses accepting cash and disadvantages of businesses going cashless.
Why is cash still relevant?
Businesses that accept cash may reach more customers than businesses that are cashless. That’s because cash is inclusive, universal, and doesn’t require a bank account. Globally, 1.4 billion people don’t have bank accounts.1 Common reasons that unbanked people don’t have bank accounts include lack of money, distances to the nearest financial institutions, and lack of documentation.2 In the U.S. alone, 5% of Americans are unbanked, and 13% are underbanked (which means they have a bank account but rely on alternative financial services, like money orders.)3 Those numbers may not seem high, but when you consider the U.S. population, that equates to a significant number of people who are unbanked or underbanked. Workers in certain professions also regularly receive cash tips, like waitstaff, valets, housekeepers, and nail technicians. Cashless business may lose business from these individuals.
Is cash hard to trace?
How customers decide to spend their money should also be private, and since cash is virtually untraceable, it’s the ultimate confidential payment method. In Germany, cash remains the most frequently used type of payment. Germany’s federal bank, Deutsche Bundesbank, conducted a study in 2021 on payment behavior, finding that respondents used banknotes and coins for 58% of purchases made toward goods and services.4“Many respondents regarded it as a reliable means of payment that protects their privacy and gives them a good overview of their spending,” Bundesbank noted in its press release on the findings.
In Canada, cannabis became federally legalized in 2018, but officials there have emphasized the privacy that cash carries. The Office of the Privacy Commissioner of Canada advised individuals who are concerned about using a credit card to use cash when purchasing cannabis, if the option is available, as other countries could deny entry to those who have legally purchased it in Canada.5
How secure is cash?
Unlike electronic forms of payment, cash can’t be hacked. And that’s important, considering as of March 2020, approximately 7 million data records are compromised every day, and 56 records are compromised every second.6 The U.S. leads the world in the highest ratio of data theft, followed by South Korea, Canada, the United Kingdom and Australia.7 If a cyberattack were to target a country’s banking institutions and disable electronic payments, businesses that accept cash are likely to fair better and continue accepting payments.
Even something as minor as a power or internet outage can temporarily render electronic payments useless. However, if a business accepts cash, and an electronic register goes down, a battery-powered calculator on a cell phone can be used to total sales. Many registers come with keys so that cash can still be stored.
Millions of residents in Ontario, Canada know all too well the importance of cash after a network outage there lasted for nearly two days in July of this year. Many stores couldn’t accept debit or credit payments, and the telecom company behind the outage said the problem stemmed from a maintenance update.8 Robb Carrick, a personal finance columnist for The Globe and Mail, later penned an article on the importance of having cash, urging residents to keep a minimum cash balance on hand.9