Two things happened in 2017 which, when the history of cash is written, may be seen as the first tolling of its death knell.
For the first time, the number of debit card payments (13.2bn) narrowly outstripped cash (13.1bn), according to UK Finance. Meanwhile, in the US, Visa launched its Cashless Challenge, which gave $10,000 each to 50 cafes, food trucks and restaurants that pledged to join its ‘100% cashless quest’.
That focus on the fast-casual sector was no accident. In most retail and leisure spheres, where average transaction amounts are higher, cards are a default payment method. But for smaller amounts, for burgers and
beer, rather than a rib of beef and a bottle of Bordeaux, cash is proving a resilient method of settling the bill. This makes pubs, coffee shops and casual restaurants a key battleground in the card industry’s push to further reduce cash usage: a move which, in the past year, a rapidly growing vanguard of cash-free venues has happily endorsed.
Inspired by new technology, stung by banking charges and, generally, serving a millennial clientele who predominantly use mobile or contactless payments, businesses from Bristol (Small Bar, Athenian) to Perthshire (Habitat café), London (26 branches of Tossed, Mare Street Market, Pleasant Lady Jian Bing) to Manchester (Takk at Hatch, Sandbar, Foundation Coffee, Cloudwater’s brew tap), have chosen to go card-only, despite robust criticism from those who regard it as elitist.
Like it or not, more venues are poised to jump in this year. So why are operators going cash free? And why is the crusade against cash so controversial?
Cashless: the pros
Time cost savings
In businesses where cash makes up less than 20% of takings, processing it can take a disproportionate amount of time (6-10 hours per site, weekly). Cash also incurs charges for bank deposits, security pick-ups etc. Operators’ figures vary wildly, but charges run at around £1,000-£3,000 annually for an average city-centre indie. In remote areas, due to branch closures, it has become difficult for some operators to even get to a bank to deposit cash. Removing cash also prevents mistakes at the till, staff theft, receipt of fraudulent notes and can reduce fit-out costs, as insurers stipulate that cash-holding venues must have a safe. In venues where cash appears to be withering naturally, the feeling is growing that, as one operator told The Guardian this year: “Cash is just grief.”
No more cashing up
Cashing up at the end of a shift can be demoralising because it tends to be time-consuming and takes place when members of staff simply want to go home. Add to this the problems that occur when the tills don’t balance and the arguments for doing away with cash suddenly become very appealing.
Removing cash from a venue protects staff by deterring thieves. Manchester’s cash-free Öl bar was broken into and all that was taken was an iPad. Such robberies, however, remain rare.
A transaction revolution
This shift to cash-free would not be happening without new card processing companies, such as SumUp, Square and, particularly, iZettle. For years, operators have complained about the long contracts, costly, bulky card-readers, high set-up fees and opaque transaction charges for every variety of card (some fixed cost, others a percentage), imposed by the traditional merchant services providers.
The new players
With their set-percentage charges, light, reliable go-anywhere card readers and the way they do not tie operators into long contracts, these new players have transformed the payment-processsing market. Depending on the package, iZettle charges either 1.25% or 1.75% per transaction, which evangelical operators insist makes it far cheaper than legacy suppliers. Comparing costs is hard, because of the variables associated with cash (man-hours, bank charges, infrastructure). On bank charges alone, the British Retail Consortium calculates that card transactions incur a cost of 0.49% of sales, as opposed to 0.15% for cash. Others talk of card charges running at 1% to 1.5% of turnover. What is clearly true is that by setting a percentage rather than a 10p-20p per transaction fee for debit card transactions, iZettle and its ilk have enabled cafes and bars to accept hundreds of card payments for minor transactions (eg, £2 to £7) at a far lower cost than previously.
Increased speed of service
Going cash-free can significantly speed up customer transactions, which, for operations that rely on a swift and busy lunchtime trade – sandwich and burrito chains, for example – can prove crucial. According to Tossed, going cash-free has cut the average service time at its restaurants from nine to three minutes. Its branches can now serve 23 people simultaneously, Angelina Harrisson, commercial director at Tossed, told delegates at the recently held Lunch! trade show.
High customer satisfaction
Older people may budget for a night out in cash but, generally, we all carry less – under £5 day-to-day, reportedly. In particular, to manage their spending, millennials increasingly rely on smart money apps, capped prepaid cards and so-called ‘challenger’ banks (eg, the smartphone-only Monzo) that offer instant updates on card transactions and balances. Many find cash a nuisance.
Most customers pay ‘anonymously’ using a card or the likes of ApplePay. But venues that use mobile ordering and payment apps (eg, Ordoo), can utilise that channel for clever customer relationship management. For instance, by using it to carefully segment and automate targeted offers and discounts.
Minimising queues at busy grab-and-go sites will increase turnover, and there is evidence that cash-free tech (self-order kiosks; ordering/payment apps), can raise per-head spend. In a 2016 ClearScore survey, 72% of people said contactless payments made them more prone to impulse spend, and 59% said using cards led them to overspend. Good for the hospitality industry, less so for debt-laden Britain.
Can you afford to alienate those that want to pay with cash?
Cashless: the cons
Last year, US burger chain Shake Shack scrapped an experimental cash-free New York site, where customers were, by turns, confused by the iPad ordering and adamant they wanted to pay in cash. In future, Shake Shack is promising a mix of screen ordering and old school cashiers. According to Payments UK and the Bank of England, 2.7 million Brits deal entirely in cash, a figure that has rocketed in recent years. Can you afford to alienate them, or people who see going cash-free as an ethical deal-breaker?
The tips are down
Cash-free customers often do not tip. Responsible operators must consider how to make up that shortfall for staff and its cost. Remember: unlike a mandatory service charge, cash tips are not subject to National Insurance.
The VISA outage in June last year that affected customers across the UK and Europe illustrated how vulnerable card-only businesses are, sparking US business magazine Forbes
to ask: “Is Europe ready to become completely cashless?”
The card-processing charges levied by new payment providers are competitive because they wants to disrupt the legacy payment companies and because cash exists as a cheap alternative. But once the key players have widely established themselves, what is to stop them from ratcheting up their prices? Going cashless is still a step into the relative unknown.
An ethical dilemma
Hospitality businesses dictating how diners should pay is, by definition, incongruous. However, there is a more profound ethical problem in going cashless, too. It is arguably classist (as it makes life difficult for those paid in cash); ageist (proportionally, older people are less likely to pay by card); and it actively discriminates against both those who do not have bank accounts (1.5 million people in Britain, says the Financial Inclusion Commission), and those who, because of poor credit histories, are forced to use expensive prepaid debit cards that charge various set-up and ongoing transaction fees (consider paying a 50p surcharge to buy a £2.80 coffee). Fundamentally, cashless excludes and penalises the poorest in society, and it can lead to a significant online and media backlash. If, as an operator, you pride yourself on your social responsibility, perhaps the most responsible thing you can do is to work proactively to continue to take cash. In Washington DC (where a group of local politicians are seeking to outlaw cash-free restaurants), restaurant chain Cava is offering online ordering and mobile payments, but still takes cash. Its chief exec told The Washington Post: “Whether it’s for underbanked reasons, privacy reasons or for budgetary tracking reasons, we want to accommodate them.”
The paper trail
Paying with card might be easier than cash, but for some customers it also leaves an unwanted trail that paying with cash simply doesn’t. It’s likely that some restaurant customers would simply prefer the anonymity of paying with cash than having a meal in a restaurant turn up on their bank statements.