As many food retailers embrace contactless and digital payments, cash has lost ground as a percentage of total payments, but don’t believe the hype that a cashless society will soon arrive.
Cash is used for an estimated 28% of transactions in the United States, down from 51% in 2010, according to the “McKinsey 2020 Global Payments report,” released in October. A downturn in cash use in 2020 was caused by the rise of e-commerce and no-contact delivery services during the pandemic, according to McKinsey, a New York-based business management consultant.
Even so, cash plays a vital role in many types of transaction types. According to a pre-pandemic report from the U.S. Federal Reserve, cash is used heavily for small-value payments — about 47% of payments under $10 involve cash. During the pandemic, some merchants discouraged the use of cash because of sanitary concerns (and there was a shortage of coins as well in the United States). But not all consumers like digital payment methods — concern about fraud stands as a main reason — and not all food retailers install the latest contactless or cashier-less technology. Also, while a country such as China offers examples of how to create a consumer society centered on mobile payments, such progress has been significantly slower in the United States, leaving another opening for cash.
The old-fashioned payment method is also winning support from local and state governments. As some quick-service restaurants and other businesses banned cash — federal law doesn’t require merchants to accept cash — politicians and consumer advocates pushed back, worried about unbanked and other people without ready access to alternative payment methods. A new law in New York City, for instance, could lead to $1,000 fines for businesses that refuse to accept cash. San Francisco, New Jersey and Massachusetts are among the states with similar laws.
Cash may have suffered some erosion this year, but if McKinsey’s research is accurate, cash continues to represent nearly one-third of transaction volume, ensuring that a wide range of cash-related operational considerations remains in place for retailers.