Helping customers move from cash to electronic payments

The economy is shifting more quickly than ever toward electronic payments instead of cash, presenting an opportunity for retailers and other businesses. Handling cash is expensive for many reasons. Businesses can benefit as more of their revenue comes from electronic payments—and may want to encourage it. 

The strength of the trend toward cashless payments can be seen in data from the U.S. Federal Reserve. The number and total value of non-cash payments is growing faster across all categories—credit and debit cards and electronic bank account transfers through the Automated Clearing House system (ACH payments). Another sign of where we are headed? The amount of money withdrawn from ATMs dropped by about 10 percent per year from 2018 to 2022, according to the Fed’s report. 

Of course, that doesn’t mean that every store or organization can wean their customers off cash entirely. “There are still segments of the population that rely on cash, for a variety of reasons,” explains David Benjamin, head of treasury management client advisory at Capital One. 

Indeed, there are some places where regulations require that retailers and restaurants accept cash. In 2020, as the Covid-19 pandemic prompted businesses to go cashless and use contact-free payments, New York City passed a rule that requires retail stores to continue to accept cash.

That said, there are solid reasons for every organization to try to reduce the amount of cash they handle. Depositing customer cash can be expensive, and not just in the form of bank fees. An employee must spend time to prepare a deposit, do the paperwork, and leave work to take the cash to the bank—and that employee’s time is money. There are risks as well, if the employee handling the cash makes a mistake, pockets some of the cash, or worse, is robbed on the way to the bank.  

Another option that some organizations use for cash deposits is the U.S. Postal Service, which has reduced service offerings in recent years. These deposits must now be brought to a post office, rather than given to a carrier, demanding more employee time; and the postal service recently implemented a registered mail charge for larger cash deposits. 

Even an entity that has a defined cash handling system can cut expenses if they take in less cash, by requiring less frequent armored car pickups, for example.

For all of these reasons, organizations today have good cause to steer their customers away from paying in cash—and provide opportunities to do so. Here are some ideas to consider. 

If you don’t accept cards, is it time to start? With the proliferation of fintech companies and the declining cost of payment technology, the upfront cost for point-of-sale equipment is greatly reduced from years prior. Getting set up to accept cards, or some type of payment application linked to a card or bank account, is easier than ever. 

Perhaps you decided a few years ago that your organization was too small or the options too expensive to accept payment in any form but cash. It may well be time to revisit that decision. New point-of-sale options are coming to market all the time, from vendors such as Micros, Toast, Square and Shopify. These devices are affordable, and they make non-cash payments more inviting. 

Pricing should be reviewed to ensure that your cost of accepting cards is competitive. As you do this, keep in mind that cards can be seen as a way of outsourcing some accounts receivable work, avoiding expenses related to funding, collections and charge-offs.  

Do you make it clear that you accept digital payments? If you already accept credit and debit cards from the major networks, clear signage indicating as much may help customers know cards are an option. In larger retail outlets, customers take for granted that cards are accepted. If you are a food truck or flea market vendor, independent convenience store or a small service entity, you may need to make the option more visible. 

Do you offer online purchases? A website that offers online purchases is a good first step, as this will of course involve non-cash payment methods. Sometimes it can be relatively simple, once you are set up online, to bring the same payments technology to your point-of-sale locations. 

If you offer online purchases with drive-up or in-store pickup, promoting that option may make sense as a way to favor non-cash payment. “Many of the retail innovations that came about by necessity during the pandemic were good ideas that will continue to provide advantages today,” Benjamin says. 

Finally, can you create in-store advantages for cashless payments? In a larger store, an automated checkout line where the customer can pay with a credit or debit card might present a faster checkout option, nudging customers away from using cash. In a restaurant or café, point-of-sale devices that can settle a check with a quick tap are becoming more common, providing a reason to avoid cash. A retailer may be able to pull customers out of line to pay on a handheld device, which has a similar effect.  

“The key question to ask is whether you are giving your customers an option or an incentive to pay using non-cash methods?” Benjamin says. The important thing is to help customers see the benefit of going cash-free and making it easier for them to close out a sale.