White Paper: Are we ready for a cashless society?

White Paper: Are we ready for a cashless society?

May 19, 2019

Making Change: Payments, Perspectives, and Politics. As more and more consumers use credit cards and mobile payment technology — and more businesses accept them — there’s increasing chatter about America’s future as a cashless society.

Amazon has tested cashless stores. So has Starbucks. Even your local lunch spot or favorite food truck may have stopped taking cash recently. But are we barreling toward a cashless society or is it just hype?

Square Inc. recently published a report concerning the cashless trend and whether or not it is really a viable option for businesses going forward. Here are their findings.

– 10% of Square sellers across the U.S. are “cashless.”
– Consumers at Square businesses paid with cash for only 37% of transactions under $20 in 2019.
– 83% of U.S. small business owners say they will never stop accepting cash.
– 2 in 3 small business owners say their customers would react negatively if they went to a cashless business model.

Business owners and consumers across America are caught in a fast-changing payments landscape that’s evolved well beyond the traditional lens of cash versus card. Depending on where you live, the concept of “cashless” is either a heated debate, the wave of the future, or a term you’ve never heard of. New Square data shows American consumers have grown less reliant on cash in the last four years, and the trend is spreading from coastal coffee shops to rural restaurants.

But according to business owners across the country, it seems unlikely we’re casting cash aside anytime soon. In this report, we share Square data on the current state of payments, new research into small business owners’ sentiment toward going cashless, and divided opinions on whether government should regulate the register.


Is the “Cashless Society” All Hype?

Square looked at millions of Square transactions across the U.S. to find out.

The following insights are based on Square transaction data from 2015 to 2019. While only 10% of Square sellers across the U.S. are cashless (accepting only card payments and not cash), Square transaction data shows a significant decrease in consumers paying with cash over the last four years.

In 2015, consumers paid with cash for 46% of transactions under $20. In 2019, consumers paid with cash for only 37% of transactions under $20, a 9 percentage point decrease in cash usage over the past four years.


Plastic over Paper. Consumers are using cards for increasingly smaller purchases, with the dollar value of when consumers prefer paying with a card to cash dropping dramatically since 2015.


Square transaction data reveals that half of consumers used their card for an $8 transaction in 2015. Four years later the transaction size has dropped dramatically, with half of consumers using their card for a $4.50 purchase in 2019.

Cash vs. Card

The biggest shift in behavior, where consumers now reach for their cards more and more, is happening with transactions between $10 and $20. In the past four years, they’ve seen a nearly 10 percentage point increase in credit card usage for transactions within that range.

Credit Converts

Look at the breakdown of cash vs. card changed for each transaction size.

$5 – Cash 59% / Card 41%
$20 – Cash 37% / Card 63%
$50 – Cash 25% / Card 75%

$5 – Cash 57% / Card 43%
$20 – Cash 36% / Card 64%
$50 – Cash 24% / Card 76%

$5 – Cash 56% / Card 44%
$20 – Cash 34% / Card 66%
$50 – Cash 23% / Card 77%

$5 – Cash 55% / Card 45%
$20 – Cash 33% / Card 67%
$50 – Cash 22% / Card 78%

$5 – Cash 51% / Card 49%
$20 – Cash 31% / Card 59%
$50 – Cash 21% / Card 79%

Cashless Is No Longer Just an Urban Trend

Gone are the days when mobile wallets and cashless businesses only appeared in urban, coastal environments. The payments trend that started in tech-friendly cities has slowly made its way to suburbs and rural areas across the U.S..

Small Cities, Big Change

Outside the top 25 metropolitan markets: In the last four years, the transaction amount at which consumers used their cards to cash dropped from $8 to $5.50.

Within the top 25 metropolitan markets: The decline isn’t quite as steep; the transaction amount at which consumers used their cards only dropped from $5 to $4 over those four years.

Payments behavior in smaller cities is shifting toward a preference for cards, a trend that first originated in major metro markets.


Talking Tender with America’s Small Business Owners

There are two sides to a coin, and many more when it comes to how business owners feel about cash versus card.

From Kenosha, WI, to Kapa?a, HI, no two businesses are exactly alike, nor are their perspectives on what type of payment is best to accept at their business. We spoke with small business owners across the country to uncover their thoughts, concerns, and frustrations with a changing payments landscape. Each business owner’s preferred payment method is tied to unique motivators: business efficiency, safety, technology, and appealing to both digital and traditional consumers.

We also wanted to better understand how small business owners across the U.S. feel about recent legislation in New Jersey, Philadelphia, and San Francisco that bans cashless businesses. Would they support something similar in their own hometown?

Overall, business owners are divided on the fine line between making autonomous decisions and protecting consumers.

After noticing 80% of his transactions were made with a card, Travas Clifton, owner of ModCup Coffee Co. in Jersey City, NJ, decided to shift his business to cashless. But New Jersey’s cashless ban in April has forced him to start accepting cash.

Laura Leister, owner of board game bar and restaurant Pieces in St. Louis, MO, launched her business with a cashless payment model, but ultimately switched to accepting cash after backlash from frustrated customers.

Candice Cox, who owns CanDid Art Accessories in Oakland, CA, says while 95% of her sales are on credit cards, most of her senior customers still prefer paying with cash, and she will always accept it for her handmade jewelry.

Anni Caporuscio, owner of Small Town Coffee Co., estimates that shifting to a cashless business model in her town of Kapa?a, HI, would leave behind roughly half of her customers. She can’t fathom making such a drastic decision. Caporuscio says most of her fellow business owners in Kapa?a take that same approach.

Gary Thomas, owner of Keva Juice in Reno, NV, believes that cash will one day be obsolete. But for now, he’s meeting his customers on their terms.

Nicholas Pidek, owner of Foster Coffee in Flint, MI, wants to best serve his socioeconomically diverse community, and that means accepting any kind of payment that comes across the counter. He believes Michigan is far away from embracing cashless.

Carlos Lopez, who owns Lopez Tax Service in Salinas, CA, says it’s important that he continue to collect cash for the 40% of his customers who are classified as low income and prefer to pay with cash.

Kelly, the owner of Elsie Mae’s Cannery and Pies in Kenosha, WI, says most of her customers are heavily reliant on cash and often surprised that she accepts credit cards at all. She believes that the U.S. will never be a fully cashless society.

Desire to Be Cashless Is the Exception, Not the Norm

Square commissioned third-party data by Wakefield Research, surveying 1,000 small business owners to uncover insights into how they feel about cash, regulation, and if—or when—America will ever go fully cashless.

83% of small business owners across the U.S. say they will never stop accepting cash at their business. For those who remain cash-only, the rationale is simple.

Sam’s Pizza and Burgers in San Francisco, CA, has been a cash-only establishment since 1966. Owner Fadi Shawa has no plans to change that. “We’ve had this restaurant for 54 years. We’re cash-only because we haven’t changed anything in this place. We aren’t trying to keep up with the whole internet and millennial thing. We’re trying to keep it where it’s at,” he said.

The majority of small business owners are skeptical of a cashless future, with 73% of small business owners saying that America will never go fully cashless. Why? Customer satisfaction: Two out of three small business owners say their customers would react negatively if they went to a cashless business model. This is consistent across geographies (cities, suburbs, and rural areas) as well as age groups, with only Baby Boomer business owners (54–72 years old) trending slightly higher toward expecting a negative customer reaction.

2 out of 3 business owners say they will never become cashless.

Is Going Cashless Elitist?

While most small business owners accept cash without question, they also support their fellow business owners’ decision to do what’s best for their own business—the majority of small business owners agree that the decision to go cashless is simply strategic (56%), rather than elitist by leaving out unbanked or underbanked consumers (44%).

For Kelly Kim, co-founder and executive chef at Yellow Fever in Los Angeles, CA, going cashless was an easy decision. In 2013 she received 40% of payments in cash, which dropped to fewer than 20% by 2015. Once her bank started charging for cash deposits, it put the nail in the cash coffin.

“From a practical standpoint as a business owner, not having cash simplifies my life 100%. All three of our locations are cashless. Different communities are more sensitive to it than others. At two of our locations, it’s a non-event. But at the third, we have a number of customers who are not happy. And it goes both ways. We also have people say, ‘That’s so smart.’ But for the vast majority of customers, they simply don’t care.” -Kelly Kim, Co-Founder and Executive Chef at Yellow Fever Eats in Los Angeles, CA

Age Denotes Cash(less) Preferences

A business owner’s age significantly influences whether they are more likely to consider cash critical or obsolete.

Generational Divide

21% of millennial business owners (22–37 years old) plan to go cashless in the next two years.
9% of baby boomer business owners (54–72 years old) plan to go cashless in the next two years.


Cashless (R)evolution

Exploring the political and socio-economic consequences of a cashless society

From New York to San Francisco, the cashless conversation is controversial, particularly when it comes to unbanked or underbanked (those without a bank account, or who have an account but still use financial services outside the banking system) individuals who may be excluded from cash-free establishments. Below, experts help explain the impact of a cashless society on this overlooked population.

“As we progress through this cashless evolution, I think we need to consider how it impacts two distinct groups: people who get left out, meaning they want to be cashless, but are unable to due to lack of access to credit cards and mainstream financial institutions, and the segment of people who simply opt out—meaning they simply prefer to use cash for whatever reason. How do we ensure we account for each group?” — Shelle Santana,
Professor, Harvard Business School

According to the 2017 FDIC National Survey of Unbanked and Underbanked Households, 6.5% of Americans are unbanked and18.7% are underbanked. In short, this means they would be excluded from a cashless society, since they rely heavily on cash, either by choice or force. Here, we take a closer look at how U.S. Census income data correlates with cash and card usage at Square businesses across five New York City boroughs, where legislation has been proposed that would compel restaurant and retail businesses to accept cash.

A Tale of Five Boroughs

A closer look at New York City transaction data reveals a correlation between median household income and reliance on cash. For the most part, lower median income translates to increased cash usage. The one outlier? Staten Island. This is the only borough that bucks the trend, which we attribute to the unique geography (isolated from the rest of New York) and demographic makeup (slightly older median age) of the borough.

When Square shared this data with NYC Council Member Ritchie Torres, he said it highlights the extreme disparity that exists amongst New Yorkers.

Council Member Torres

In early 2019, NYC Council Member Ritchie Torres, who represents the Central Bronx, formally introduced legislation that would require every restaurant and retail establishment in NYC to accept cash. According to the FDIC, nearly 8.4 million U.S. households do not have a bank account, presumably relying on cash for daily purchases. In NYC, 25% of residents are underbanked; in the Bronx, that number rises to 30%. As Torres sees it, “Even if a cashless business model appears to be neutral on paper, it has a real-world exclusionary effect.

Local Regulation Leaves (Small) Business Divided

According to new third-party data by Wakefield Research, commissioned by Square, small business owners across the country are split on the idea of local leaders banning cashless businesses.

51% of small business owners would support a regulatory requirement that they accept cash; 49% would oppose it.


The Legislation and Looking Forward

Who has proposed (or passed) cashless business bans?

Over the last year, proposals for cashless business bans have spread from New Jersey to Washington, D.C., to San Francisco, with fines that range from $500 to $5,000 for small business owners who don’t comply. Now, bills have also been proposed in Congress that would require businesses across the country to accept cash.


Several states have proposed legislation banning cashless restaurants and retailers (as of May 2019), including the local card-to-cash ratio based on Square payment data. PA, NJ, MA and CA already passed legislation with proposals in OR, NY, DC, CT and RI.

Cents and Sensibility

As the company that made it easy to accept credit cards, one would think Square would be the loudest advocate for a cashless economy. They’re not.

The first integration they ever launched for their point of sale was connectivity with a physical cash drawer, because they wanted business owners to be able to accept whatever form of payment comes across the counter. Their philosophy was a Square seller should never miss a sale, which is why they made it easy for sellers to accept cards, swipes, chips, taps, mobile payments, and yes, cash.

As a company they learned a lot in their exploration of how business owners view the changing payments landscape, as did we, and one thing stood out above all: Today, a decade after Square started, cash is still an integral part of a small business owner’s income, and an overwhelming majority of small business owners will continue to accept cash, despite the fact that fewer customers are using it.

Source: Square Inc.