US consumers use cash less — but retailers still want to accept it

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While cash usage is becoming less frequent among US consumers, merchants aren’t ready to make the cashless switch just yet, according to a Square study of 1,000 small businesses.

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Consumers are using cards more for lower-value transactions. Square found that in 2019, 37% of consumers pay for transactions below $20 in cash, down from 46% of consumers in 2015. But shoppers are starting to use cards more often for smaller-value transactions: Half of shoppers now use cards for purchases as small as $4.50, a significant drop from 2015 when half of buyers used cards for purchases of $8.
Despite consumer reliance on cards, most retailers don’t foresee a completely cashless future. Seventy-three percent of retailers surveyed said the US will never be fully cashless. Meanwhile, 83% of firms said they will always accept cash — and 2 in 3 of these retailers believe customers would view completely cashless merchants negatively.
This merchant sentiment comes as many retailers reverse their cashless policies. Several quick-service restaurant (QSRs) and other retailers in the US went cashless, but reevaluated their strategies in response to backlash from both the public and regulators, who view the practice as discriminatory: Amazon recently announced that its Amazon Go stores will begin accepting cash, while QSRs Sweetgreen and Shake Shack both reversed their cashless policies.

The bigger picture: Cashless retail is under scrutiny in the US and that will ultimately perpetuate cash acceptance at retailers.

Major cities and entire states have banned cashless retail — all for the common reason of protecting consumers. New Jersey and Massachusetts have both banned cashless retailers state-wide, along with major cities like Philadelphia and San Francisco. Advocates of banning cashless retail argue that it marginalizes the 25% of people in the US who are un- or underbanked and might not have access to noncash payment methods. Advocates in San Francisco, specifically, pointed to the homeless population as a segment that would be harmed by such retailers.
Meanwhile, several US legislators are proposing nationwide bans on cashless retailers.Earlier this month, Congressman David Cicilline introduced the "Cash Should Always be Honored Act," which requires retailers in all states to accept cash, stating that the bill will "protect the economic freedom and opportunity of millions of working people," and other similar bills have recently been introduced. If this bill passes, it would effectively end the argument over the future of cashless retail in the US. However, consumer preference, which is increasingly leaning toward cards and other noncash payment methods, will likely continue growing despite cashless bans.

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