Is your business ready to go cashless? Read this first

Rule No. 1: Know your customer base – their level of comfort with non-cash payment alternatives will likely dictate your options


Before going cashless, your business should consider the pros and cons first. Start by knowing your customer base – and learn from past experiences.

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Four years after the release of Apple Pay – and 70 years after the first credit card was introduced – is it time for U.S. businesses to go cashless?

As a few small-business owners around the country have experienced, the answer is complicated. Here’s everything you need to know if you’re considering going cashless.

See related: Americans going cashless varies by age and region.

Going cashless might mean smoother, faster transactions

For Kelly Kim, the time to go cashless is now. She’s the owner of Yellow Fever, a fast-casual restaurant with three locations in the greater Los Angeles area.

Not taking cash “makes for a smoother transaction and a faster transaction,” Kim said. Yellow Fever went cashless in March 2017, and though some customers complained, “the younger consumers think it’s a really cool thing,” she said. “Overall feedback has been very positive.”

But that’s not the case for every retailer. In San Francisco, bakery owner Stacie Pierce worries that she’ll exclude the elderly people at the next-door senior center if her Little Bee Baking stops accepting legal tender.

In Houston, Thomas Nguyen went cashless for a year and a half at his Peli Peli group of fast-casual and fine dining restaurants – until the online complaints became too much of a headache. And in Baltimore, within days after The Land of Kush restaurant announced it would go cashless, irate customers launched a boycott campaign on social media.

“There’s still a large segment of the population that prefers cash,” said Jackson Mueller, associate director of the Milken Institute’s Center for Financial Markets.

Tips for businesses considering going cashless

Before retailers leap with glee into the cashless waters, experts and cash-free veterans suggest you do this:

  • Think carefully about who your clientele is: Do they have access to other payment forms? Are they comfortable with losing the cash option?
  • Consider who you might be willing to not serve: You might lose young, elderly and/or low-income customers whose only form of payment is cash.
  • Try to foresee what the general reaction might be: Some businesses have gone cashless successfully; others have faced online complaints and even boycotts.

See related: Carrying money abroad: Why take cash, credit, or debit cards

Going cashless? Know your customer base first

“I think the most important thing is, know your customer – and know what they’re comfortable with,” said Rieva Lesonsky, a columnist for Small Business Trends focusing on retail trends and the president and founder of GrowBiz Media, a consulting company, “and realize that this is the way consumer demographics are changing.”

For the moment, many of the small-business owners taking the cashless plunge are in the food services industry.

This may be because people are more likely to use cards when dining out, said Ellen Cunningham, marketing manager for CardFellow, an online marketplace that matches small businesses with credit card processors.

“At a restaurant, maybe you’ll have that second drink, or maybe you’ll have dessert, and maybe it’s a little easier because you’re thinking that you’re swiping your card, so you’re not necessarily [limited to] the money that’s in your wallet,” she said.

See related: Food trucks leaving cash in the dust

Visa Cashless Challenge met with mixed results

Visa, the credit card network, is eager to encourage this trend.

Last year, Visa announced the winners of its Cashless Challenge: 50 restaurants who’d won $10,000 after sending the credit card issuer a short video about why they were or planned to go cashless.

The money came without restrictions, and recipients were not required to go or stay cash-free in order to keep the prize.

That’s probably a good thing, because of the three winners interviewed for this story, not one has managed to stay cashless, even though all of them said they really wanted to do so.

“In a perfect world, all businesses would be cashless. Our employees love it, we love it. It’s where the world is headed.”

Experiencing ‘cashless backlash’

“In a perfect world, all businesses would be cashless,” said Nguyen, of Peli Peli. “Our employees love it, we love it. It’s where the world is headed.”

But as Nguyen found out, it’s not where his customers are at now. There were complaints at the restaurant and online, particularly after Yahoo Finance and other news outlets wrote up articles about the cashless restaurant trend, using Peli Peli as an example.

“People say things like, ‘Oh my god, these Communists! They don’t accept cash!’” Nguyen said. “And, ‘Is this illegal?’ It’s crazy stuff.”

Is going cashless against the law?

For the record, not accepting cash isn’t illegal, at least in most of the country.

Although U.S. coins and currency are “legal tender for all debts, public charges, taxes and dues,” says the Federal Reserve on its website, “private businesses are free to develop their own policies on whether to accept cash unless there is a state law that says otherwise.”

There is, as it happens, one such state law. Massachusetts has a law dating back to 1978 that states “retail establishments must accept legal tender when offered as payment by the buyer.”

Cashless ban getting traction

The idea is trending again. Starting July 2019 Philadelphia will become the first major U.S. city to require most retail stores to accept cash. Additionally, the state of New Jersey and municipalities, including New York City and Washington, D.C., are considering similar bills.

What’s driving this legislative push is fear of discrimination against customers who, for a number of different reasons, don’t have ready access to remote pay or some form of debit, credit or prepaid card.

This is the reason why Pierce still leaves her bakery in San Francisco’s Bernal Heights neighborhood three times a week to deposit ever-smaller sums of money. “It’s
such a mundane task and I hate it,” she said of the 45-minute roundtrip run to the bank. “Not to say the people at the bank aren’t nice and that I don’t know them all, but if I never saw them again, I’d be OK.”

When you want to go cashless, but your customers won’t abide

A year ago, Pierce was so eager to go cashless that she applied for the Visa contest. “It wasn’t so much it was going to greatly increase my business,” she said. “It was just like, OK, I’m going to get my time back. Then I won, and it was like, now I’ve really got to consider it.”

What she considered was the 10 percent (and dwindling) of her customers who still pay in cash: The children who drop by the bakery with a fistful of singles for a snack; homeless people who buy coffee with change; and the older people who attend the lunch program at the senior center next door.

“They don’t have that advantage of Apple Pay,” said Pierce, who instead used the prize money to pay down debt and purchase a new freezer and refrigerated display case.

When people start calling for boycotting, it’s never a good thing.

The price of continuing to accept cash

One small-businesswoman who did use the prize money for its intended purpose was Naijha Wright. She and her husband are owners of The Land of Kush in Baltimore.

They entered the contest after an armed man burst into the restaurant the day before Thanksgiving and, in front of a line of customers waiting for holiday pickup, demanded the cashier hand over the money box. “That was a scary situation,” she said.

They were thrilled to discover they’d won, and immediately sunk the money into a second point-of-sale terminal, dual-facing iPads, upgraded processing equipment, and marketing to increase sales and cover the extra investment.

Then they went cashless – and their community went nuts. People on social media wondered if the restaurant was part of a conspiracy to stop people from using cash, she said. Others insisted that as a black-owned business, they were buying into “Big Brother” by going cashless.

Then came the push to stop eating at the restaurant. “When people start calling for boycotting, it’s never a good thing,” Wright said. Now Kush accepts cash – and pays for an armed guard Fridays, Saturdays and Sundays.

See related: 6 reasons to stop using cash and start using credit cards

Cashless businesses can find a workaround for cash customers

Even so, cash receipts at Kush continue to dwindle. Conversely, at Yellow Fever, despite a sign in the window that declares, “Oh yeah, btw, we’re cashless,” the occasional customer still comes in with cash and no card. The eatery will give them change if it has it, and whatever amount is left, the cashier will run a gift card for it and give that to the customer, Kim said.

This is the wave of the future, Lesonsky said. Currently, there are about five generations of consumers, she said, and the younger ones are less likely not only to pay in cash, but to carry it at all. “We’re just getting used to not having … cash for anything,” she said. That will continue to shift, and quickly.

“I think in five years,” she said, “we won’t be having this discussion.”

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