A woman paying with an apple watch at a POS checkout system.

Why do some businesses not accept cash

Saturday, January 03, 2015

Understanding the rise and context of cashless businesses

Cash acceptance has been largely assumed for most businesses around the country. Customers generally expect that when they provide a form of payment at a place of business, cash is one of the accepted payment methods. However, there are some cashless stores that are popping up around the country. For example, retailers in Seattle and Chicago have cashless businesses where checkout does not include cash payments. Some of these businesses included Amazon Go stores where customers can pick-up items and skip check-out lines with automatic charges going toward their individual account.

The trend toward card payments without any option for cash payments started prior to the coronavirus outbreak; however, the pandemic has accelerated the idea of a cashless society quicker than before. In fact, a recent study found that from March to April in 2020, the number of cash-free or cashless businesses rose from 8% to 31%. This article will discuss reasons that businesses don’t accept cash, the downsides of not accepting cash, and how small business owners can make decisions about payment methods moving forward.

Is it legal to not accept cash?

As of May 2022, there was no federal law that required private businesses to accept cash or paper money as part of their approved payment methods. However, it is important to be up-to-date with local legislation and initiatives by lawmakers at the state, city, and local levels, as these laws may be different. For example, San Francisco and New Jersey are places that require retailers to accept cash.

Localities that require businesses to accept cash are often trying to keep low-income customers who may not have access to checking or banking accounts. Without access to this type of banking, it is impossible to secure a debit card or credit card for payment. Thus, governments are trying to make sure that customers can frequent any business and provide as wide a range of payments as possible.

Why would a business not accept cash?

Operating a cashless business has several advantages for business owners and business operators. Removing this type of legal tender helps reduce a variety of concerns for businesses. Here are some reasons why businesses would not accept cash:

  • Reduce germs. This reason was most notable when the COVID-19 pandemic started in 2020. As businesses worked toward re-opening after mandatory closures, business owners were eager to find ways to maximize cleanliness and health safety. By removing coins and paper money, there could be a lower transmission of germs due to the lack of exchange of legal tender between many different parties. Customers could be confident that businesses would be safe and clean to visit.
  • Reduce risk. Cash-based businesses have a higher chance of being robbed since there is cash on hand. Not only is there risk for external robberies, but there is also the risk of internal theft from employees. With cashless payments, all income and sales is completed through bank account transfers, ACH payments, and card payments. This way, your business’ assets are better protected.
  • Reduce risk of error. When you have a cashless business, cash reconciliation becomes a problem of the past. Instead of risking human error during manual counting, you can complete calculations of sales through reports generated through point of sale systems. In addition, machines that take credit cards are generally less expensive than cash registers that store bills and coins.
  • Reduce banking issues. Cash deposits can take away valuable time for business owners. Not only does the bank deposit have to take place, but there needs to be accurate counting of money and the preparation for the deposit. With cashless systems, bank transactions encounter less hassles and become more streamlined over time.

What are the downsides of not accepting cash in a business?

Although cash is not the primary modality of payment for many customers, it is still a form of payment that customers rely on. In fact, a recent study showed that 1 in 5 customer transactions occur with cash payments. This is especially true for situations where cash payments are easier to make, like with highway tolls, or with customers who are not yet able to access bank accounts (such as younger customers). So, it’s good to keep in mind that if you choose not to accept cash, you may find that customers will have a negative association or a negative experience with your business. Customers may have to remember to bring cards with them to your business, and this can be inconvenient when customers don’t recall or remember that your business is cashless.

As discussed, there is also a sizable customer base that is considered “unbanked” – defined as customers who don’t have access to checking or savings accounts. It is estimated that 5% of households in the United States don’t have access to a bank account. By going cashless, you may eliminate this market segment from your business which can negatively impact your financial bottom line while decreasing the accessibility of your business model. Moreover, if you live in an area with a higher population of unbanked customers, you may want to consider how you can best serve the community you work in.

What should businesses do?

Ultimately, for most businesses, the accepted forms of payments can be decided by the business owner or retail leader. Whether your business is new or old, it is always helpful to consider how your customers experience your brand, from the first entry point to checkout. Payment processing is a big part of this experience and could impact whether a customer comes back for another visit.

Whether you accept cash or not, it is important to consider the benefits of accepting a wide array of payments, whether cash, credit cards, mobile payments, debit cards, or gift cards. This way, your customers can pay with the payment that works best for them and allows them to continue to engage with your business on a regular basis. When payment processing is streamlined, the customer has to think less about payment processing and more about the product or experience they associate with your business and company reputation.


Next steps

Are you ready to explore your form of payment options at your business? Is now the time to explore cashless options at your retail business? Are you looking for support in determining options related to cash payments?

Heartland is ready to help.

Every day, America’s entrepreneurs wake up and grind away at the day-to-day operations that keep their businesses afloat. But Heartland customers get a head start because they trust us to deliver a complete technology solution that makes it easier to stay competitive, connect with customers, sell more, and even manage and pay their employees. With our POS, payments and payroll technologies in place, and our people passionately committed to their success, nearly 1 million businesses have peace of mind, a growing bottom line and more time to focus on leading their businesses into the future. Learn more at heartland.us.