Cash, once king, has become controversy.
Critics believe physical currency’s days are numbered, especially as a possible vector for contagion in the coronavirus era. But now the protests going on in the U.S. could mean some retailers have no choice but to accept it.
Protests across the country over the killing of George Floyd by the Minneapolis police were marred on the sidelines by destruction and looting of businesses across the U.S. But even as the national conversation shifted from COVID-19 to the protests, the risks from the health crisis itself never actually went anywhere, except potentially up.
Dr. Anthony Fauci, the foremost authority on infectious diseases in the U.S. and a key member of the White House’s Coronavirus Task Force, has repeatedly discussed the need for social distancing. Most recently, he told the Journal of the American Medical Association that “pictures, photos and TV clips of people very much congregated, no masks together, very closely congregated on a boardwalk, on a beach, in a pool, has been and continues to be a concern to me.”
Fauci was cautious about remarking on the packed protests taking place in hundreds of cities across the country, saying only that the impact from those gatherings won’t be known for weeks.
By then, retailers may find themselves in a difficult spot: They may survive the turmoil, only to face a resurgent pandemic and tighter safety protocols. Whether that will include touch-free transactions is an open question — because it’s not at all clear whether damaged, hurting businesses can afford to turn away cash sales. But amid a resurgent pandemic, would they be able to afford not to?
It may be hard to remember that as little as two weeks ago, the key conversations about public safety revolved around business reopenings.
At the time, stores from Saks Fifth Avenue to the Gap were moving to resume business in most American cities and establish safety protocols. Some of those standards were common to all: Masks are a must, hand sanitizer will be available throughout the premises, and management will urge shoppers to use contactless payments. In the leadup to its reopening, even Disney World said that “the most magical place on earth” would be rolling out touchless payments.
The measures were designed to protect people from the coronavirus, which is believed to live for a while on paper money. And that need won’t go away anytime soon. In fact, the need may be even more pressing.
Unfortunately, there’s no consensus on whether ridding cash is the right thing to do, with health experts and fintech companies at odds with state and municipal legislators.
In March, a World Health Organization representative said it was possible that paper currency could spread the coronavirus, adding that, “when possible it’s a good idea to use contactless payments.”
The WHO clarified that this was not an official advisory, but the sentiment speaks to a fundamental concern: A 2002 study published in the Southern Medical Journal discovered pathogens on 94 percent of dollar bills tested, and the money can transport a live flu virus for up to 17 days.
It looks like consumers got the memo. In the first quarter of the year, Mastercard saw a 40 percent surge in contactless payments covering solutions such as tap-to-pay and mobile payment technologies.
Chief executive officer Ajay Banga believes that’s just the beginning. He told analysts during the company’s earnings call that “we are seeing an increase in the use of contactless transactions, and we think this trend will continue after the pandemic.”
Likewise, Apple’s first-quarter 2020 earnings call shed light on Apple Pay momentum as the health crisis started to emerge. The company reported that Apple Pay revenue and transactions more than doubled year-over-year, with a run-rate exceeding 15 billion transactions a year. Today, Apple Pay is live in more than 50 markets globally with over 6,000 bank partners.
Other companies, such as Klarna, have been tracking rising demand for their contactless payment solutions.
“What we’ve seen recently is a massive surge in interest in our virtual card,” ceo Sebastian Siemiatkowski said about the offering, which links to Apple Pay or Google Pay for shopping. “We’ve definitely seen a jump. People are nervous about reopening, and they’re looking to do social distancing.”
Klarna — which does business in 20 countries and launched support for brick-and-mortar stores in Europe a year ago and in the U.S. roughly six months ago — has seen a spike in interest from both merchants and consumers.
Online, it serves clients such as Abercrombie & Fitch, Asos, The North Face, Overstock, Sephora, Zadig & Voltaire, Timberland and Toms, to name a few, with H&M, Good American and Planet Blue signed on for both online and in-store. Klarna projects hitting 10 million app and merchant checkouts in the U.S. by the end of the year.
Siemiatkowski sees the trend being driven by customers. “Consumers are changing their behaviors toward contactless,“ he explained. “People don’t learn from what we tell them … what actually changes behavior is experiences. And what we’re seeing is one of the most extreme experiences that people can have.”
Mobile payment apps are just one option among many. Minimizing physical retail interactions can range from using Apple Pay, Google Pay and Samsung Pay to QR codes and buy online, pick-up in store — also known as BOPIS — services, among others.
In May, PayPal was working to speed up the rollout of its in-store digital payments, and it’s been pushing QR code payments in several markets worldwide. The latter would allow anyone, even cash-only businesses, to accept digital payments without having to change equipment.
“There has never been a greater need for digital payments and we’re not going to be using cash nearly as much in the future,” said Dan Schulman, PayPal’s president and chief executive officer. “People want to use QR codes so they don’t handle cash, or pick up a pen or sign on a touchscreen at checkout.”
Visa is a major proponent of tap-to-pay, but lately it has been extolling the virtues of BOPIS as a way to avoid checkout counters altogether.
The credit card issuer framed its Visa Tokenization Service as useful for enabling the curbside pick-ups. VTS uses tokens or bits of encrypted data that enable secure online transactions, and it boasts a convenience feature that automatically updates stored card details if the customer loses the card or it expires.
The idea is to make it easier for retailers to accept stored Visas and facilitate their curbside pickups. Visa just signed 28 new payment tech partners in May, expanding the global availability of VTS.
“The thing that is so notable, in light of the pandemic, is that it’s not about groceries. It is across every single vertical retail segment that we report — from workout, apparel and supplies to make-up to fashion,” said Carleigh Jaques, a Visa senior vice president and general manager of CyberSource, a Visa solution.
Visa serves clients in every sector and, according to Jaques, the pandemic has had “everyone tapping into buy online, pick-up in store. It truly is a massive phenomenon.” Sixty-nine percent of U.S. consumers choose to store a card-on-file or have recurring billing set up with merchants, according to Visa.
In other words, a large portion of the population is primed to ditch cash. But not all — and that’s precisely why some regions have prohibited stores from refusing physical currency, at least in the U.S.
Why Cashless Hits Home For Some, But Not All
“We’ve been advising payment processors to work with their merchants to help them get on board with contactless payments as quickly as possible,” said Ramon Llamas, a research director at IDC. “We’ve been advising credit card and debit card issuers to make sure that the cards they have in the field are contactless enabled. We encourage issuers to make sure that all of their programs are compatible with the mobile contactless wallets — the Google Pay, Apple Pay, Samsung Pay — to give people more options for that.”
Llamas noted that in the U.S., QR codes are fairly nascent and niche, though it depends on the different merchants. “[But it’s] not as prevalent as it is in other markets, particularly Asia Pacific, where QR codes just took off to a significant degree a couple years ago,” he said.
Proponents of contactless payment technologies like to point to other areas of the world, such as China and Sweden, as evidence of a global cashless movement. They’re not wrong.
In a national 2010 survey, 40 percent of Swedes said they used cash for a recent purchase. By 2018, the figure shrank to just 13 percent. At the end of that same year, Pew Research Center reported that roughly 70 percent of U.S. adults used cash in a typical week.
Sweden — birthplace of companies like Ericsson, Skype, Spotify and Klarna — is known for cultivating digital tech innovators and serves a tech-savvy population that enjoys extensive broadband coverage. Culturally, its people have tended to be ripe for tech-forward solutions.
“A lot of it has to do with just the payment infrastructure. And actually it’s very different in Europe than it is in Asia,” Llamas continued. “In Europe, contactless cards took off quite big within the last few years. And that was mainly driven by some regulatory changes and some rules that were put in place by the card brands that said, if you use the contactless payment, there is no requirement for other authentication, if the value is below a certain threshold.”
But when it comes to cashless societies, Asia tends to be a leader, where a huge population now relies heavily on their mobile devices.
“In Asia Pacific, there was very little infrastructure in place to handle electronic payments. And so mobile phones became a very simple path to create a way to get around the lack of the robust infrastructure that you might find in the U.S. or Europe,” Llamas added. “And so they gravitated towards that very quickly.”
China’s cashless society is often a key talking point for contactless payments. Consumers there have massive mobile tech adoption numbers and embrace solutions like QR code payments, biometrics and others. That all feeds into today’s WeChat-driven society, where citizens rely on the app as a central lifestyle, communications and shopping hub.
According to early 2020 statistics from the People’s Bank of China, the country’s banks registered 62.1 billion electronic payments, 30.7 billion of which were on mobile, for a year-over-year increase of 73.6 percent. In March, China reported 776.08 million mobile payments users.
But while places like China and Sweden are racing toward a cashless future, various U.S. lawmakers view the trend with concern.
Last year and in early 2020, cities and states like San Francisco, Philadelphia, New York City, New Jersey, Connecticut, Rhode Island and Massachusetts voted to protect cash’s place in retail as scores of stores and restaurants began to stipulate they only took credit or debit cards.
However at one point, Rhode Island appeared to be rethinking its rules — at least in the days before the recent protests, when COVID-19 was the only major upheaval in the spotlight. Despite having recently passed legislation banning cashless establishments, Rhode Island Gov. Gina Raimondo urged restaurants to accept contactless payments during the announcement of her phase one reopening plan.
Kristen Regine, a professor of marketing at Johnson & Wales University’s College of Business, saw the governor’s announcement as good news.
“COVID-19 has forced us all to look at everything differently,” she told WWD. “People are now wondering: ‘Who and how many people have touched that dollar bill that I am now putting into my wallet?’”
Beyond public health, she also views laws that force stores to cling to cash as putting these businesses at a disadvantage on the global playing field.
“There is no going back; cash is no longer king,” she said. “Our elected leaders must be forward thinking in their efforts to address the emerging consumer behavior of cashless transactions, especially now living in the world of the coronavirus.”
WWD reached out to officials in other areas, such as New Jersey and New York City, and so far, none are officially reconsidering the rules, even in light of the pandemic.
The reason is to protect financially vulnerable members of the public. “There are many New Yorkers who do not have access to banks or debit or credit cards and rely on cash to buy what they need,” Julia Arredondo, deputy press secretary in Mayor Bill de Blasio’s office, told WWD, “and that is still true during the pandemic.”
New York’s City Council passed its bill earlier this year, and the bill “lapsed into law in February; it will be going into effect in October,” she said.
The decision is often colloquially referred to as a “cashless ban,” but Arredondo pushed back against that notion. “The bill only requires [that] stores accept cash as a form of payment, it does not require that people must only use cash,” she added.
In other words, stores can offer touchless payment options. But it can’t be the only option.
One key criticism of digital payments is that the vast majority are tied to a savings, checking or credit card account. That leaves out a large portion of consumers. In 2018, the U.S. Federal Reserve estimated that as many as 55 million Americans were unbanked or underbanked.
Those figures and more underscore the loaded issue of cash. Even the imagery emerging from the past two weeks during the Black Lives Matter protests puts a finer point on it. Broken ATM machines lie in the streets. Looters, often unrelated to the otherwise peaceful protests, stole merchandise from stores ranging from Apple to Walmart. Even the event that preceded it all — George Floyd’s murder at the hands of Minneapolis police — came about because of the victim’s alleged attempt to pass a counterfeit $20 bill at a store.
Now there’s an added dimension to the coronavirus pandemic: The lootings could cause many retailers to permanently close their stores rather than reopen, lessening the choice in those neighborhoods.
Those circumstances could fuel arguments on both sides of the cashless debate. An escalation of the public health emergency may create new hot spots that demand a hands-off approach when it comes to cash. Others could argue that, with fewer retail options available, it’s even more important for stores to be as inclusive as possible.
How Retail Is Meeting the Contactless Moment
While leaders and academics debate the issues of immediate urgency versus long-term business, many retailers on the ground are hedging their bets.
Walmart raced to ditch the onscreen interactions in its Walmart Pay solution, making it touchless.
“During the pandemic, we were able to make Walmart Pay contact-free within a matter of a week or so. Same thing for pickup and delivery, which became contact-free,” said spokeswoman Molly Blakeman.
But the chain doesn’t want to alienate any of its budget-shopping clientele, so it will still accept cash.
“[Contact-free is] really important right now, but by no means saying that it is the only way to pay,” she explained. “We’re focused on making sure that we have options that make customers feel comfortable and allow them to pay in the way that makes sense for them and their finances.”
Fast-fashion retailer Rue21 won’t forego cash either, and its data explains why: Seventy percent of its shoppers pay by physical currency or debit card. Specifically, about 40 percent prefer to use cash, according to Mary Blodgett, senior vice president of store operations.
The apparel retailer reopened hundreds of stores across the country from April to May, and Blodgett noted that “it didn’t seem to bother customers to pay by cash.”
In this case, the details matter. Rue21 caters to budget shoppers looking for fast fashion. While the company was heartened to see fans flock to its online channels during the store closures, more than 90 percent of its business hinges on physical retail.
The retailer partnered with Klarna on an interest-free pay-by-installments offering. But the deal also allows Rue21 to pivot, if things change, and implement touchless payments. In short order, shoppers would be able to download an app and immediately pay on the spot.
“I’m in Texas, where they have signs up that say, ‘Please, no cash.’ But I haven’t seen much, in terms of ‘no cash accepted,’” said IDC’s Llamas. “I suppose it’s possible, and there’s no prohibition on it here. But nobody wants to turn away business. So they’ve adapted their protocols for accepting payments in general — they’ve got glass; people wear gloves; they try not to handle things; they’ve done away with signatures. So there are a lot of things you can do to reduce contact.”
A Tough Spot
While it appears that the coronavirus may be hastening cash’s demise in the U.S., it is far from dead, and it may not be in the foreseeable future.
Whether that’s good news or bad depends on whom one asks. It also sets up yet another potentially loaded digital and social divide — one sharpened by health worries, deepened by economic disparities and complicated by varying rules, all set against a backdrop of social unrest that’s leaving some communities with few options.
The implications are deep and varied. Residents in a city like Beverly Hills, which has no cashless ban in place, might see stores that offer contactless checkouts exclusively as safer and be thrilled to shop them.
But in other areas — like parts of New York City, New Jersey and the Bay Area — plenty of residents would be left out of that scenario. That may matter now, more than ever.
Stores that are fighting to survive won’t be able to reject any sales, cash-based or not. So they may have to keep accepting those crumpled bills and coins. It is, in a figurative and perhaps literal sense, a matter of life and death.