Will the Hospitality Industry Go Cashless?
The COVID-19 pandemic is affecting the American economy in previously unforeseeable ways. One broader trend is the shift away from cash exchanges to avoid person-to-person contact between buyer and seller. Statistics show that at the start of the pandemic, 8% of U.S. sellers were effectively cashless, meaning that at least 95% of their sales were made through credit or debit cards. That figure spiked in April 2020 to a whopping 31%. In an effort to go contactless, consumers are even requesting e-gift cards as presents or loading their gift cards onto Apple Pay and Google Pay. Although there is little medical evidence to support the transfer of the virus via cash, the fear is still driving businesses and consumers alike to rely on digital transactions.
So what does this mean for the hospitality industry? Should businesses shift away from cash exchanges completely? Though there’s no simple answer to that question, it's fair to say cash will still have a place in our economy for the foreseeable future. Not only are credit cards and payment apps more convenient, but keeping everything digitized paves the way for a more streamlined and organized revenue system. For restaurants in particular, a completely digital payment system saves them from holding large amounts of cash on the premises. Still, businesses should continue to offer cash options if they want to serve a more diverse customer base, a good portion of which do not necessarily rely on their phones.
Despite the drastic shift away from cash in April, the percentage of sellers using solely credit or debit has leveled off from 31% to 20% as cities reopen. This demonstrates a desire to cater to all consumers, not just those with credit cards. The fact of the matter is that going completely digital excludes a large sector of the consumer base. According to the FDIC, 8.4 million U.S. households don’t have a bank account, while 22% of Americans don’t have a credit score — meaning by extension that they do not have a credit card. That’s reason enough for cash to continue to have a place in the economy, as completely digital businesses exclude a chunk of the consumer base.
The added benefit of cash options is that they help businesses avoid a credit card fee being tacked onto each transaction. Fees can pile up quickly — so much so that some small businesses and single-location businesses have begun to offer discounts for cash payment. In an economy that is already facing challenges, accepting cash can help alleviate some of that financial pressure.
With a chunk of consumers bankless, it’s best to establish a means for payment that suits all of your patrons’ needs. Although digital will continue to grow and shape our economy — especially as millennials and Gen Z'ers continue to lead the way on cashless transactions — cash is not going anywhere. For a more inclusive customer base, consider keeping cash transactions in the mix. Digital does indeed make for a more cohesive financial operation, but cash can continue to have a role in that system.
About the Author:
Mo Chaar is Chief Information Officer at Givex.