“Making It Work” is a series about small business owners struggling to get through tough times.
When Egypt Otis opened his business, Comma Bookstore and Social HubThree years ago in Flint, Michigan, the pandemic was in full swing. But his neighbors appreciated the literature and art he sold in his store that celebrated people of color, as well as the community programs he organized.
Despite the warm reception, Ms. Otis quickly discovered that she had a sales problem: her customers wanted to pay with their cell phones.
“I realized that people barely had a wallet or a physical card, which limited my ability to sell and make money,” Ms. Otis said. So she updated her transaction platform to include touch-and-go purchases on mobile devices. “People don’t carry cash,” she said. “It’s getting stale.”
The number of Americans who say they are cashless has increased in the last five years. Forty-one percent of Americans said they went cashless for purchases in a typical week in 2022, up from 29 percent in 2018, according to a Pew Research Center survey Released last October.
Small business owners are increasingly switching to cashless payments for a number of reasons, including growing consumer demand, faster payments, lower labor costs, and increased security. Those who wait risk losing income, experts say.
However, there are drawbacks to going cashless, including a learning curve for business owners who may not understand how to set up digital payments, a lack of access to credit cards for low-income consumers, and privacy concerns.
Juanny Romero was an early adopter of digital payments for her small business. She fifteen years ago, when she founded Nurse coffee roastersa chain of coffee shops in Las Vegas, started using Square, a low-cost digital payment system for small businesses.
“I was a young businesswoman and not an astute one,” she said. But Square saved him $3,000 a month in merchant fees for credit card processing.
As Ms. Romero expanded her business (to four Las Vegas locations, with two more on the way), added more payment options, including Apple Pay and Google Pay.
But he noticed a change during the pandemic: His customers no longer wanted to use cash, and his employees no longer wanted to handle it. “We didn’t know where the covid came from,” he said. “There were still people bringing cash, but it was scary and dangerous.”
When the coin shortage hit in 2020, she was completely out of cash, but Ms. Romero found she saved on labor costs. “My managers lined up for two hours to deposit the cash,” she said. “I can’t get an armored car service to pick up $100 cash.”
Still, customer demand prompted her to return to cash sales, which Ms. Romero says are holding steady at about 11 percent of her total revenue. She said she would be out of cash if the stake fell below 10 percent.
The pressure to adapt is growing. More than 2.8 billion mobile wallets were in use at the end of 2020, and they are projected to increase by almost 74% to 4.8 billion (almost 60% of the world’s population) by the end of 2025, according to a study published in 2021 by Boku, a fintech company
The United States lags behind other countries in the adoption of cashless payments. Among the world’s most cashless countries is Britain, where the pound accounts for just 1 percent of all transactions, according to a Merchant Machine report, a London-based payments research company. But in the United States, some small business owners don’t understand the complexities of digital payments.
“Smaller merchants don’t always have the knowledge and resources to know what to do,” said Ginger Siegel, who heads the North American small business segment at Mastercard, which provides training for business owners like Ms. Otis of Comma Bookstore. .
Ms. Otis said she noticed an increase in sales when she started offering mobile payments, which speeded up the checkout process. “As a retailer, you want the experience to be as efficient as possible,” she said. “It is a matter of survival”.
Benefits include immediate payment, increased sales, and the ability to sell to customers who might use other currencies. “You have to set it up, but it’s worth it,” said Kimberley A. Eddleston, a professor of entrepreneurship at Northeastern University.
But some business owners say they are hesitant to move too fast, worried that today’s technology could become obsolete tomorrow. And there are compatibility and cost issues to consider, said Wayne Read, chief executive of forged and formed, an online jeweler with a physical store, Studio D Jewelers, in Woodstock, Ill. At his jewelry sales, where the items can be expensive, he said a quick transaction might not be appropriate. “We don’t want people to feel like they’ve made a hasty decision,” he said.
Despite technological advances, many Americans still have little to no access to financial services like credit cards and mobile wallets, though that is slowly improving. An estimated 5.9 million households did not have a bank account in 2021, up from 7.1 million households in 2019, according to a Federal Reserve survey.
Another obstacle to adoption is privacy concerns: some people prefer the anonymity that cash provides. And cash is perceived as a way for consumers to stay on top of spending. Complicating the transition to the digital economy, the recent banking turmoil in the United States has caused many depositors to question the safety of financial institutions.
But experts agree that cash is unlikely to go away. Low-income household consumers continue to rely on cash for payments, according to the Fed survey.
And small business owners say that despite the speed and efficiency offered by cashless payments, cash is still a viable option for their customers.
“At the end of the day, I know the people I serve,” said Ms. Romero. “I would feel conflicted if I didn’t do the right thing.”