Try as They Might, Trendy Retailers Won't Kill Cash

(Bloomberg) -- Standing in line for a 99 cent bowl of poke, I held a weathered dollar bill. It was the grand opening of RAW MKT, a Hawaiian-Japanese fusion joint, and they were offering the usually $11.99 meal for a buck. When I collected my spicy tuna bowl and presented my limp bill and a dime for tax at the cash register, I was informed that the establishment was card-only. It seemed silly to charge $1.08, but I had no other choice. I rummaged in my purse for my credit card and went off to eat the marinated fish.

Raw Mkt, located in New York's trendy Greenwich Village neighborhood, is yet another business that eschews cash in favor of credit. “We only accept credit cards because it is the fastest way to process payment," partner Scott Schubiner said in a statement. Airlines have long  accepted only cards for inflight purchases. As more retailers have followed suit, trend pieces have been quick to dub card-only payment the next big thing and to pillory cash as dead.

But rumors of cash's death have been greatly exaggerated.

According to a November 2016 study by the Federal Reserve Bank of San Francisco, physical currency is still the most frequently used payment method, followed by debit cards, which pull funds directly from a checking account. "Each company has its own business model," said J. Craig Sherman, the National Retail Federation's spokesman. "But by and large, cash is king, and retailers prefer cash." 

Credit cards offer convenience and speed, but they also come with fees that range from 1.5 to about 3 percent. "There are certainly costs involved with handling cash, but they are microscopic compared to the costs of accepting plastic," Sherman said. These bills—armored car pick-up, accounting, and losses due to theft—are largely negotiable, as the business owner can fire one vendor and opt for a cheaper one. "Banks and card companies do not negotiate over their swipe fees," Sherman added. 

Going cashless also risks alienating unbanked, underbanked, and privacy-sensitive consumers. "It's discriminatory against low-income people and people just starting out; not everyone who is unbanked is necessarily going to be poor their entire life," said Jay Zagorsky, a professor of economics at Ohio State University. A 2015 survey (PDF) by the Federal Deposit Insurance Corp found 7 percent of American households unbanked and an additional 19.9 percent underbanked, accounting for nearly 67 million adults. 

Sweetgreen, a hip lunch joint, has also opted for plastic over paper. In an interview with the New York Times last year, co-founder Jonathan Neman expressed concern for the poor and unbanked and said he considered putting gift-card machines that accept cash in his stores. Contacted for this article, a spokesperson for Sweetgreen declined to comment. Such gift-card machines were not visible at Sweetgreen locations visited by Bloomberg in New York. Raw Mkt's Schubiner also declined to comment on concerns that the practice discriminates against the unbanked and underbanked. 

Alienating these communities might not much concern locations that thrive on the office lunches of urban workers. The average salad at Sweetgreen runs about $11, and eating it every weekday would cost $2,860 annually, which is roughly 6 percent of the national average annual wage. Companies have "thoroughly analyzed who their customers are," said Sherman. With a specific combination of product and customer, "it might work very well"  for some retailers, he said. 

Zagorsky is blunter. Cashless retail policies, he said, are a retailers way of saying "Low-income unbanked people, you're really not welcome here."

Thus far, going cashless has been the choice of only a few retailers and smaller chains. Domino's, which has over 13,800 locations worldwide, considered a card-only policy but opted against it. About 40 percent of Domino's orders are made via phone, and many of those customers pay using cash. The company was also unsure if it could mandate a cashless policy with independent franchisers, spokesman Tim McIntyre said.

"One of the things we pride ourselves on is convenience—and until our culture makes cash obsolete, eliminating that method of payment for the millions of people who still use it could do more harm than good to our brand and our business," McIntyre added.  

Not every business that goes cashless sticks to the policy. A Boston-area falafel shop, which went on to close for unrelated reasons, tried to go cashless but didn't stick to it when customers reached for paper. "We ended up taking cash from people, anyway," a spokesperson said. "Because some people just need to pay with cash."

To contact the author of this story: Polly Mosendz in New York at pmosendz@bloomberg.net.

To contact the editor responsible for this story: Josh Petri at jpetri4@bloomberg.net.