Amazon Go: A case study in cashless retail pushback

After Amazon publicly confirmed that it had reversed course and decided to accept cash at its autonomous Amazon Go stores, public officials, consumer advocates and industry experts agreed that the omnichannel retailer has recognized that U.S. consumers are not quite ready to give up cash as a payment option and that digital payment technology can still win the day without locking out an entire class of customers.

"I think this is a wise business move on behalf of Amazon and one that acknowledges that not every one has has access to credit and even those that do don't always want to use it," New Jersey Assemblyman Paul Moriarty told ATM Marketplace sister publication Mobile Payments Today by phone.

Moriarty's state became one of the first state and local jurisdictions to ban the growing trend of cashless retail and restaurants amid concerns that low income individuals and communities of color would be effectively locked out of these establishments, where customers need either a mobile payment app or a plastic credit or debit card in order to have a meal or make a purchase.

Steve Kessel, senior vice president of physical stores at Amazon told employees in March that it will allow cash payments at its cashierless Amazon Go stores, which has become a growing issue in the industry as several retailers and retaurant chains began are experimenting with autonomous retail and cashless payment models. Currently Amazon has a total of 10 stores in Seattle, Chicago and San Francisco, but plans to increase that number to approximately 3,000 by 2021, in a direct challenge to 7-Eleven, Krauzer's and thousands of bodegas across the country.

"We are working to accept cash at Amazon Go," a spokesperson confirmed to Mobile Payments Today.

When asked what type of technological or labor changes would be required, the spokesperson did not directly answer the question and replied that it would would work the same way you would expect, “you’ll check out, pay with cash and then get your change.”

Policy debate

Officials involved in some of the earliest policy debates over cashless retail see the Amazon Go decision as a recognition that local and state governments will do what is necessary to protect the right of their constituents to access goods and services, no matter their socioeconomic status.

"We have not heard directly from Amazon about these proposed changes to their Amazon Go stores, so we are not sure of their intent," said Lauren Cox, deputy communications director at the office of Philadelphia Mayor Jim Kenney. "If this change is being made in an effort to take the concerns about potential discrimination against low-income individuals seriously, then we welcome it."

New York City council member Richie Torres, who led the fight against cashless retail in that city and sponsored a bill to force all stores to accept cash, said that Amazon is recognizing the public backlash against Amazon Go and restaurants with similar policies.

"Amazon saw the writing on the wall and made the right decision to start accepting cash at its Amazon Go stores," Torres said in an email statement provided by his deputy chief of staff. "Now it should extend that policy to other brick-and-mortar stores nationwide. A cashless business model is a discriminatory model that excludes the unbanked and people without access to credit."

The business model

It remains unclear how Amazon Go will transition the business model to begin accepting cash — for example would there be a designated cash checkout line or kiosk or would point-of-sale terminals be configured to accept cash? The change also raises the question as to whether Amazon would need to hire cashiers.

Aite Group senior analyst Thad Peterson said the transition should not be too difficult a task, depending on how Amazon structures cash payment acceptance.

"If you look at an Amazon Go store as the world's largest vending machine, which it kind of is, then accepting cash could easily be an option," he said, "but if the cash payment was taken in-store then it would force a reconfigure of the store to complete a transaction."

Amazon already offers a preloaded stored value product called Amazon Cash, which operates similarly to a prepaid retail gift card or mobile wallet. Customers can load from $5 to $500 cash value onto a card or mobile app and use that payment instrument to shop online. Customers can purchase the cards at CVS, 7-Eleven and Gamestop stores.

"Amazon Cash would provide the ability for an underbanked or unbanked individual to use Amazon Go," Peterson said. "If the customer loaded value into an Amazon cash account at one of the Amazon Cash locations prior to arriving at the store, they would have a virtual prepaid debit card available for use in the store."

The decision by Amazon comes at a time of fierce debate in the U.S. and overseas about cash access, the growing prevalence of e-commerce, and a lack of access to traditional banking facilities among lower income and rural communities.

The Health of Cash, a 2018 study by Cardtronics PLC, found that 92% of consumers want choice in the types of payment methods available to them.

The study also revealed that 73% of consumers use cash regularly, even though they have other options. Additionally, while 37% of respondents preferred a debit card as their go-to payment option, 28% preferred cash.

“Cash is universal, its convenient, it’s accepted everywhere, its safe to use and there is anonymity to it," said Brad Nolan, executive vice president of Allpoint, a unit of Cardtronics.

Industry experience

Officials at Standard Cognition, a San Francisco firm that developed AI-powered checkout technology, which it sells to third-party retailers nationwide and uses to power its recently launched autonomous grocery store in the city, said that accepting cash payments should continue to be part of the retail experience.

“Standard found early on in talking with retailers that they all wanted to accept cash and credit/debit card payments, so right from the start Standard decided to offer a kiosk option for non-app payments,” Michael Suswal, co-founder and COO told Mobile Payments Today via email.

He said shoppers using the Standard or store app can just use the app and walk out of stores, however shoppers that want to pay with cash just need to stop at any kiosk and pay with credit/debit or cash options.

Financial Innovation Now, an alliance of technology firms including Amazon, Stripe, Apple, Intuit, Google, Paypal and Square, has advocated for the development of faster payments and other methods of accelerating the development of e-commerce technologies.

"FIN members are working to provide innovative payment tools that are more accessible, safer and faster than cash," said Brian Peters, a spokesman for the organization. "We are aligned and working towards the same goals of financial inclusion. To make that a reality for all consumers, we are hopeful that policymakers provide flexibility in how we approach all kinds of consumer payment environments."