3 issues with cashless payments

If you look up the word cashless on Google, you will get a flood of articles heralding it as the way of the future, particularly when it comes to payments. While it can be a useful tool, I often find such articles ignore many inherent issues with cashless payments that continue to cause major issues.

In particular, I believe the three major issues with cashless are: infrastructure, resilience of cash and the underbanked.

Infrastructure

I wrote a story last year about my experience with cashless at the Louder than Life rock musical festival in Louisville, Kentucky. For the festival I received an RFID wristband that I needed to register online. When I went to that registration page, it encouraged me to link my debit card to the band for cashless payments at the event.

Since I was curious how it would work, I linked my debit card. However, when I actually attended the event, I stood in line for the merchandise table for almost an hour and a half, and when I got to the front of the line, the worker informed me that they didn't have the right equipment to accept the cashless payment.

Luckily, I had my wallet on me, but I could only imagine how frustrating this would be for someone who decided to go completely cashless at the event.

While this may have just been an oversight of the event planners, it points to a bigger issue that many places simply do not have the infrastructure in place to accept cashless payments. Some might accept only one type of mobile payment, while others, especially smaller stores likely do not have those tools in place.

As long as that remains an issue, consumers will need to keep multiple forms of payment on hand, which leads right into the next issue.

Resilience of cash

Economists have been predicting for a very long time that cash would go out of style. In fact, Jack Lefler wrote an article in 1968, in the Las Cruces Sun News, that cash would go away very soon. During COVID-19, the same predictions hailing the death of cash continued to circulate.

However, in Canada, that turned out not to be the case. Cash in circulation went from $83 billion prior to the pandemic to more than $96 billion in September 2020, according to a report by the Financial Post. A Deutsche Bank survey also found that a third of Americans and Europeans rank cash as their favorite payment method.

To quote my story about Louder than Life, many of the smaller vendors who were pushing carts filled with water and beer were only accepting cash as well.

A bigger point here is that while cashless can be a useful tool, consumers and businesses will still want options to accept different forms of payments, which will include cash.

The underbanked

The third big problem with cashless is that it directly impacts those who do not have access to banking services: the unbanked or underbanked.

As the American Civil Liberties Union recently pointed out in a blog post, "Participation in a cashless society presumes a level of financial stability and enmeshment in bureaucratic financial systems that many people simply do not possess. Opening a bank account requires an ID, which many poor and elderly people lack, as well as other documents such as a utility bill or other proof of address, which the homeless lack, and which generally create bureaucratic barriers to participating in electronic payment networks. Banks also charge fees that can be significant for people living on the economic margins."

As a result, many communities have begun to ban fully cashless stores, including in New York City where multiple businesses have been fined for refusing to accept cash.

Cashless, while certainly an interesting trend, has hurdles to overcome if it is to become the only method available. In my opinion, I think consumers will always want choice when it comes to payments, and I know I'm not the only one who thinks that.