Cash isn't dead

Despite the rise of cashless and contactless payment in recent years, cash is far from dead, according to a panel of experts convened at December's Self Service Innovation Summit in Hollywood, Florida.

Dead or alive?

"Cash — is it dead?" asked moderator Elliot Maras, editor of Vending Times and Kiosk Marketplace.

"Based on what we see, cash is certainly not dead — far from it," moderator Vik Devjee, VP at CIMA Cash Handling America Inc., said, adding that he's not worried about an abrupt end in demand for the cash automation equipment his firm designs.

"What we are seeing though is that there is certainly a decline in the use of cash in certain segments, and I think that's really the key point," Devjee, whose company sponsored the session, continued. "I think the broader industry tries to generalize the demise of cash across the entire industry... but what we're seeing is that cash is alive and well" in segments like hospitality, gaming and the cannabis market.

"Cash is a big deal for us," Rocco DiNapoli, owner at Superior Amusements, a Milford, Connecticut based ATM and amusement machine operation, agreed. "It's not dead — it's shrinking." Though consumers still like to use cash, especially for tipping, DiNapoli argued the government would like to eliminate cash because it's harder to trace and control. Such efforts have already made it harder for amusement machine and ATM operators like himself to run their businesses.

War on cash

"No, cash is not dead at all." Bruce Renard, executive director for the National ATM Council, said. "We're in a war on cash — it's a global war. And there's an unholy alliance out there between companies that would benefit by cash going away, along with law enforcement and taxing authorities," Renard said, noting that his group has been lobbying Congress in support of the Payment Choice Act, which he said is designed to "preserve the option for consumers to pay with cash throughout the country."

Still, the push for a cashless society is strong.

"We saw this blatantly come to a head during COVID, when all kinds of misinformation was put out there about cash," Renard said, but despite these pressures, "there's more U.S. currency in circulation today than ever before in history."

"This idea that cash is going away is completely bogus," Renard continued. "What is happening is this: digital payments are becoming more and more prevalent, and so the percentage of cash transactions has dropped some... What we are in is a transition. We've got to figure out how to keep cash around, keep it strong, while still introducing digital payment methods — and have them coexist and be able to go from one to the other without it being a problem for consumers."

Still, it's not all dark; consumers saw the value of cash during COVID in a new way, and with massive consolidation in the banking industry, he said. Along with branches closing or being replaced by ATMs, there is a new opportunity. Banks are outsourcing ATM operations to entrepreneurs in a big way; while ATMs are popular with consumers, they far are more labor intensive than the average bank wants to deal with.

In addition, ATM transaction amounts have gone up since COVID.

On the regulatory front, there are initiatives at the federal, state and local level in favor of preserving cash, Renard said. People are realizing the value of cash in the face of world events, from American natural disasters to a rush for cash in Ukraine during the Russian invasion.

"Cash is a safety net for all of us. Cash is essential for over 5 million households in this country who only can deal with cash — they have no credit," Renard added, noting that cash has value as a national defense tool in case of electromagnetic pulse attacks or any other failure of electronic and Internet systems.

Cash vs. digital? Pro's and cons

"I think cash is limited," said Andrew "Andy" Kartiganer, president at Professional Vending Services Inc., a Deerfield Beach, Florida based convenience services operator. "Credit is about 75% of our sales, 25% is cash. It's a double-edged sword; there are different problems with both, but I would never eliminate cash. If your (card) reader goes down, that's the only way you're going to collect."

On the digital side, Kartiganer added that card readers have hidden costs and headaches, equipment failures or expiration (e.g., the sunsetting of 3G) and losing a percentage of each sale to credit card transaction fees. Also, there can be human errors in paperwork and configuration or even deposit routing, like when a machine sends transaction profits to the wrong business. Auditing is also much harder with these transactions thanks to sheer volume.

On the other hand, there are fees for processing and counting cash, Kartiganer said. The whole industry suffered during a coin shortage during the pandemic, which he said has now eased. Echoing other panelists, he said that it has become extremely difficult for him to deal with banks. Only one bank is currently willing to provide him the cash and coin services he needs.

Dishonest users using fake coins and other workarounds can cause further headaches on the cash side, Kartiganer said, but the sheer speed of evolving technology has caused unexpected headaches for cashless payments as well, such as the transition from swiping to contactless in digital payments.

Customers have reached out to him to complain about the machine not accepting their mobile payment app, for example, only to realize that it was a problem with the way they had the app set up on their phone. "It just takes time to learn the technology," he said.

Even so, he feels there is value in both digital and cash.

"As an entrepreneur, I want you to put money in, and I don't care how you do it. I don't care what it costs me to count it — but I want you to buy from my machine. I'll stick with both."

Innovation raises quality, lowers costs

Renard agreed with Kartiganer that technology innovation continues, most of which is beneficial.

"I think there's a little bit of an awakening in the market here in the U.S. in terms of cash recycling opportunities and things that may be more prevalent in other parts of the world that just haven't happened here, like smart safes," Renard said. Cash recycling equipment is becoming more common, and equipment is becoming more high-tech.

The market is also becoming more aware of (and seeking fixes for) the kinds of hardware, software and back-end headaches that Kartiganer mentioned.

But what kind of benchmarks can be used to gauge the technology's quality?

"The only benchmark we use … is the acceptance rate," Devjee said. "If we can accept more than 99% of the notes that are deposited into our devices, then I think we're in a good place." Notes are relatively easy, he said, but coins are much more difficult and cause over 75% of the problems in the industry by his estimate.

The technology's rising quality and price-efficiency is also lowering prices for operators and retailers, Devjee said, raising productivity.

"As technology has evolved, and as the cost of manufacturing technology has also come down, it's given us as a manufacturer the ability to build technology that does more for the same price," he said, citing cash recycling, which reduces operating costs for users who have increased interest in recycling. "We're certainly seeing a huge growth in demand for recycling technology now. The biggest benefit is productivity increase and the elimination of manual labor associated with dealing with that cash."

Recyclers are not a silver bullet for all operations, such as Kartiganer's. "It takes too much cash," Kartiganer said. "Most of our transactions are just buying a bottle of soda and to do a recycler you have to store a lot of cash in there in order to make the change. It's not worth it to us. Especially given the fact that only 25% of our sales come through cash. I don't think we're losing anybody because we can't take a $20 bill."

Digital transition inevitable

While the transition to mainly-digital payment seems to be inevitable in the long-term, the panel strongly urged industry, banks, consumers and government to keep cash alive as an option and to manage the transitional period carefully.

Renard said that governmental committees he has served on, including serving with the Atlanta Federal Reserve, has prioritized leaving no one behind during the transition towards digital currency.

Kartiganer noted that prioritizing easy auditing should be a priority as governmental and industry entities develop this transition. Also, having to keep pace with so many different payment technologies adds hassle and cost.

"A validator has a long life, when we're talking about sunset dates," Kartiganer offered as an example. "It might jam, it's a simple mechanism, but it has a long life — versus readers, which seem to change every few years. Just additional expense. I'd like to see that stop — I'd like to see one thing that interfaces with our machines and is universal."

Devjee added that from a manufacturing perspective, cash automation technology needs to align with strategies and initiatives like those that Renard's group supports in making cash more accessible.

"As a manufacturer it is our goal... to make the ability to pay in cash easier in any environment possible," he said, pointing to Manhattan's mandate requiring cash acceptance in retail environments. For ghost kitchens with kiosk ordering, this was a challenge, especially without human cashiers. Automating the cash payment at the kiosk was possible thanks to technology; thus, cash-based innovation is helping not only consumers but operators.

While the long term transition to a digital-dominated economy is inevitable, the transition period should be carefully designed to protect consumers, low-income citizens and small businesses, argued the panel, and cash is a common good that should never be fully eliminated. Towards this end, excellence and innovation in cash automation technology paves the way in operational excellence.

The full panel discussion, including an audience Q&A, is attached to this report.

Photo by Willie Lawless.