Question

Many of you may have noticed signs popping up during the pandemic about a coin shortage. That was a real situation, brought on by so much business being pushed online, even for industries like restaurants. There has been a growing movement across the globe toward shifting away from coin and paper currency, relying instead on electronic payments. In a July 2020 Bloombergarticle discussed decisions by several Atlanta restaurants and the Atlanta Mercedes-Benz Stadium to go completely cashless. The stadium indicated they had saved $350,000 since moving to electronic payment only in March of 2019. According to a 2020 Economic Well-Being report by the Federal Reserve Board, 1 in 5 American adults had either no access to banking or insufficient levels of banking to support electronic payments. They represent 1/3 of all households earning less than $40,000 a year, and Black and Hispanic populations were overrepresented (56% and 32% respectively) in these numbers. What are your thoughts about moving toward a cashless society, and what would your recommendations be to a small business seeking to plan for the future, with respect to this issue?

Answer 1

With the rapid emergence of digitization in each and every aspect of our lives and with rapid growth of e-commerce the move towards a cashless society has become an imperative. Even in the case of brick and mortar stores payments are now being increasingly made through credit cards and debit cards and even through digital wallets. All these developments are pointing towards the imminent emergence of a cashless society at some point in future. The reason why more and more businesses and organizations will prefer going cashless and start accepting payments only digitally is that it leads to reduced costs as well as reduced levels of business risks. For instance risks of theft, robbery, counterfeit currency is eliminated when digital payments are encouraged. Various costs like the cost of security, transporting of cash, of cash withdrawals etc. will also fall substantially. Moreover speed of transaction will increase manifold as digital payments are transferred instantly and hence is processes in a matter of seconds. Government is also pushing for a cashless society as it will put them in a better situation to compile economic data and to fight corruption.

My recommendations to a small business seeking to plan for the future is that the small business should spend some money today to acquire the infrastructure related to digital payments. For instance the small business may have to install PoS terminals, digital wallets, QR readers etc. It will have to own a good set of computers and data servers as well. New payment trends will have to be embraced by the small business as well. Lastly it will have to train its employees in this regard. All these will help a small business to be prepared and ready to go cashless in future. While some costs and investments will be required in the beginning in future it will get more than offset by the benefits and cost savings that will accrue to it in future.