Running a Cashless vs Less Cash Business

When was the last time you used cash for a major purchase, like a new pair of shoes? Dinner for two at a restaurant? Or to pay for a tank of gas?

There’s a good chance it’s been a while.  Researchers have been following the trend toward a “less cash” society for years, documenting the threshold where people switch from currency to a payment card and how businesses make the decision to go cashless. 

Dr. Shelle Santana is an associate professor at the Harvard University Business School and author of an HBR article on the use of currency in modern society. During a recent BBB National Programs’ >Better Series Podcast, Dr. Santana discussed how the COVID-19 pandemic is accelerating a decades-old trend to towards an increasingly digital economy.

“Cash is typically used for low dollar transactions,” explained Dr. Santana. “The definition of low dollar has declined dramatically over time. There was a time about 20 years ago when $25 or so was the threshold between cash and a payment card. That’s declined steadily to about $5.”

Historically, comfort with technology, access to banking services, and privacy concerns have been the major reasons why more Americans don’t go cashless. “For people who have grown up with technology, the concept of actually having paper money that they carry around with them is quite burdensome,” noted Dr. Santana, who also cautioned there are legitimate concerns about a 100% cashless society.

“There are unbanked and underbanked people who are not part of the full digital economy who risk being marginalized if we move in a direction where everything becomes cashless. And then there is a group of people who really have privacy concerns. If you begin to put all of your transactions on a card then there is a digital footprint for everything that you’ve ever purchased.”

During the COVID-19 pandemic, what has been more of a lifestyle and convenience issue has become a matter of public health. Dr. Santana cited the example of a fast-food chain that now requires all orders to be placed through a mobile application. No cash ever changes hands. 

“They will let you know through the app when your order is ready and when you open the door, the orders are actually all lined up on a table with your name on it so that you grab and go. That’s for two reasons: one is keeping social distance and the other is minimizing the exchange of money to reduce the risk of sharing germs.”

“If you don’t have access to credit cards, though, it’s really difficult for you to get anything done while also keeping social distance,” according to Dr. Santana. “Let’s figure out a way to build a bridge between these communities and the digital economy.”