When Sam Largent opened his second bar in the Seattle area, he thought he’d take a bold risk: No cash allowed. Well, no physical currency, anyway.
All customers must pay with plastic. Debit and credit only; no greenbacks welcome.
“Dealing with cash brings a lot of issues,” says Largent. Like making change, reconciling at the end of each wait staff shift, going to the bank. “If the till is short at the end of the night, it’s usually a simple error, but it can take half an hour to find.”
Largent opened his first bar, Flatstick Pub, with his brother Andy back in 2014. Located on Seattle’s posh east side, not far from Microsoft headquarters, it’s a relaxed place that serves only local microbrews and includes a nine-hole mini-golf course. And, it took cash.
But when the brothers eyed a second spot in Seattle’s Pioneers Square, near downtown, crime concerns were a factor. And that helped tip the no-cash scales. When the second Flatstick opened this June, it was a “cards only” establishment.
“I’d seen a few other places do it, so I thought we’d try it,” Largent said. He anticipated complaints, but he got hardly any. Things went so well that the original Flatstick went “cards only” this month.
“There was a little more pushback there, because we had been taking cash there. But overall, it’s working out well,” he said. So well that the additional credit card transaction fees are worth it. “I like the idea from any efficiency standpoint.”
Retailers refusing cash isn’t exactly new. Airlines have been doing it for years when fliers buy meals (A 2011 lawsuit against Continental Airlines for not taking cash was dismissed by a New Jersey Superior Court). Plenty of non-manned facilities, like parking garages, only take cards.
Traditional retailers have been slower to go cashless, however. Back in 2010, some Apple stores reportedly didn’t accept cash when selling iPads, though the firm reversed that policy.
There are scattered examples of cash-free shopping popping up around the country, however. A coffee shop chain on the east coast named Bluestone Lane announced recently it would go cashless on Oct. 31, citing faster checkout speed and enhanced store operations.
“It’s a more sustainable option. Less vehicles moving money around the city,” the chain says on its website.
The Drawbacks of Going Cashless
Going cashless is not without growing pains, though. The most obvious might be lower tips for wait staff, as consumers stop dropping loose change or dollar bills into tip cups. As Starbucks increasingly nudges its customers towards paying with their app, Starbucks employees have complained that tips there have plummeted.
Largent says it’s been a mixed bag for his bartenders. Consumers who tip 20% on a credit card bill full of $6 microbrew purchases might actually be giving more than the usual $1-per-drink tip formula.
There’s no denying the pain Uncle Sam brings to this equation. Tips left on plastic must be declared and taxed, while wait staff can evade taxes left in cash.
Employee theft might be another enticement for owners to push forward with cashless solutions, but Largent said that didn’t factor into his thinking – it’s not a problem for him. On the other hand, high-cash businesses like bars bring all sorts of opportunity for below-the-table transactions that he doesn’t have to worry about now.
“We try to do everything by the books, not cut corners,” he said.
And increasingly, it appears consumers are trying to do everything without cash. A recent survey by Accenture says the percentage of consumers who used cash regularly dropped from 67% to 60% in the past year.
What About People Who Don’t Use Plastic? Or Banks?
The other main concern with cash-free retail is consumers who don’t have access to plastic through checking or savings accounts, a group sometimes referred to as the “unbanked.” The Federal Deposit Insurance Corp. estimates that 7% of U.S. households— about 9 million— are unbanked. While this group can’t get a traditional debit or credit card, use of General Purpose Reloadable cards —prepaid debit cards— is quickly filling that gap. Use of the cards jumped 50% from 2012 to 2014, according to the Pew Charitable Trusts.
Some 2.4% of the U.S. population are unbanked consumers with prepaid debit cards, meaning the number of people without access to any kind of plastic payment is less than 5%.
While those consumers aren’t complaining, Largent said, when I posted a picture showing Flatstick’s new policy on my Facebook page, readers didn’t care for it:
“I’d probably boycott on principal alone,” said one Oregon resident.
“That’s a place I wouldn’t shop. I refuse to be forced to use plastic,” said another.
Other readers were more sympathetic.
“One of the stores in the chain I work for took four counterfeit $100 bills in one day. That is enough of an incentive to do something like this,” said one.
But even before the change, Largent said cash sales at his original location were only about 10% of total sales — so in the end, the risk for his business was very small. Meanwhile, he and other retailers have a whole host of new, non-cash payment systems to worry about.
The Accenture survey mentioned earlier found that 32% of millennials had used mobile payment tools like person-to-person app Venmo. Other mobile wallet technologies like Apple Pay and Android Pay, while less popular with consumers, are making in-roads and helping squeeze out cash.
“I think the trend will be more and more options for people to make payments electronically,” Largent said. “We get very busy, and not taking cash really helps us keep the line moving, lets us focus on our customers.”
If you’re among the unbanked, but are thinking about opening a bank account, here are seven important questions to ask your banker before opening an account. And if you don’t have any credit cards but would like one, it’s important to remember that your credit scores will help determine what credit cards you qualify for. Being rejected for a card you don’t qualify for (if you apply but you have bad credit, for example) can actually ding your credit scores. If you don’t know what your credit scores are, you can see two of your free credit scores, updated every 14 days, on Credit.com)