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Cashless Stores, A Cashless Future?
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Cashless Stores, A Cashless Future?
 
This article will look at cashless stores, and their pros and cons. The recent controversies surrounding cashless stores and how they impact low income families and individuals will be explored and the writer will consider what the future of cashless stores is likely to be, in light of recent controversies and speculation.
 
 
A Cashless Future?
 
In the UK cash transactions account for 34% of total transactions. In Sweden, the number of transactions involving hard cash is just 2%, with analysts suggesting that cash based transactions in Sweden are predicted to fall to less than 1% by 2020. A very different picture exists in the USA though, where analysts surmise that “cash is still king”. According to the Federal Reserve cash is the most frequently used payment method, representing 30 per cent of total transactions and 55% of those under $10.
 
Reasons for the transition towards a more cashless society are complex and multi-faceted. Some relate to society as a whole, with analysts suggesting that society runs more smoothly with fewer hard cash transactions. Cashless transactions are said to minimise crimes like bribery, tax evasion, counterfeiting and the financing of terrorism, because unlike hard cash, which is largely untraceable, cashless transactions leave an electronic “paper trail” which can be followed, identified and analysed. This makes it harder to conceal income and the sources of payments and investment. In this way, cashless transactions make it harder for black markets to operate and even exist.
 
Cashless payments are becoming increasingly more secure with the advent of voice and face recognition, and retina scan technology. Compare this to the vulnerability of cash, which can be stolen readily from safes, or from retail premises and another reason for the growth of cashless technology becomes clear.
 
On the other hand, many analysts are suspicious of the emergence of a cashless society, because not all surveillance on the movement of cash is desirable. Unauthorised surveillance allows for information to fall into the wrong hands, and some fear the information could concentrate too much power in the hands of governments.
 
Other concerns have grown up around IT glitches, and the potential for technology to fail. These concerns are not solely theoretical. In April 2018, nearly 2 million TSB customers were affected by a string of technology glitches which left them without any access to their online bank accounts. With no control over money held in their accounts, customers complained that they were late in paying household bills and incurred charges and fees. RBS was beset by similar problems when an apparent failure in a firewall upgrade led to three RBS controlled banks being hit by an outage. Natwest customers also reported widespread problems with the failure of debit card payment failures, again in 2018. This has led to the Bank of England promising to run online “stress tests” to attempt to prevent future problems, however, as everyone knows there are no guarantees that future problems will not recur.
 
In the USA the issue of cashless transactions is fast becoming a hot topic of discussion as many stores are switching to cashless payment receipt systems. So, what are the pros and cons of cashless stores?  
 
 
Cashless Stores – What Are Their Advantages And Why Are They Becoming More Common?
 
Automation and robotics is having a massive impact on all aspects of business operations, including logistics, manufacturing and customer service. Cashless stores is just another part of these growing dynamics – the rationale is that customer service is streamlined where cashless stores are used, and this reduces waste, error and increases the overall efficiency of the check out process. Research has also shown that customers tend to spend more when they are not paying in cash, and are instead using credit and debit cards. Furthermore, research is suggesting that cashless stores reduce crime and thefts from stores.
 
Research shows that cash, as a method of payment, is much slower than cashless transactions, including one study which suggests that cashless payments are on average seven seconds faster than cash payments. This makes a huge impact for business owners, particularly in restaurants where faster payments can facilitate more people being served on an average day of business. Moreover, for high volume restaurants and retail outlets, these small advantages add up to huge changes in their overall profitability, due to the sheer volume of transactions they are able to handle more efficiently with less error and less time spent on manual operations.
 
A lesser known advantage of cashless status is that it prevents or thwarts armed robberies. Research has shown that in 2018 retail businesses have experienced almost 6000 violent robberies, more than half of which were armed robberies. In 2018, 488 people died as a direct result of armed robberies of retail premises. The majority of the workers who died were paid at minimum wage. In certain areas, stores dealing with traditional cash payments have been plagued by several robberies a month, where robbers make off with whatever cash is in the register, but the cashless store holds no reward for the armed robber. As such, many argue that the advent of cashless stores offers protection to minimum wage employees, who would otherwise be exposed to increasing dangers as armed robberies on retail premises continue to grow.
 
Security represents a wider problem for retailers accepting cash as a means of payment. If a business does a large amount of business in cash, then the cash needs to be protected in transit, usually in armored convoys which themselves are targets for robbers. On the other hand though, whereas a cashless system can’t fall victim to physical robberies, hackers and cyber crime continue to represent a threat to cashless operations. Often a lot of money needs to be spent creating a secure cyber system to facilitate cashless transactions. These systems also need to be continuously maintained, at further cost to the retailer.
 
The cashless store typically incorporates robotics and automation into customer service operations in several different ways. One of the fastest growing ways is for a self-service station to be set up, in-store, where shoppers can check out their items without needing to queue up, engage with a human customer service operator, make payment and then pack their items away. Human assistants supervise the process and in cases where there are problems with the technology, human assistants can be called to help.
 
Conversely, processing cash payments requires an infrastructure to be built and managed. Usually human “tellers” are required to deal with and process the cash, increasing the costs that businesses have to meet. Equally, keeping records of cash transactions requires infrastructure, and in many cases, specifically trained staff to keep records and accounts involving cash transactions. Removing these costs is therefore an attractive option for many retailers who can migrate the management of receipt of payment to robotic systems, albeit one that attracts a high initial cost to install the technology that is required to replace “human” payment processing staff. Staff must also be trained to supervise its use.
 
Some stores have utilised robotics to combine the cashless service option with robotics, which locate and carry heavy items for customers. Many successful chains like IKEA offer low cost items that require customers to locate, and check out heavy items, however these requirements represent barriers for some people who for whatever reason can’t shop in this way. Robotics combined with cashless checkout and payment is being used to address these barriers and make shopping for bulkier items, easier.
 
 
Cashless Stores In The USA
 
Amazon has been one of the major champions of the cashless store in the USA, and they have opened several cashless “Amazon Go” grocery stores across America. None of these stores accept cash for any transactions. Other US stores, for example Sweetgreen restaurants, have switched to cashless status for the same reasons – to gain competitive advantage based on the advantages that cashless status entails. Since it has been the US where cashless stores are proliferating, it is no surprise that it is the US where most of the controversy and debate surrounding cashless stores has arisen.
 
 
Backlash Against Cashless Stores
 
Cashless stores have proven to be controversial mainly because of their impact on people with low income. One of the biggest controversies is the impact that cashless stores have on the so-called “unbanked” or people who are so poor that they deal only in cash, since they are not eligible to get any kind of credit and as such hold a bank card, credit card or even a debit card. Moreover, banks and financial institutions often require minimum deposits, or have minimum deposit requirements every month for their users. These features of products offered by banks make their products off limits to poor people who will often have no savings and as such no way to successfully obtain the products that are required to carry out cashless transactions.
 
Many of the so-called “unbanked” are homeless and as such they find it difficult to use any means of digital payments, since these will often require things that only homeowners have like an internet connection, an address to apply for a credit or debit card from or a phone which can scan labels.
 
In the US this is a very big problem. Research suggests that 6.5 % of the population is “unbanked” which meant that nobody in the household had a bank or checking account. As of 2017, approximately 8.4 million US households including 14.1 million adults and 6.4 million children were “unbanked”. A further problem of being “under-banked” has additionally been identified by researchers. This is where very basic banking facilities were accessible by the household, but they continued to use facilities like money orders, check cashing, payday loans, rent to own services, pawn shops and auto title loans. Research suggests this is a wider problem with approximately 24.2 million US households (including 48.9 million adults and 15.4 million children) falling into this “under-banked” category.
 
The problems that impact the “unbanked” population aren’t confined to not being able to shop in cashless stores. Unbanked people can’t shop in low price outlets like Amazon, Overstock and Wish because these outlets are exclusively digital and you need an address to get items delivered to and you need a bank card to place an order in the first place. Furthermore, there are hundreds of product lines created by brands like Everland and Dollar Shave Club that are not available at all in stores, they are only available online. These brands are able to create superior products, by cutting manufacture and distribution costs associated with stocking traditional stores. However, the unbanked population doesn’t have access to them because they cannot make digital purchases.
 
Some have suggested that cashless stores actively encourage irresponsible spending. There has been a lot of research conducted on consumer behaviour linked to paying in cash and paying using cashless technology like debit and credit cards. It seems counterintuitive, however people buying the same products or services using paper money and cashless technology actually behave very differently. Research has strongly suggested that people paying for products and services using cashless technology actually spend more, and are more tempted to spend beyond their means. As such, forcing people to use cashless technology can create problems linked to budgeting and overspending, which is something that may even create more low income families and may create more problems for people who are already struggling on low incomes.  
 
 
Cashless Stores And The Elderly
 
The elderly have been identified as another group within society, which has been hit hard by the proliferation of cashless stores. Older people can experience vulnerability and many prefer to deal with cash, as this is what they have always done in the past. Dealing with technology can be confusing, even for adults who are not vulnerable, and so being forced to make payments as part of a cashless system can place undue stress on elderly people. Elderly people with sight and visual impairments may also prefer to deal with cash because they are used to how it looks and feels.
 
 
Solving The Problem Of The “Unbanked”, And The Negative Impacts Of Cashless Payments
 
All of these controversies have led to pressure being placed on legislators and policymakers to make provisions for the unbanked population, estimated at 14 million adults in the USA alone. Researchers have also predicted that the problems experienced by the “unbanked” are only set to increase as businesses move online and traditional bricks and mortar stores become less common.
 
Some have argued that legislation is required to protect the unbanked, and first in the firing line of those lobbying for these kinds of protections for the unbanked is the chain of cashless stores “Amazon Go”. A bill has been proposed in New Jersey, which, if passed, would require all stores to offer cash processing alternatives in every one of their stores. Moreover, cashless merchants have been banned in Philadelphia and Washington DC. Chicago debated a ban on cashless stores, however the proposed ban was never put in place.
 
Other solutions that have been proposed include governments issuing prepaid credit and debit cards. These have been suggested as a solution to the problems with low income families spending the majority of their cash on gambling, drugs and alcohol. The prepaid cards can be programmed to prevent spending on certain restricted items.  
 
Others have suggested that banks should be required to reduce or remove barriers that are experienced by unbanked people, or that retailers should be required to install vending machines where free prepaid debit cards can be accessed in exchange for cash.
 
Some retailers have taken it upon themselves to try to solve the access issue for the so-called “unbanked”. Walmart for example has installed vending machines, which sell prepaid debit cards to their customers. As such customers can go in-store and use cash to purchase debit cards required to participate in cashless transactions. United Airlines also provides kiosks with prepaid cards so that low income people can exchange cash for cards to be used in making online digital transactions and bookings.
 
 
Cashless Stores – Pros And Cons
 
This article has looked at the proliferation of cashless stores and the controversies that surround them. The biggest issue with cashless stores is the claim that these place lower income individuals and groups at a disadvantage because these groups already find it hard to access banks, bank cards and credit facilities – all of which are required for making cashless transactions. This problem extends to groups within society that are already marginalised, like black or Hispanics, and also the elderly.
 
Although cashless technology has given rise to much controversy, most commentators agree that cashless stores will continue to grow. However, the controversy shows no sign of abatement and none of the efforts to quell the controversy including the provision of prepaid kiosks have completely solved the problem. As such, the proliferation of cashless stores continues to be at risk of even heavier regulation by legislators representing the interests of those on low incomes.   
 
 
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