Credit (Not Cash) Is King

It is the new norm among fast-casual restaurants to solely accept cashless payment options, rendering physical currency useless when customers walk through their doors. The move improves efficiency for restaurants and appeals to evolving consumer preferences away from cash. Despite the advantages, cashless payment systems present societal issues for underbanked populations across the United States.


Sweetgreen, a popular salad chain boasting its sustainable, farm-to-table approach, became cash-free in 2017, only accepting credit card, debit card and mobile app payments. Founders Nicolas Jammet, Nathaniel Ru and Jonathan Neman expressed, “we believe digital payments are the future, and we want to help lead that charge, not lag behind.”


Other food establishments, including Dos Toros, Dig Inn, Two Forks and Bluestone Lane are also drivers of cash-free policies. Even Shake Shack, a larger, more ubiquitous name in the fast-casual restaurant industry, has experimented in the last year with cashless kiosks in their New York and San Francisco locations.


Local fast-casual restaurants, food trucks and cafes are also getting rid of hard cash. Through the 2017 Visa Cashless Challenge, 50 small businesses throughout the country won $10,000 each to implement cashless technologies within their establishments.


The cashless business model provides greater efficiency throughout business operations, critical for fast-casual restaurants striving to produce both high quality food and fast service. For businesses with a highly productive “assembly line” method for making customer orders, the desire to achieve the same speed at registers is understandable. In fact, Sweetgreen employees can perform five to 15 percent more transactions every hour when they do not have to handle cash. During peak lunch hours, customers avoid long lines and congestion when paying for their food.


Greater efficiency extends beyond direct transactions with customers. By going cash-free, managers accountable for counting cash and monitoring cash inventory can spend their time overseeing other tasks critical to business operations, such as mentoring and training staff.


Safety concerns associated with cash are easily eliminated by switching to card payments. The likelihood of robbery and theft is mitigated when there are no concentrated quantities of cash present, benefitting both staff and guests. Establishments also do not have to incur expenses and spend extra hours when transferring cash in armored cars, according to Sweetgreen.


For most customers, going cash-free is not concerning. According to a U.S. Bank Cash Behavior Survey, 47 percent of consumers surveyed say that they prefer making payments through a digital application rather than through cash. Consumers also carry cash less frequently, with 50 percent of survey respondents carrying cash less than half the time. Digital payments are particularly popular among millennials–49 percent prefer cashless payment options.


Sweetgreen revealed that 75 percent of consumers prefer to pay with credit or debit cards, while only 11 percent prefer cash. Thus, the cash-free decision is not only lucrative for business operations, but also a response to the shift in consumer preferences.


The adoption of cashless policies does mean additional costs associated with processing fees for card use. According to Marco Carabjo, a credit expert for the U.S. Small Business Association, fees can cost up to 5 percent of revenue. However, the returns are much greater than these costs.

The majority of customers already use cards and the switch to cash-free allows for greater efficiency.


Alongside increased transaction costs, the political ramifications of cashless restaurants present a challenge. There is rising concern that the refusal of cash payments is a policy that exacerbates socioeconomic disparities within the United States. While many people have no difficulty pulling out a credit or debit card, unbanked and underbanked groups of customers have trouble. Leo Kremer, CEO and Founder of Dos Toros, expressed that “going cashless just allows us to focus that much more on doing a good job.” In return, some argue that cashless restaurants are not truly doing a “good job” if customers without credit are being turned away.


Americans in different income groups rely on cash differently. In August 2018, CNBC compiled data revealing that cash was used by 24 percent of households with an income of $125,000 and greater. In contrast, 35 percent of Americans earning $25,000 to $49,000 used cash. As the nation moves towards the implementation of cashless businesses, low-income groups are more likely to suffer because they have a greater dependency on cash transactions.


Technically, businesses are not breaking any regulations. While United States coins and currency are considered legal tender for all debts and public charges, the U.S. Federal Reserve also contends that “private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise.” Massachusetts is the only state that has a law banning cashless businesses, enforced since 1978.


Lawmakers in Philadelphia, Chicago and New York have acknowledged the social dilemma posed by cash-free restaurants and are currently taking measures towards banning this practice. Council member Ritchie Torres, who is sponsoring the bill in New York to get rid of cashless restaurant policies, noted, “requiring a card is erecting a barrier for low-income New Yorkers—period.”


There have also been pro-cash social movements, such as the Cash Matters movement, aimed towards the re-establishment of paper transactions. The organization’s website stresses the importance of cash as the “only truly democratic form of payment.”


Beyond presenting challenges for low-income customers, cashless restaurants may be particularly problematic for certain racial groups. According to a 2018 FDIC National Survey of Unbanked and Underbanked households, 36 percent of black households and 31.5 percent of Hispanic households have no mainstream credit, compared to 14.4 percent of white households. Even if restaurants are not overtly attempting to exclude certain groups, minorities remain most impacted by such a financial shift, contributing to an overall racial divide.


Restaurants adopt cashless transactions as a means of achieving seamless integration with the digital era. Through increased efficiency for restaurant staff, the cashless revolution increases margins and benefits the industry as a whole. Before customers are easily persuaded by the efficiency of cashless restaurants, they should consider the societal implications of a simple card swipe on underbanked populations.