Here’s Why Visa Wants to Pay Small Restaurants $10K to Reject Your Cash
What would you do if you couldn’t pay cash for your lunch?
It may seem like a no-brainer at first. With chip cards and smartphone payment options — like Apple Pay, Android Wallet and Samsung Pay — being highly accessible, the days of scrounging for change in the bottom of your purse may seem like an eternity ago.
Is cash really obsolete, though?
Visa seems to think so, and it’s ramping up a challenge to entice food establishments to drop cash altogether.
On July 12, Visa announced a challenge for 50 small restaurants, cafes and food truck businesses in the U.S. to go completely cashless. The incentive? A pretty $10,000 each to get them started.
The Visa Challenge: Good Idea or Hassle?
According to Visa’s announcement, a cashless business has multiple advantages. The company’s yet-to-be-released study of 100 cities calculated that if businesses transitioned from cash to digital in New York City alone, they could generate an additional $6.8 billion in revenue and save more than 186 million hours in labor.
Visa also claims that eliminating cash could mean “convenience, security and ease of use.”
But critics of Visa’s cashless society say it brings a multitude of problems to the table, such as increased menu prices and decreased revenue for small businesses.
Slate’s Henry Grabar writes that the U.S. has some of the world’s highest interchange fees, which are the fees the merchant pays to the cardholder’s bank. Small businesses earn lower profits from these fees, and customers see higher prices as a result, Grabar writes.
Here’s Who Pays Big in a Cashless Society
Along with small businesses that have to keep up with the interchange fees, customers who don’t have bank cards also lose out.
Last year, fast-casual salad chain SweetGreen announced it was going cashless in 2017. It cited increased efficiency, safety and hygiene as driving factors to eliminating cash transactions.
After the announcement, The New York Times reported how dropping cash increases obstacles to those who have no alternative. The article cited a 2015 Federal Reserve study’s finding that cash transactions still accounted for 26% of purchases in the U.S.
SweetGreen’s new cashless policy puts an unfair strain on “poor people, senior citizens, immigrants and historically marginalized folks,” according to Medium writer Dorian Paul. “Marginalized black and brown communities have distrust in financial institutions and have significantly less access to credit cards, debit cards, and smart devices,” which means SweetGreen’s shift away from cash put them at a disadvantage.
A 2015 FDIC study found that 31.1% of the black community is underbanked, meaning they depend on bank alternatives, such as check cashers or prepaid cards, to conduct transactions.
The Risks Associated With Going Cashless
Let’s not forget about the vulnerability that comes with digital transactions. Fast-food chain Chipotle Mexican Grill is still recovering from a data breach that affected transactions between March 24, 2017 and April 18, 2017.
With technology comes the risk of hackers stealing valuable consumer information and committing fraud.
For now, Visa insists cash is no longer king. Will its $10,000 incentive be enough to push 50 companies to make the switch? We’ll see.
Kelly Smith is a junior writer and engagement specialist at The Penny Hoarder. Catch her on Twitter at @keywordkelly.