The so-called “War on Cash” that has escalated in the last decade has become even more pronounced in the midst of the COVID-19 pandemic. The rise of e-commerce as well as fears over potential contamination of bills and coins has led to many Americans choosing cashless payments and making fewer withdrawals at ATMs.

According to CPA Practice Advisor, cash withdrawals plummeted 25% at the start of the pandemic, with 27% of business reporting an increase of contactless payments. Use of credit and debit cards as well as services like PayPal and Venmo, which allow user to transfer funds electronically via mobile apps, have both been on the rise in recent years, and have become even more popular in the past few months. Partly fueled by news of China burning or disinfecting its paper bills in response to the virus, this recent decrease in using cash to pay for goods and services is only the latest blow to the payment medium. The past few years have brought a significant downturn in payment using paper bills. From 2017 to 2018, the percentage of transactions involving cash went down from 30% to 26%. This decrease was even more pronounced in younger buyers ages 35-44, whose cash usage went down from 32% to 19% in the same period. 

Still, many industry experts maintain that cash is not going away anytime soon. According to Michael Lee, chief executive of the ATM Industry Association, while cash withdrawals were down in early April, they have already begun to recover and are expected to be back at pre-COVID levels when the pandemic subsides. Dominic C. Canuso, chief financial officer of WSFS Financial Corp., has also stated that although overall transactions decreased, the amount of money being withdrawn at once was higher than it was before the crisis. This means that overall cash circulation actually remained the same or slightly higher than pre-virus days, though fewer people were choosing to pay with cash.

The change has many entrepreneurs concerned. An increase in credit card payments can be especially difficult on mom-and-pop shops, whose banks often charge fees for processing such transactions. In a time when many small businesses are already struggling to stay afloat, these fees can feel like a significant impact on the bottom line. Still, it’s very difficult to operate without accepting credit cards, as consumers appreciate both the convenience and feeling of safety that comes with using their own cards. 

Some business owners choose to limit credit card transactions to purchases over a certain amount (commonly $10,) but this may lead to a decrease in sales, as many customers, especially the younger demographic, do not carry cash. If these shoppers do not want to make a purchase of over $10, they are then unable to patronize the business.

While cash will likely stick around as an important part of the economy, particularly for lower-income individuals who do not carry bank cards, it is vital as a small business to adapt to changing times and create a strategy to accept many different forms of payment. In diversifying the types of transactions you are able to process, you ensure that you are able to capture the largest market share and serve people with varying needs and preferences.

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