The end of cash?
Canadian retailers, consumers shifting to cards, appsShoppers looking for the cash register to pay for their purchases at Vancouver’s Kit and Ace active apparel stores in Gastown and Kitsilano will find a complete absence of banknotes.
The Vancouver-based brand — founded in 2014 by family members of Lululemon Athletica founder Chip Wilson — is one of the most notable cases of retailers abandoning bills and coins, which some observers have heralded as “the beginning of the end” for cash transactions in Canadian society.
In September, payment technology company Moneris said in a report that cash will make up only 10 per cent of the money spent in Canada by 2030, with credit or debit card payments and mobile solutions like Apple Pay making up the vast majority of day-to-day transactions.
Rob Cameron, chief product officer at Moneris, said the adoption of cashless payment is accelerating as technologies like contactless (or “tap”) transactions gain wider adoption among merchants. As of 2014, cash still made up 35 per cent of Canadian transactions, but Moneris’s survey showed younger shoppers increasingly moving to alternatives.
“I think if anything, the 10-per-cent projection is conservative,” Cameron said. “If cash gets small enough … more retailers may start turning it off. We are already seeing that; we’re seeing the airlines do that, we’re seeing parking do that, and we are seeing some quick-serve retailers starting to do it.”
Observers say the move to cashless transaction is being driven by merchants and consumers. For the consumer, it is the convenience of tapping a card and being quickly on one’s way. For businesses, tapping is far more efficient than handling change and it’s even more efficient than traditional card payment methods like chip-and-PIN, meaning they can handle more customers in the same time.
“We chose this route because, as a brand, Kit and Ace is forward-thinking and driven by innovation, and our spaces are designed to offer a seamless, efficient shopping experience,” said company spokeswoman Anna Cordon, who said the company’s 60-plus stores in North America, Great Britain and Australia are all cashless.
“We merchandise our product intuitively — smallest pant sizes on the lowest shelf to correlate with customers’ height — we don’t have phones on the shop floor, and we don’t accept cash,” she said, adding that customers have primarily been positive, despite some adjustments. “Our goal is to save people time and remove clutter while shopping.”
There are no laws preventing retailers from refusing cash. Some industries, such as airlines’ inflight merchandise and food sales, have taken particularly to cashless payments. A statement from WestJet said airlines also appreciate the efficiency of not having flight attendants handle cash, allowing them to focus on service.
Moneris’s Cameron said that when contactless cards became widespread in 2013, they took over one-in-five transactions in a single year. The company expects half of this year’s Canadian transactions to be tap-based.
The total disappearance of cash, however, is highly unlikely, financial analysts say. Even as more and more people embrace the convenience of cashless technology, tangible banknotes and coins remain a source of direct contact and trust for many merchants and shoppers, said Hendrix Vachon, an economist with Desjardins Group, the Montreal-based association of credit unions.
Vachon was the author of a Dejardins report last year that suggested Canada should abolish the nickel in the next five years. Oddly, that suggestion is really aimed at strengthening cash in the facing of competition from high-tech alternatives.
“The idea behind that change (that) we propose is that it’s a way to control the cost of cash, because there are costs,” Vachon said, noting the production, handling, calculating and transport of coins and banknotes all cost money for governments and financial institutions using them, thus discouraging their use.
The Desjardins report also suggested dropping the quarter for a 20-cent coin, effectively making all cash transactions’s cent-count end in zero, in the same way that the elimination of the penny limited the count to either be either five or zero. Such efficiencies, Vachon said, would allow cash to survive the onslaught by cashless methods.
Such moves are crucial, since — while many consumers and shops are going cashless and using mobile devices, cards or the Internet to purchase — there remains a large segment of the Canadian population that depends on cash.
“There’s an argument to having universal access to a method of payment,” Vachon said. “The numbers show us that the percentage of access to the Internet in Canada is 87 per cent; that means there are more than 10 per cent of the Canadian population that don’t have access.
“Maybe older people have difficulty adapting to new technology, and lower-income persons don’t have the same access to that technology. If you consider all those factors, it’s hard to believe one day that cash would totally disappear.”
Cameron argues, however, that touchless is starting to convert older Canadians as well. He points to Moneris’s survey figures that show 49 per cent of respondents 65 and older prefer to use tap payments — a number higher than the 48 per cent of those aged 55 to 64 who prefer the method.
“My dad, when he discovered tap, he said, ‘Wow, I figured out that I just tap my card and move. I don’t need my PIN, and it’s super fast,’” Cameron said. “And he’s almost 80 years old. Once you do it once, you realize it’s easier. And for lots of elderly Canadians, it is actually easier than trying to figure out the PIN pad.”
The biggest resistance to going cashless — especially credit cards and mobile apps — has come from small businesses.
Laura Jones, executive vice-president of the Canadian Federation of Independent Business, noted at least 1.5 per cent of any transaction using a credit card goes to the credit card company (such as Visa or Mastercard), and premium cards like Infinite Avion cards cost store owners much more.
“For a small business on a slim margin, these can be big costs,” Jones said. “Customers are usually very aware of their own fees, but they are often unaware (that) when a business takes credit card transactions, business owners are paying fees, as well.”
She added resistance is not limited to independent stores. Last year, Walmart Canada stopped accepting Visas at stores in Manitoba and Thunder Bay, Ont., because of a dispute that ended in January. Jones added many stores have fought back, either working through CFIB to lobby Ottawa or educating customers with signs encouraging cash payment — sometimes by offering extras (like a cookie, in the case of one Lower Mainland tea shop) for avoiding credit cards.
“The good news is, the climate is getting better, and the cost of accepting credit cards is coming down,” Jones said, noting Mastercard has recently agreed to give CFIB members rates similar to what the company charges Walmart, a saving of 12.5 per cent for the small businesses. “However, we still hear concerns from small businesses that costs are high, and they continue to ask customers to consider alternatives.”
There are also concerns that cash is important to tax avoiders and supports a “black-market” economy of cash-only transactions. Such cases have been reported in other Western nations like Australia, where the Sydney Morning Herald’s Tony Featherstone wrote last March that many Australian small businesses “flout” tax rules by using cash.
Vachon agrees that reducing tax evasion is a key reason for promoting cashless transactions, but noted of the $80 billion of Canadian banknotes in circulation, half are in $100 bills, indicating that eliminating the large bill itself may be enough to end much of the black-market economy, without having to eliminate cash completely.
“There are several reasons some people prefer to use cash,” he said, noting that he has heard anecdotes about Quebec residents saving up more cash after the ice storms of 1998, which rendered some households without electricity for months. Similarly, experts in B.C. often advise people to keep cash handy in their home earthquake kits.
“Many people feel it’s useful to keep some bill notes in their back pocket as a rainy-day reserve, just in case the other systems stop working. There is trust in something you can feel physically.”
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