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Cash Exodus: COVID 19 pandemic could accelerate shift to cashless, experts say

shutterstock_350739986Some businesses reopening with pandemic protocols in place have said they won’t accept cash for the time being, potentially accelerating what the Bank of Canada describes as a decade-long shift away from the banknote.

Cashiers at Longos, Best Buy and The Shoe Company, for instance, will refuse cash out of concern the bills are a vector for the novel coronavirus. But experts – and Canada’s central bank – warn this leaves those without bank accounts, and some others with low incomes, by the wayside.

“This is going to be a big shock to the system that will push us in the direction of a more modernized payment system,” said Walid Hejazi, an associate professor of economic analysis and policy at the University of Toronto. “And if the developments we’ve seen during the pandemic continues to accelerate, we’re going to get to that fully modernized payment system much more quickly.”

The migration away from cash has been ongoing for more than a decade, according to the Bank of Canada’s most recent survey on methods of payment, conducted in 2017.

That year, it said, 33% of transactions were done in cash, down from 54% in 2009.

Smaller surveys conducted by Payments Canada, which handles the clearing and settlement of payments in this country, suggest the trend has only continued in the last few years and has accelerated in the past few months. And Interac, which operates Canada’s debit payments system, said last week that e-transfers are more frequent than ever during the pandemic and use of the contactless “Flash” tap payment system is also up.

But Canada’s central bank warns that the decision to refuse cash, while legal, could be disastrous for some of society’s most vulnerable, including the homeless and others without bank accounts.

In its report based on the 2017 survey, the Bank of Canada said 99 per cent of Canadians had a debit card and 89% had a credit card.

But Hejazi said the number of Canadians reliant on cash is likely much higher than those figures indicate.

“There’s large groups within our society that will not have access to those digital platforms in the way that might be assumed,” he said.

Some may have debit cards without much – if any – money in the account, while others may have credit cards that are maxed out, he said. Others still have low-cost bank accounts with limited transactions.

And as the popularity of online and mobile payment rises, the cost of mobile data plans also factors in, Hejazi said.

For businesses, the benefits of going cashless are appealing even beyond the pandemic, he said. Businesses that don’t accept cash don’t have to carry a “float” – money to give as change. Their transactions are already counted and their books are automatically reconciled, they need to make fewer trips to the bank and are less likely to be robbed.

But the effects on already marginalized groups would also be lasting – particularly for the homeless population, some of whom rely on panhandling to survive, he noted.

The Bank of Canada last month urged retailers to continue allowing cash transactions in part for that reason.

In an effort to mitigate the consequences, the Retail Council of Canada is recommending its members “encourage” contactless payment methods rather than mandating them.

“We’re still finding that a lot of merchants will accept cash, and that’s everything from large entities that have multiple tellers all the way down to conveniencestores,” said Karl Littler, senior vice-president of public affairs for the council. “But obviously, it’s the merchant’s prerogative as to whether to do so.”

He said the council’s recommendation errs on the side of caution as both the Bank of Canada and the World Health Organization say handling cash is about as risky as touching other common household objects, such as doorknobs, and warrants a wash of the hands rather than an outright ban.

But Littler said discouraging the use of cash minimizes risk.

“If you give cash, you get cash in return,” Littler said. “And so one of the challenges there is that although the people in the store may be very well oriented towards appropriate sanitization and physical distancing and so on, you’re actually getting somebody else’s cash back.”

 


Choice and added-value keys to adoption of alternative payment methods

Apple_Pay_and_contactless_payment_logoWhen it comes to checkout and payment, new technologies are abounding and retailers across all industries are trying to keep up. Whether it’s payment via a mobile wallet, mobile app or emerging in-vehicle payment technologies for fuel, the options continue to increase.

Convenience store operators and fuel retailers are responding to the changes with upgraded mobile apps, wider adoption of the various mobile wallets available, and both Shell and Chevron in the United States are now offering in-vehicle payments, with Shell partnering with General Motors and Chevron with Honda. Others are following Amazon’s lead and offering cashierless checkout for a frictionless experience.

But how can c-stores here in Canada gain greater consumer adoption of their new, alternative checkout offerings?

The key is to offer added value and a reason to use the technology besides just payment, according to Kevin Grieve, North American payments lead at Accenture, a consulting firm based in Dublin.

“Mobile payment is the end game, but it’s taken longer to adopt… because there has not been enough value provided by the solutions,” Grieve told Convenience Store News. “There are multiple payment methods — whether it’s a retailer’s own mobile app, Apple Pay, Google Pay or Samsung Pay — and people will align with what provides the most value to them.”

For c-store chains with their own branded mobile app, adding more than just payment ability will be key to converting customers and driving usage, he said, pointing to Starbucks as a best-case example. The coffeehouse chain connected its loyalty program to its mobile payment, which helped drive usage. Starbucks also added mobile ordering to allow people to pay before even entering the store.

“Consumers will drive demand, but this is where the future is headed and c-stores should get into it now. Do the pilots and tests, and get the customer feedback to know what works and what doesn’t,” Grieve advised. “At one point, Starbucks had no drive-thru and now, they don’t open a Starbucks without them because it’s what consumers wanted.”

Many c-store chains are adding loyalty programs into their branded apps, along with mobile payment. For example, Shell worked with General Motors (GM) to integrate its Shell Pay & Save program into GM’s in-vehicle payment system, and also offers this integration though its own branded app.

Even those offering mobile self-checkout for a frictionless experience are including loyalty in the mix. 7-Eleven Inc. announced a pilot of mobile self-checkout that work through the 7-Eleven app, and the retailer integrates its 7Rewards loyalty program into the process.

Those c-store operators using Skip, a third-party app that enables frictionless mobile self-checkout, also have the ability to link to a loyalty program.

Going forward, offering value will be even more important as more payment methods surface and competition heats up between apps and payment technologies.

If an app doesn’t offer a relevant experience — not just payment — it isn’t likely to last, according to Patrick T. Raycroft, a consultant at W. Capra Consulting Group in Chicago, who specializes in c-store, petroleum, QSR and specialty retail, as well as digital commerce technologies. “Just being able to pay on the phone doesn’t do it the way people anticipated.”

And it’s important to offer multiple checkout and payment options to customers so that they can choose which works best for them. Allowing for Apple Pay, Chase Pay, Google Pay and more provides convenience and ease, which is what today’s consumers are looking for when shopping.