Is Canada becoming a cashless society?
When David Segal opened his newest business, Mad Radish, he decided not to include one thing: a cash drawer.
Mad Radish serves salads and healthy meals, to bring to your table or get as takeout, and the two Ottawa stores don’t accept cash as payment.
“I don’t think you have to anymore. There’s very few people who don’t have a debit or credit card, or both, in their wallets,” said Segal.
His customers don’t seem to mind, he says. “Yes there’s the occasional person who doesn’t like it but the response has been overwhelmingly positive.”
It’s still unusual for a business to not accept cash, but it’s definitely true that Canadians are using cash less than before. A Bank of Canada survey, conducted in 2013, found that 44 per cent of the total number of transactions were done using cash. That’s 10 per cent less than in 2009.
Moneris, a company that processes credit and debit transactions, predicts that by 2030, only 10 per cent of money spent in Canada will be in cash. In 2013, it was 23 per cent, according to the Bank of Canada.
“In five years, I don’t even think this will be a topic of conversation. I just think this is the way the world’s moving,” said Segal.
Costs of doing business
Norman Shaw, an associate professor at Ryerson University’s Ted Rogers School of Retail Management, said that while he doesn’t expect cash to disappear entirely, he thinks that electronic payments will become even more popular.
“It’s the convenience and the speed,” said Shaw, who enthusiastically uses his smart watch for purchases. “The banks and the payment companies have done a very good job of putting tap-and-pay terminals everywhere, and consequently, it’s very easy to go with your credit card and just tap and pay.”
Almost all transactions can be done electronically now, he said, and he believes security on those payments is even stronger than if you used cash.
There are advantages for businesses going cash-free too, said Segal. With customers paying through tap, he says he can provide faster service. He won’t run out of quarters during a lunch rush and he won’t send his young employees to the bank carrying bags of cash for deposit. He also doesn’t have to pay his accountants to check cash deposits and make sure they match sales.
He wouldn’t have considered going cash-free a few years ago though, before tap-and-pay became widespread. “It’s really been a game-changer.”
Shaw notes businesses do have to pay fees to process electronic payments. But with cash, they have to pay employees to count it, to take it to the bank, to make sure everything adds up. “There is a cost to cash that merchants don’t think about.”
Easy come, easy go
Convenience can have a downside though, according to Gary Tymoschuk, vice-president of operations for the Credit Counselling Society. Unless you’re in the habit of budgeting carefully, it’s much easier to spend a lot of money through tap-and-pay, and not really keep track of where it goes.
“I think it’s way too easy to just get that card and swipe it. You don’t think about it,” he said.
Someone who buys a latte every day can end up spending a lot over the course of a month at $4 or $4.50 per drink. “If you’re pulling out a five-dollar bill every day, that’s going to sink in,” he said. If you ask someone who swipes a credit card every day instead, how much they’re spending, they’ll estimate far less than the real amount. “They’re going to lowball it by a significant amount because they’re not making that connection and understanding in their mind about how much it actually is.”
Businesses are happy to encourage people to use debit or credit for larger purchases, said Shaw, because it doesn’t place a hard limit on what you can spend in the same way having only $40 in your pocket does.
Tymoschuk thinks that banks and credit card companies might be happy about the shift too, and not just because of the fees they get from merchants.
“I think that the banks and the Visas and the Mastercards and all of those organizations, make no mistake, they’re making money,” he said. “People who don’t pay off their Visa or Mastercard statement every month, of course, they’re incurring costs, and those organizations are making money on that. And that’s their hope, let’s be honest about that.”
He thinks that consumers should always set a clear budget and stay within it. “People who have a solid understanding of their money and finances and everything, typically those people are the ones who have and live by a budget. They’ll know where their money is going, whether it’s cash or not.”
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