In 2015, transaction data from the company’s devices that are in millions of physical stores showed that half of all consumers used their cards in transactions as low as $8. Four years later, half of all consumers have pulled out their cards for purchases as low as $4.50.
Credit card usage has been trending higher even for these small payments, with growth even more pronounced for transactions between $10 and $20. “In the past four years, we’ve seen a nearly 10% increase in credit card usage for transactions within that range,” Square said. Today, for transactions under $20, 63% of people will reach for plastic.
Not all regions of the country see the same cash usage. Wisconsin, Delaware, Iowa, West Virginia, and Hawaii see a relatively even 50-50 divide between cash and plastic for transactions between $1 and $20.
In Utah, Virginia, Colorado, Washington, and California, cards are used twice as much as cash for those transactions.
The shift from cash to cards is palpable, but Square commissioned a survey of more than 1,000 small-business owners and found that the full “cashless” switch was expected by very few people.
Square’s data, of course, is not representative necessarily of the entire country, as only a fraction of the country’s businesses use Square to process payments. But broader numbers confirm the trend. According to the Federal Reserve’s 2018 Diary of Consumer Payment Choice, cash is used for 55% of all transactions under $10, and represented 30% of payment usage in 2017, compared to cards and electronic means, which represented around 62%.
Not moving to a cashless economy
Eight out of 10 Square’s businesses said they would never stop accepting cash, with two out of three estimating that their customers would react negatively if they abandoned cash — a figure consistent both throughout the country and age groups. (Several cities, including San Francisco, have moved to ban cashless stores.)
In its conclusions about the study, Square pointed out that it had no interest in promoting a cashless economy, even though its hardware business enjoys broad popularity among sellers — because it allows them to accept cards. (Obviously, anyone can accept cash for free.)
Given that the credit card’s gains on cash are already so cemented in consumer behavior, the goal now is simply to make sure sellers don’t miss an opportunity to make a sale.
As Square noted, “cash is still an integral part of a small-business owner’s income, and an overwhelming majority of small-business owners will continue to accept cash, despite the fact that fewer consumers are using it.”