The Cashless Future: 2021 and Beyond
Changing customer behavior in the past year has seen the fastest acceleration yet toward a truly cashless society. Consumers are now more open than ever to embracing cashless options and merchants are welcoming this shift to reduce the risk of virus transmission to employees. The early days of the pandemic saw banks in China sterilizing bank notes and even the United Nations promoted cashless payments to preserve public health. While there is no medical evidence that cash is a transmitter of the deadly virus, these early measures sent us down a path of online shopping, telehealth appointments and work from home confinement.
From an efficiency standpoint, cashless payments are faster so merchants can help as many customers as possible with fewer slowdowns. Faster transactions can translate to higher customer satisfactions and fewer errors in making change, which means fewer losses and more revenue. Merchants can reduce their risk of exposure to internal employee theft as well as external robbery when they reduce or eliminate the sizeable amount of cash needed on hand each day.
When it comes to coins, the cashless movement has created an unintended scarcity galvanizing the U.S. Mint to take action. When the coronavirus first appeared in the United States, many companies closed in response to city and state lockdown mandates. This lockdown meant in-person spending in the form of cash payments was significantly reduced, resulting in several choke points in the circulation of coins. Recycling companies, retail, laundromats, arcades and other coin operated machines all help ensure coins get re-circulated. However, the 2020 lockdowns ensured these companies remained closed causing a major kink in coin circulation.
The U.S. Mint responded to this shortage by doubling output, minting just under 5 billion coins in three months to alleviate the shortage. The Federal Reserve also removed restrictions on the number of coins each bank can get. Still, the Federal Reserve had to take it one step further at the end of the year to create a Coin Task Force to get consumers to bring in their coins. Companies like Chic Fil A got creative offering free meals to those who brought in coins. One enterprising car wash company in Florida started accepting Bitcoin. And financial institutions launched Coin Buyback programs that offered $5 for every $100 in coins members brought in. Yet the shortage has continued right into 2021 further cementing the idea that customers will remain cashless for the foreseeable future.
In 2020, Amazon grew its retail business by 39% posting record profits despite delays, worker strikes and COVID-19 diagnoses at their warehouses. Walmart and Target also posted record online sales along with Etsy and many other online retailers. With digital shopping becoming more entrenched, the risk of card fraud increases exponentially. Credit unions will need robust card control and real-time alerts functionality within their digital banking platform to offer peace of mind to their cardholders. Lost or stolen cards and cards with fraudulent activity can be temporarily deactivated or permanently canceled by members from within the digital banking application. This reduces fraud risk and the related fraud expenses for the credit union, and also reduces staff expense by alleviating the time spent researching card fraud claims.
There’s no doubt the balance between cash and cards as forms of payment has been altered as a byproduct of the pandemic. With the escalation of cashless payments there is an increased need for robust member card control and real time alert functionality within the digital banking platform to mitigate the effect of high-risk fraud for both card user and the credit union.