Payments

How Canadian retailers are waging war on cash

  • Some Canadian retailers are going cashless, a move enabled by the wide adoption of contactless payments.
  • A U.S. retailer that did a cashless trial says going fully cashless would shut out the unbanked and the underbanked.
close

Email a Friend

How Canadian retailers are waging war on cash

When DavidsTea co-founder David Segal launched Mad Radish restaurant in Ottawa, Canada, this summer, the hope was that cashless payments would be part of a better customer experience.

“Great brands are built by customer evangelists,” said Segal, who left DavidsTea last year. “Offering a cashless checkout process is just one of the ways we’re working to create that unique experience.”

Retailers see winning the war on cash as a way to differentiate themselves. Banks and fintech companies have gotten behind the idea, too. But Segal’s vision of being able to pay for things without cash is partly enabled by aspects of the Canadian payments ecosystem. Compared to the U.S., Canada is moving faster toward cashless retail because of the wide adoption of contactless technology (the ability to wave a credit card or phone to make purchases); a different approach to using cash; and a smaller number of banks and payment processors.

“Forty percent of transactions in Canada are contactless,” said Jeff Guthrie, chief sales and marketing officer at Moneris, one of Canada’s largest payment processors. “It’s easier in Canada compared to the U.S.; we have a handful of very large banks everyone deals with,” he said, adding that a smaller number of acquirers have allowed for contactless technology to be widely offered across point-of-sale terminals across the country.

As Tearsheet reported in May, the U.S. has been slower to take up contactless cards. Three years ago, Chase discontinued the contactless Chase Blink cards it rolled out in 2005; US Bank scrapped contactless cards after an unsuccessful test run a few years ago.

With the widely available option to tap debit and credit cards to buy things, people tap to pay for even the smallest of purchases, said Guthrie. As a result, people even started paying for coffee and donuts this way. Canada has also made a few moves that facilitated the cashless transition for retailers, including the replacement of $1 and $2 bills with coins (the so-called “loonies” and “toonies”) and the abolition of the penny five years ago.

“Once you accumulate a few coins in your pocket, they weigh you down quickly,” said Guthrie. “The idea to tap is very convenient.”

In the U.S., while the idea of banning cash from retail is being tested, it’s far from becoming the norm.

“I think it would take excluding whole groups of our country for retail to go fully cashless,” said Arianne Bennett, co-founder of the Amsterdam Falafelshop, a small chain of restaurants with locations across the U.S. The restaurant tried going cashless but decided to go back to letting customers use cash.

“It disrespects people who don’t have access to forms of electronic payments, bank accounts, etc., basically the middle class to the most poor among us,” she said. Contrast that to Canada, where 99 percent of people have access to bank accounts.

Still, others in the payments industry feel that U.S. retailers will eventually go cashless, but before that, there needs to be a compelling business case for both retailers and customers.

“If you’re going to drive out cash, you need alternatives — one is contactless payments, and the second alternative could be peer-to-peer payments,” said Ron van Wezel, senior analyst at Aite Group, adding that a future U.S. payments ecosystem could see customers using peer-to-peer payments services like Venmo or Zelle for retail purchases.

0 comments on “How Canadian retailers are waging war on cash”

Payments

Square’s Cash App continues to scale the bitcoin hype wall

  • Bitcoin prices are up over 100% year to date.
  • Square's Cash App is riding those prices higher as it sees record bitcoin revenues.
Zoe Murphy | November 10, 2020
Member Exclusive, Payments

PayPal’s new plans focus on owning more of the ecommerce transaction

  • PayPal has massively grown its payment volume, but not its engagement metrics.
  • PayPal's recent earnings call show a company with expansive plans for its digital wallet.
Zoe Murphy | November 04, 2020
Payments

‘The nice thing about our model is everyone wins’: Plastiq allows consumers to use credit cards at businesses that don’t accept them

  • Digital payments are good options for everyday-type transactions.
  • Many merchants still don't accept credit cards because they don't need to.
Michael Deleon | October 26, 2020
Payments

Inside the Techstars and Western Union Accelerator

  • As a 170 year old company, Western Union looks outside for innovation in addition to its own product development.
  • The company recently named its 2020 class of fintech startups to the Techstars and Western Union Accelerator.
Zoe Murphy | October 22, 2020
Payments

PPRO’s Steve Villegas on how COVID is impacting local payment behavior

  • PPRO has a lot of experience working with local and cross border payment options.
  • The firm's vp of payment partnerships in North America joins us on the podcast to talk payments.
Zachary Miller | October 13, 2020
More Articles