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”

Member Exclusive, Payments

Payments Briefing: Stripe launches fiat-to-crypto widget to simplify Web3 purchases

  • This week, we take a look at Stripe’s new fiat-to-crypto payment offering and what it means for the crypto industry.
  • We also discuss the potential benefits and pitfalls of implementing the Federal Reserve’s instant payment service, FedNow, for B2B transactions.
Ismail Umar | December 08, 2022
Payments

Quick take: Behind Wise and Deel’s new feature for global payroll

  • Wise recently partnered with payroll and HR platform Deel to create a feature that would help the latter’s customers transfer funds for payroll more efficiently.
  • The product announcement may feel like just another drop in the bucket, but it does point to an emerging trend regarding cross-border payments.
Rivka Abramson | December 06, 2022
Payments, Power of Payments Podcast

Power of Payments Ep. 19: Stripe’s Josh Ackerman on the changing nature of online checkout

  • Josh Ackerman, Product Lead at Stripe, joins host Ismail Umar on this week’s podcast.
  • He talks about the existing gaps between consumer expectations from online checkout and what most merchants currently offer, as well as how the checkout experience has evolved over the years.
Ismail Umar | December 02, 2022
Member Exclusive, Payments

Payments Briefing: What we know so far about Twitter’s payments plans

  • This week, we explore Elon Musk’s plans for Twitter’s entry into the payments market.
  • We also take a look at Citi’s new integrated solution for institutional billers.
Ismail Umar | November 18, 2022
Payments, Power of Payments Podcast

Power of Payments Ep. 18: Chase disrupting rent payments, MoneyGram’s crypto expansion, and more

  • This week, we discuss why JPMorgan Chase is launching a digital rent payment solution, and how Americans plan to use more flexible payments this holiday season.
  • We also talk about MoneyGram’s recent crypto expansion, and the potential role of digital currencies in the remittance industry.
Ismail Umar | November 18, 2022
More Articles