Chapter 2: Payments and the Pandemic
This is an installment of Making Change, an ongoing series of reports based on Square data (June 2020).
As the COVID-19 pandemic began to sweep the world, so too did health and safety concerns among business owners. This raised questions of how to properly conduct business and accept payments during social distancing and shelter-in-place mandates. Seemingly overnight, an increase in online ordering, touch-free digital payment methods, curbside pickup and no-contact deliveries emerged as the new normal, all in the name of a safety-first approach to business.
Just one year ago, Square payments data surfaced an increased affinity for digital payments, but both consumers and business owners expressed a strong commitment to cash, proving it unlikely that we’d cast paper currency aside any time soon. Here, we reexamine Square data to determine how the onset of COVID-19 has affected payments behavior and whether a global pandemic can accelerate a tangible shift at the physical and digital registers of the future.
COVID Sparks Cashless Growth Spurt
According to the Centers for Disease Control and Prevention (CDC), by mid-March, all 50 states, the District of Columbia, and four U.S. territories had reported cases of COVID-19. We analyzed Square payments data to assess what impact the initial spread of COVID-19 in the U.S. had on the share of cashless businesses across the country.
On March 1, 8% of U.S. Square sellers were effectively cashless*; 54 days later, on April 23, the number of cashless businesses had skyrocketed to 31%.
Share of cashless businesses
by business category (from March 1 to April 23)
|Beauty and Personal Care||11%||51%|
|Charities and Education||15%||57%|
|Food & Drink||7%||26%|
|Healthcare and Fitness||10%||35%|
|Home & Repair||9%||17%|
|Leisure and Entertainment||14%||48%|
Asked in 2019 what she thought of the notion of a “cashless society,” Kelly Deem laughed and bluntly declared she’d never heard of the concept.
Today, the bakery owner is facing an entirely new reality. When the shelter-in-place mandate in Kenosha, Wisconsin, went into effect on March 14 (Pi Day*), the pie bakery’s busiest day of the year, Deem and her staff shifted gears. She acquired her essential paperwork and within days, for the first time, began offering same-day online orders, curbside pickup, and delivery. “Strawberry rhubarb pies weren’t going to feed Kenosha, or Wisconsin for that matter. So I changed everything,” Deem recalls. The bakery now offers a full slate of grocery items, from farm-fresh eggs to flour to toilet paper, alongside family dinners, fresh loaves of bread, and, of course, pies.
Deem’s inventory isn’t the only thing that has changed dramatically since the start of shelter in place.
These days, cash is super-rare. We used to be a 70% cash business, and now it’s about 10% cash...and I don’t think we are ever going to see it return to the way it was before.”
Owner of Elsie Mae’s Canning and Pies in Kenosha, WI
Card Usage Accelerates Among Low Tickets
Prior to COVID-19, it took four years for the share of card usage in the U.S. to rise nine percentage points, from 54% to 63%.
But in just one month during the COVID-19 pandemic, card usage for $10 to $20 transactions in the U.S. increased two percentage points, from 71% card on April 1 to 73% card on April 29. By comparison, it previously took five months* for the share of card payments to rise two percentage points.
Consumers are clearly accelerating their adoption of digital payments for lower-dollar transactions. For many, the social-distancing requirements of COVID forced them to adopt digital payments perhaps sooner than they would have, and those who found the process safer, more secure, and easier than they expected will likely stick with it.”
State-by-State Cash Comparisons
This map shows which regions of the U.S. are leaning into paper currency, and which are partial to card.
|NE 51% cash||UT 22% cash|
|DE 49% cash||CO 29% cash|
|SD 45% cash||VA 30% cash|
|NJ 45% cash||MA 31% cash|
|WV 45% cash||VT 34% cash|
A Global Look at Cashless Businesses
The worldwide impact of COVID-19 is reflected in global payments trends, well beyond the US and in each of Square’s markets. We compared the share of businesses that are taking 95% or more card payments from Japan to the UK, to see how each country compares before and after peak pandemic.
*Metrics adjusted to control for differences in Square's local product availability and local payment nuances.
I have no concerns in changing my businesses to a completely cashless model once I reopen. In fact, COVID-19 encouraged my move toward cashless since the general perception of cash has now shifted toward unclean and unwelcome.”
Owner of Kakimori, a stationery store in Tokyo, Japan
We commissioned third-party data from Wakefield Research, surveying 1,000 small business owners to learn how they feel about cash during the age of COVID-19 and whether the pandemic could propel America toward a fully cashless future. The results of the Wakefield Research were as follows:
However, the overwhelming majority of business owners (82%) are still accepting cash payments despite the COVID-19 outbreak. Meanwhile, 15% are not currently accepting cash but plan to accept it in the future. Just 3% are not currently accepting cash and don’t plan to accept it in the future.
We have really enjoyed the forced lack of cash exchange from a reduced process and room for error standpoint. I know why some businesses are tempted to go cashless.”
Owner of Foster Coffee in Flint, MI
Cashless Predictions and Precautions
Year-over-year comparison of when small business owners think the U.S. will become a cashless society: