Like most economic trends, the coronavirus has accelerated the lean toward cashless payments — resulting in more swipe fees for merchants and potentially higher prices for consumers, according to Investopedia.
Though medical experts say paper currency is not a large source of virus transmission, the percentage of cashless businesses almost quadrupled in less than two months after the pandemic began, according to payment processor Square — going from 8 percent on March 1 to 31 percent on April 23.
The company considers a business to be cashless if 95 percent or more of its transactions come from debit and credit cards.
Both Visa and Mastercard were scheduled to hike their merchant swipe fees earlier this year, but they postponed the increase due to the pandemic, Investopedia reported.
The companies haven’t confirmed whether they’ll go back to their original plan, but an increase could affect merchants and consumers more than similar changes have in the past. That’s mostly because cash customers have historically helped subsidize their cashless counterparts by reducing the total amount merchants have to pay in swipe fees. But with more consumers using cashless payment methods, merchants may be forced to increase prices across the board to maintain profit margins.
More than 14 million Americans have no means of payment other than cash — 6 percent of American adults are "unbanked," according to the Federal Reserve, which means they don’t have a traditional checking or savings account.
In response to these trends, some states and cities, including New York, Massachusetts, Philadelphia, and San Francisco, have passed or are in the process of passing laws requiring merchants to accept cash payments.
Federal legislation, the Payment Choice Act of 2020, has also been introduced to stop merchants from declining cash, charging cash customers a higher price, or posting notices saying they don’t accept cash.