As a young bartender reliant on tips, Josh Rivero developed an early affinity for cash and envisioned one day opening his own bar, complete with ATM, that would operate on nothing but legal tender.
Times changed, and when he and his wife, Anna, opened the Fika Coffee House in 2008 in downtown Parker, he noticed the gradual shift toward credit and debit cards. Most customers now tap or swipe or complete their transaction on their smartphone, though Rivero still loves when someone pays for a $2 cup of coffee with a $20 bill and tells the cashier to “pay it forward,” which means to pick up the tab for the next several patrons.
When the coronavirus hit in mid-March, though, Rivero posted a sign asking customers to avoid paying in cash, out of safety concerns that the virus could be hitching a ride on well-traveled paper and change. The sign came down more recently, but the migration toward digital payment continues.
“In our 13 years I’ve seen a tremendous decrease in cash we take in,” said Rivero, who with his wife also co-owns a second Fika outlet in the area. “With the pandemic, we suggested people do something else, but we’ll always take cash. Personally, I prefer cash. I’m old school.”
Not long ago, when the coronavirus shutdown hamstrung businesses and made many uncomfortable with handling paper money and coins, the gradual move away from cash accelerated in Colorado and across the country. Although fears of virus transmission via currency have lessened as health officials determined the biggest threat is airborne, the trend toward plastic continues.
Commerce may never banish greenbacks entirely — some businesses prefer cash to avoid card transaction fees — but the winds blow strong in a digital direction. That means a trend toward ever-greater convenience for many consumers. But for lower-income people who work in cash-dominated businesses and can’t access a bank account — or for those who simply don’t trust the nation’s financial system — it can mean a lifetime of added expense and an inability to access credit for anything from retail purchases to cars and homes.
The pandemic also hastened boom times — or at least the promise of boom times — for those in the business of facilitating digital transactions.
PayPal CEO Daniel Schulman told the Los Angeles Times that the pandemic basically condensed the time frame for reaching the “tipping point” for digital payments from years to months. And person-to-person payment systems, like PayPal-owned Venmo, also experienced a dramatic spike in new users.
Colorado has also gotten a piece of the action. After a recent vacation day on Union Reservoir, Nancy Trigg stopped off for a late-afternoon beer at Left Hand Brewing Company in Longmont. As she went to pay, she chose not to use cash — not surprising for Trigg, who’s the chief growth officer for the Boulder-based Arryved, which provides point-of-sale services for the craft beverage industry and others.
Instead, she pulled out her smartphone, opened an app and took care of the tab without having to use currency or even handle a pen to sign a credit card receipt.
Only a few months ago, pre-coronavirus, Trigg and her colleagues at Arryved were talking about testing their new app and how they could encourage people to download it. Then, when the pandemic hit, they moved quickly to release it — and watched as it accumulated more than 30,000 downloads and counting.
In short order, the company pivoted from point-of-sale services — processing card transactions — toward building apps and online stores for their beverage-focused customers in 48 states, primarily breweries, brewpubs and some restaurants.
“Everyone was looking for touchless options,” Trigg said. “During COVID, although our revenue is down, in terms of new customers we’ve grown exponentially.”
Meanwhile, popular eateries like Chick-fil-A have moved toward contactless service, including using plastic containers to receive cash and dispense change. Even card transactions no longer require punching in a PIN number or gripping a pen for a signature.
And with a nationwide shortage of coins — another cash issue triggered by the pandemic — several large retailers like Lowe’s and King Soopers have sounded the alarm and some businesses have started to request either exact change or a card to process purchases.
Cash had been dethroned as the leading form of payment well before the pandemic shut down almost all bricks-and-mortar commerce, which gradually reopened with measures like plexiglass at the point of sale. But the coronavirus supercharged the concept of touchless transactions.
Still, debit cards had already left cash in their dust when it came to consumers’ preferred payment options, said Christina Huber, professor of economics at Metropolitan State University Denver.
“Of course, the pandemic definitely accelerated that,” she said. ”Consumers became a little afraid to use cash and retail stores actively discouraged use of cash for fear of touching cash and making you sick, or cashiers and consumers making each other sick. Stores discouraged it, and local authorities encouraged touchless payments.”
And so, during the pandemic, two primary forces have been pushing consumers away from cash, according to Thad Peterson, senior analyst at the Boston-based Aité Group. The first was necessity: When the lockdown paralyzed in-person business, retail customers migrated toward online shopping, the only game in town.
“This dramatic increase in digital commerce will decline somewhat when the pandemic abates,” Peterson said, “but many consumers will have discovered the convenience and simplicity of digital payments and will be less likely to use traditional payments going forward.”
The second was safety-driven: Contactless transactions allowed consumers to make in-store purchases without having to make physical contact with a terminal, be in close proximity to a clerk — or dig into their wallets, where Benjamins may have been cooling their heels for months.
“Between the two of these, the use of cash is declining more rapidly than it had been before the pandemic,” Peterson said. “However, cash will not be replaced in the foreseeable future. No form of payment has ever gone away in the history of payments, and a cash drawer will be a fixture at retail locations for a very long time to come.”
A 2019 study by the Federal Reserve Bank of San Francisco showed that from 2017, cash transactions dipped by 4 percentage points, to 26% from 30%. Cash did account for nearly half of payments under $10 and 42% of payments under $25, but only 10% of transactions over $25.
There’s also a generational theme to cash use. The youngest age group, 18-25, and the oldest, 65 and over, use cash for about one-third of their purchases, while the lowest level of cash use — less than 20% — is by those between 25 and 44.
The simple truth is that currency is just filthy.
Virtually all of those bills in your pocket are dirty, studies have shown, once they’ve been passed around awhile — and cash can stay in circulation for a decade or more. They can harbor hundreds of varieties of microbes, bacteria, viruses — and even traces of cocaine. The porous makeup of U.S. currency, 75% cotton and 25% linen, makes it easy for microorganisms to settle in for a ride, but harder for them to come off on your hands and transmit disease.
Still, when the coronavirus pandemic hit, the Centers for Disease Control and Prevention put out directives to minimize contact with both cash and the mechanisms used to process credit cards. Some businesses quit accepting cash altogether, but that move elicited pushback on the grounds that it put people who relied on cash at a disadvantage.
Although fears of spreading the virus via currency have lessened, an update for bank employees issued by the CDC at the end of June still cautioned that the virus could be transmitted by touching cash and then the mouth, nose or eyes.
The current focus centers on airborne transmission, said Dr. Lisa Miller, professor of epidemiology at the University of Colorado Anschutz Medical Campus.
“What CDC is saying is they don’t think objects — or fomites, as they’re called in science literature — are the main way coronavirus spreads,” Miller said. “Based on the literature and the outbreaks that we’re seeing, it’s mostly a person-to-person respiratory spread. Things like your mail or currency don’t seem to be a major factor.”
Nevertheless, she added, it still makes sense to wash hands thoroughly or use hand sanitizer when returning home or after contact with other people — and avoid touching your face with your hands. The virus can survive on objects anywhere from hours to days, depending on the type of surface, so it’s good to be aware of shared surfaces.
“Cash is one thing,” Miller said, noting even some digital transactions involve shared pens or a clerk swiping your card. “But there are other things that we’re touching as well. Not everything is contactless. Currency is definitely one that gets shared a lot, but there are still other shared objects people should be conscious about.”
In the early days of the pandemic, some bank customers in the U.S. and abroad actually started pulling their cash from accounts.
“Not necessarily to spend it,” said Huber, the MSU Denver professor, “but to store it under a mattress because they were unsure what would happen with the financial system, with society, and how the pandemic would play out.”
Amanda Averch, spokeswoman for the Colorado Bankers Association, confirms that there were reports of large cash withdrawals.
“We tried to get out ahead of that, to let people know their money is safe, and not a penny of FDIC-insured money has been lost by a bank,” she said.
On March 18, the CBA issued a media release urging customers not to make large cash withdrawals, warning against possible contamination.
“Particularly amid concerns of spreading a virus, consumers should remember that keeping cash in the bank is a prudent defense against contamination,” the release read in part. “A single dollar bill can be home to as many as 3,000 different bacteria and has changed hands upwards of a thousand times. Instead, consumers are urged, whenever they are able, to use other forms of payment including credit and debit cards, which can be easily sanitized using alcohol-based antibacterial wipes or a wet, soapy cloth. While consumers are cleaning their cards, they can rest assured their banks are well prepared to stay up-and-running amid any crisis.”
Huber notes that, while there’s less cash movement now, the trend toward using money to “store value” rather than as a medium of exchange continues to gain traction.
“The amount of cash circulating has risen in the last 10-15 years,” she said, “but the amount of transactions has gone down. That means people are keeping cash somewhere. They’re not using it to make payments.”
For some, the attraction to cash runs deeper. Not only does it promise anonymity, but it also bypasses a financial system with its rules and records and remains largely immune to large-scale, cataclysmic events — like a pandemic.
To take advantage of the convenience of digital transactions “means you have to trust the government, the banking system, the financial system that all of those transactions will be safe and your money continue to be there,” Huber said. “Trust seems to be slowly breaking down in our society, so maybe we’ll never go completely cashless.
“But I don’t think this trend toward cashless transactions will go away,” she added. “There are a lot of benefits if we go cashless. Hopefully, society figures out creative ways to do it so nobody is left behind.”
Nationally, an estimated 6% of adults don’t have checking or savings accounts that would allow them to process online payments.
At Bank On Denver, part of a national nonprofit network that offers free financial coaching and helps so-called “unbanked” or under-banked individuals into affordable banking, program director Lauren Money said the pandemic hasn’t changed the impact on cash-dependent people so much as it has “shined a light” on their problem.
“If you don’t have a bank account,” she said, “you’re steered toward more expensive products, like prepaid cards or money orders. Some cards have fees for everything — when you load them, check the balance, make a payment.”
She added that studies have shown individuals with no bank account spend about $45,000 more over their lifetime in fees and other costs associated with those more expensive payment methods.
Money notes that the low- and moderate-income people her organization sees found themselves at a further disadvantage as coronavirus stimulus funds reached individuals with direct deposit before those who were cut paper checks. And then they faced the question of how to cash them.
Some banks that partner with the Bank On coalition agreed to cash them, and offer free or low-cost banking services that can include prepaid debit cards with no fees. An arrangement with the Aurora court system helps individuals pay fines for nonviolent, non-felony crimes by reducing the amount of the ticket for people who attend three financial coaching sessions.
Part of the goal is to help people realize the advantages of digital transactions.
“That’s where we’re moving to,” Money said. “Thirty years ago, banks couldn’t even operate across state lines. Now they’re internet based. We’re moving toward a more digital age.”
Tony Cookson, an associate professor of finance at the Leeds School of Business at the University of Colorado Boulder, has studied another group at high risk of being left behind in the digital migration — Native Americans.
Cookson looked at every reservation in the U.S. with at least 250 residents and surveyed both those who grew up with banks nearby and those who did not to determine if that affected things like financial literacy and whether they were likely to have credit cards.
About 30% of those who grew up in proximity to banks had no credit history, and about half of those in areas without ready access to banks did not. The lesson from the study, Cookson said, is that early exposure to banks and digital forms of payment leads to familiarity.
“Having a bank account is one thing,” Cookson said. “But as far as having these other forms of payment, there’s even more who fall into that category, who don’t even have a credit record. A lot of the reason is access. One of the things we know is that having a bank nearby makes it more likely that you’ll get a credit card and get experience with finance.”
One subset of the general population has reason to rely on cash that cuts across socio-economic boundaries — people who purchase cannabis products in an industry that, pending a change in federal law, remains almost entirely a cash-only proposition.
Alex Levine, the co-CEO of Colorado’s Green Dragon dispensaries, said that while retail cannabis has adapted somewhat to its federal banking prohibition, the fact that the stalled cannabis banking bill was even mentioned recently in the midst of discussions about the coronavirus stimulus package represents a shift in the way the industry is regarded.
“If there’s any silver lining to all this,” he said, “I hope it’s that people understand the importance of getting cash out of this business or reducing the cash exposure of the cannabis business. But until a bill like that passes, no one’s been able to do anything.”
Levine said that even though the industry has developed some workarounds that allow patrons to use cards in what amounts to an ATM transaction, the idea of cannabis as a cash business remains ingrained. And COVID-19 did little, if anything, to change that.
“If ever there was a moment that would make people switch to cards, this would be it,” Levine said. “I was working a lot of the stores, because we were so short-staffed and to me, even though people were concerned, consumers were still paying with cash.”
There are a lot of reasons Levine doesn’t like cash — for one, the logistics of keeping cash are expensive — but when it comes to the transmission of the virus, he said he sleeps better knowing that his dispensaries have handling currency down to a science.
“There’s very little touching of cash,” he said. “Yes, you tender the change. But we feed cash into smart safes. We’re doing drops and deposits all the time. In our chain of custody, we touch it very little. It’s not like at the end of day we have people counting and bagging the cash, doing all this reconciliation in house.”
With the near-complete shutdown in March and only gradual reopening of the economy, the concept of digital financial transactions has caught on with some new fans, said Mac Clouse, professor of finance at the University of Denver’s Daniels College of Business. Security issues still give some pause. But the coronavirus-charged rush to electronic payment has counteracted that a bit.
“Now the public is in a situation where in some cases they’re not given a choice,” Clouse said. “So people discover it’s not bad to swipe a card, and it’s easier to accept than other payment methods.
“I haven’t taken cash out of my wallet for months.”