- A recent Square report shows increased consumer demand for and merchant adoption of cashless payments.
- In April 23.2% of Square sellers were cashless, up from just 5.4% in February.
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By the height of the pandemic in April, 23.2% of Square sellers were cashless (defined as taking 95% or more of transactions electronically), up from just 5.4% in February, according to the Square Making Change report.
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Though easing restrictions and reopenings have stabilized cashlessness, the pandemic has left a lasting impact: By August, over 12% of businesses remained cashless—more than double pre-pandemic levels.
Cash’s share of total transactions at Square sellers fell seven percentage points to just one-third by August 2020, likely driven by three factors:
- Card payments: During the pandemic, customers turned away from cash payments to limit physical contact, in turn growing card usage. This could have prompted merchants, especially small businesses, to enable card acceptance for the first time or cease taking cash entirely for a period.
- Contactless payments: More than half of US adults surveyed by Mastercard indicated the use of some form of contactless payment, which could include contactless cards or mobile wallets. That has increased acceptance: Square saw a 6.6 percentage point increase in the share of Square sellers accepting contactless payments from February through July this year, with that number hitting 70% by August. With the pandemic serving as a catalyst for contactless usage, it’s likely lasting interest in mobile wallets will continue to move customers away from cash.
- Ecommerce: Temporary store closures and stay-at-home measures contributed to a rise in ecommerce during the pandemic: Ecommerce sales grew 44.4% year-over-year (YoY) in Q2 2020 compared with the 13.9% YoY increase in Q2 2019, per the US Census Bureau. Merchants adapted by adding online stores, with 40% of Square sellers now offering ecommerce, which will help them boost sales as ongoing uncertainty continues to propel online retail.
A surge in cashless payments means that digital payments providers need to find ways to accommodate businesses looking to meet consumer needs. To keep pace with consumer needs, point-of-sale (POS) hardware and software providers will need to continue to find ways to offer merchants cashless payment solutions so that they can acquire new clients and keep existing customers loyal.
These providers can help merchants adapt to the decline of cash by offering affordable acceptance solutions, especially to cash-strapped small businesses, and expanding payment method acceptance by providing buy now, pay later (BNPL) or other tools. They can also look into sectors with lots of potential but low penetration, like parking and transit, to continue to bring in new business and differentiate their offerings from those of new entrants and other competition.
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