The Economy Got Suddenly Closer to Cashless Commerce in the Past Year, a Square Study Shows

Three years’ worth of movement away from cash in the United States has taken place in just 12 months as a result of the Covid-19 pandemic, according to estimates in a report released Tuesday by Square Inc.

“It’s not to say we’re ditching cash entirely any time soon, but the contactless payments, online ordering, and touch-free pickup and delivery we’ve come to rely on during this past year are telling signs of the forms of commerce that are here to stay on a global scale,” the report notes.

San Francisco-based Square, which defines a cashless business as one where less than 5% of payments take place with cash, says 14% of all merchants for which it processes were cashless by February, up from 6.3% a year earlier. Of all transactions it processes, cash accounted for 30.5% last month, down from 37.4% in February 2020.

Driving the change away from change is the rapid adoption of online and contactless payment technology, the report says. While 45% of Square’s sellers were accepting online payments in February, just 30% were a year earlier. And the share of merchants taking contactless transactions grew over the same 12 months from 64% to 74%.

Once these businesses adopt digital payment methods, they don’t go back, Square says. “A year ago, there was no telling whether the sudden spike in cashless businesses and digital payment options was going to last,” says Square economist Felipe Chacon, as quoted in Square’s release about its report. “But today, we can look to markets where the pandemic has largely been eradicated, such as Australia, and see that the increase is sticking with business owners and consumers beyond the pandemic.”

The report’s findings are far from unique to Square as payments providers scramble to equip merchants for digital payments in the face of the pandemic’s impact on consumer shopping habits. “We believe this report helps to contextualize some of the behavioral changes and financial impacts catalyzed by the onset of Covid-19,” says Daniel Perlin, an analyst at RBC Capital Markets LLC, in a note regarding the report. “Shifting technological usage [and] consumers’ and/or businesses’ attitudes stemming from the pandemic affect nearly every stock in our coverage universe.”

Still, the report stops short of predicting the total demise of cash. While the cash crunch has accelerated, coins and bills still account for about one in three transactions. “That’s not insignificant,” says Shelle Santana, an assistant professor of marketing at Bentley University in Waltham, Mass. Santana’s comments were included in Square’s release on the report.