PHILADELPHIA -- Tom Ivory, the founder of the Baker Street Bread Co. in Philadelphia's Chestnut Hill section, fought a valiant effort for years to rein in bank fees by imposing a minimum credit card purchase of $10. But more customers wanted to go cashless, and Ivory eventually relented and accepted plastic for any transaction, no matter how small.
About 78% of the purchases at the cafe and store are now paid through credit cards or other electronic transfer -- up from 10% just five years ago.
"You have to keep up with technology," Ivory said. "To operate as just a cash business today is a suicide mission. You're just not going to succeed."
The coronavirus pandemic has accelerated the trend toward a cashless economy, financial experts say, buoyed by the growth of e-commerce and the fear of handling paper money contaminated with COVID-19. During the lock down, when Baker Street's retail business was limited to takeout at the doorway and was conducted only by phone or online, nearly every transaction was cashless.
The Centers for Disease Control and Prevention, in official guidance to retail workers in response to the pandemic, encouraged the use of touchless payment options, when available. Cash withdrawals from ATMs plunged 25% nationwide during the early weeks of the pandemic, according to industry figures.
The electronics-transfer industry has hailed the growth of a cashless economy as a consumer-driven trend and expects it will continue as the nation adapts to living with the pandemic. About 27% of business owners reported an increase in contactless payments in late March, according to a survey by the Electronic Transactions Association, a payment technology trade group, and the Strawhecker Group, a consulting firm for the payments industry.
"It's clear that the 'new normal' for businesses of all sizes is defined in part by a shift in consumer preference for e-commerce and contactless payments, which can help limit consumer exposure and promote social distancing during the pandemic," Jodie Kelley, the chief executive of the Electronics Transactions Association, said in a statement. The ETA represents more than 500 payment and technology companies.
But not everyone is sanguine about the rise of electronic payments, which include not only credit and debit cards, but non-bank financial services and mobile apps such as PayPal or Venmo, which allow users to exchange funds directly with other individuals.
Ivory is wistful about Baker Street's growing dependence on the modern electronic banking system, which collects about 3.4% in bank fees on every credit card transaction, a significant expense for a small business. The electronic transactions provide the bakery with some convenience and security, but in Ivory's view, they mostly generate profits for the banking sector.
"Big Finance is the key driver moving us to a cashless society," he said. "You'll notice banks have been slowly closing branches and ATMs and they're doing so in an effort to nudge us more toward their digital platforms. This saves them labor, it saves them a lot of real estate costs, and it improves their bottom line."