ALBUQUERQUE, N.M. — The evolution of money looks something like this: barter, coins, paper, plastic and now, phones.
Ask local business owners what their payment preferences are these days, and you’re likely to hear a range of responses.
While most customers are using multiple systems, such as paying electronically and using debit and credit cards and mobile apps, there still are consumers who prefer paying in cash or who can be persuaded by a business owner to write a check.
We’ve all encountered them: The home remodeler, the landscaper, the tailor at the dry cleaner, restaurateurs and food truck operators who are happy to accept payments other than plastic to avoid merchant fees on Visa and Mastercard transactions, the companies that handle about 70 percent of all credit card activity in the U.S.
The way consumers interact with money clearly is changing, and most small businesses are able to handle many payment methods. In the past 20 years, banks have pushed credit and debit cards at consumers, and shoppers have embraced the convenience and perks that come with plastic, such as receiving reward points and cash back and building a credit history.
Plastic clearly is trumping cash in retail transactions, according to the website NerdWallet.com, which in a 2017 survey showed “just 21 percent of point-of-sale purchases were made with cash,” while credit card purchases were 34 percent. More than 2 in 5 Americans (44 percent) say they primarily use debit cards for everyday purchases, like groceries and gas.
Gone are the days when most consumers paid for something substantial with cash, money order or even a check, though the decline of check use appears to have slowed, according to reports from the Federal Reserve.
The great majority of paper checks still written are used to pay businesses, with small businesses taking the lead, according to the Federal Reserve. Why are they still popular? Because accepting them requires no setup (like an online bill pay does) and does not incur a fee (like card payments do), say several business owners who prefer checks.
Indeed, some would like to put the kibosh on credit cards entirely to avoid processing fees that run about 2 to 4 percent of the transaction amount.
One is Derek Crnkovich, the owner of Builders Unique, who steers his customers to writing him a check.
“Right off the bat, I’m not a fan of credit cards,” said Crnkovich, a custom wood flooring contractor. “The good thing about cash is that there’s no merchant fee,” he said.
Crnkovich, already operating on tight margins, said the hit on a $10,000 home remodeling job means less for him and his crew. Still, he won’t take the drastic step of refusing credit card transactions.
Brandon Heckroth, the owner of Desert Ridge Construction, also asks for a check for his labor when he installs flooring. He belongs to a builders showroom where customers can purchase the materials on their credit cards. “It’s usually about their miles,” he said of the die-hard credit-card users.
He said customers understand why businesses want to avoid paying card fees. Heckroth said one customer made it a point to hit the bank to withdraw cash at the teller cage to get a job started.
With a personal check, Heckroth can pay himself and his crew in a more timely manner. When he worked as a sub for different contractors and as an installer for Home Depot, payments would often be two weeks after his part of the job was finished.
Neither contractor offers a discount for check transactions, saying their bids are competitive, they do good work, have solid references from previous customers, provide estimates and invoices, and pay their gross receipts taxes.
Cash’s cachet dwindles
Cold, hard cash generally is losing its appeal. In a survey of more than 2,000 Americans, U.S. Bank found that people aren’t carrying a lot of cash with them, and, when they do, they aren’t spending much. Overall, 50 percent of respondents said they carry cash with them less than half of the time.
But snubbing the lowly greenback can shut out many dollar-friendly customers, say some Albuquerque merchants.
James Pecherski, owner of three Casa Taco stores, two of them in Albuquerque and one in Elephant Butte, says the vast majority of his customers use credit cards to pay. But his newest store, near Coors and Central NW, has a 60 percent cash transaction rate. Many of those customers, he suspects, cannot get credit. Some fork over big bills at the eatery, such as 100s and 50s, especially on paydays. “We really fly through the 5s, 10s and 20s quickly,” Pecherski said.
For another category of business owner, food truck operators, cash is king and highly welcome.
“I take cash and Square,” said Nestor Lopez, owner/chef of the Gobble This food truck, which makes a regular appearance at Marble Brewery as well as running a stand-alone cafe in Old Town. Most food truck operators in town take cash only, said Lopez, who says he’s able to better track sales in cash, and feels it’s easier to get a hold on costs.
Square is a credit card-processing company that provides a way for small businesses like Lopez’s to accept credit cards without carrying the burden of all those fees that typically get added in by other credit card processors, he said. The merchant pays only per transaction, with no setup or monthly fees. The fee is 2.75 percent per swipe for all major credit cards.
There may be a good reason why some Burqueños pay for small transactions with a weathered $10 or $20 bill. According to a NerdWallet study, the Duke City has the eighth-highest percentage of “unbanked” households in the nation, with 11.1 percent of households in the metro area having no members with a bank account, which likely means no debit or credit cards.
For most small businesses in Albuquerque, operating on a cash-only basis is not practical. But processing credit card transactions generally requires an upfront investment.
Many small-business owners coming out of the WESST program in Albuquerque are using iPads for business operations like taking payments. The statewide small-business development organization, which has a strong focus on preparing women for the business world, includes payment processing consulting in its business incubator program.
A full-on, point-of-sale system, with equipment costs and merchant contracts and fees, may not be feasible for those just launching, said Clint Reecer, WESST regional manager. Larger systems may include a touch-screen device for entering sales, a desktop computer running software and payment hardware like credit card readers and bar-code scanners. Traditional systems can run $1,500 to $5,000 per terminal.
“They can be expensive,” Reecer said.
For most WESST clients, payment processing in the early going needs to be more accessible, which is why Square and GoPayment are popular approaches, Reecer said.
“For small businesses, the simplicity of Square’s setup works well,” said Reecer. “All you really need for a bare-bones setup is Internet access, a card reader and a compatible smartphone or tablet with the free Square Register app installed.”
Welcome to the future
To get a glimpse of one aspect of commerce in America, look no further than your neighborhood Starbucks.
The average Joe lining up for his morning cup of joe increasingly is paying with a mobile phone app heavily promoted by the coffee retailer. With more than 7 million active customers using the mobile payment system, Starbucks, based in tech-savvy Seattle, is looking to transform the way on-the-go coffee is selling today.
In a recent filing, the coffee giant reported that shoppers using mobile devices to pay for their orders accounted for 30 percent of transactions in its U.S. company-operated stores, according to website Internet Retailer.
There are a multitude of mobile wallets and payment apps on the market today,
Apple Pay has the largest percentage of supporting U.S. merchants, with 36 percent accepting the mobile payment service today, up from 16 percent last year, research released by Boston Retail Partners reveals.
PayPal falls in second place, with a 34 percent acceptance rate, followed by Mastercard PayPass (25 percent), Android Pay (24 percent), Visa Checkout (20 percent), Samsung Pay (18 percent), Chase Pay (11 percent) and private label mobile wallets with 4 percent, the 18th annual edition of the POS/Customer Engagement Survey shows.