When Grounds for Coffee’s Kitsilano location went cashless earlier this year, owner and founder Dan Hilton expected a slight drop in sales. Instead, the coffee shop experienced a significant boost.
“Sales went up double digits, and they've held steady,” Hilton said. “Foot traffic seems to have gone up as well. This has been steady for four months. It hasn't dipped.”
But after opening a second location in East Vancouver a month ago, Hilton learned a cashless payment system doesn’t work for all neighbourhoods in the city.
Since debuting on Commercial Drive May 15, the business has experienced “considerable” public pressure to accept cash at that location, which they will begin doing shortly.
“I've been receiving a lot of email requests from people who, for the most part, are advocating on behalf of those they feel that maybe aren't so capable of paying with a form other than cash in or around the Drive,” Hilton explained. “And then we've had requests from people at the store who want to pay with cash.”
“We're the new kids on the block,” he continued. “It just doesn't feel right in that particular location to dig our heels in and say, 'No, this is the way it is.’”
Hilton’s experience on the city’s East Side contrasts sharply with Ground’s switch to a card-only payment system at its Alma and 10th location.
“Honestly, most people didn't care,” said Hilton. “More than 80 per cent of our customers weren't using cash anyway.”
Mostly made up of university students and the well-to-do, Kits may be moving away from cash quicker than the rest of the country, but now more and more Canadians are opting for plastic.
A 2018 study from Payments Canada found just under 30 per cent of all transactions in 2017 involved cash — down 10 per cent from five years before. Credit and debit card payments accounted for almost half of all transactions in 2017.
When the Angus Reid Institute recently asked Canadians what’s in their wallet, 63 per cent “agreed either strongly or moderately that they hardly ever carry cash,” including 70 per cent of individuals between the ages of 26 and 37.
Though it may be the first cash-free café in the city, Grounds for Coffee is not the first Vancouver business to experiment with a cashless system.
In early January, the Vancouver Civic Theatres, a city-owned company, which operates the Queen Elizabeth Theatre, the Orpheum, the Playhouse and the ANNEX, went mostly cashless. The venues still take cash at coat check, where food and drinks can be purchased. Since making the switch, they’ve enjoyed a rise in concession sales, says Guy Leroux, the director of VCT.
Kit+Ace, a clothing retailer founded by Chip Wilson, went cashless back in 2017. So did Marutama Ra-men, a small restaurant chain with three locations in Vancouver.
“Now customers wait less time to be seated as the result of faster payment [and] faster rotation,” Tatsumi Koizumi, chief operating officer at Marutama, told the Courierover email.
The business now pays more in debit and credit service fees, but most customers were paying by card prior to the switch anyways. The advantages of a cashless system, including increased efficiency and reduced labour costs, far outweigh the disadvantages, Koizumi added.
Hilton echoed this sentiment explaining why he chose to go cashless at Ground’s Kits location.
“People often think about the commissions of credit cards, but when you've got staff staying late to count cash, counting it throughout the day, [and] you're paying managers to go to the bank — the cost of [handling] cash was tens of thousands of dollars a year,” he said.
Meanwhile, service has improved, and customers have also started tipping more, says Hilton.
“The quicker you can process a transaction and get their order up, the quicker you can serve the next customer — it's just a better experience for everybody,” he continued. “It is more efficient by a long shot.”
Still, Grounds inevitably hit some road bumps after first introducing the system in Kitsilano. Accommodating children who may not have access to a debit or credit card led the 26-year-old coffee shop, famous for its cinnamon buns, to improvise.
“What we decided to do was load up some gift cards with the prepaid amount for a cinnamon bun on there, [and] attached a little note with the gift card explaining to their parents that we had gone cashless,” Hilton said. The parents could then reload the gift cards for their kids to use, a system he says has worked well so far.
Grounds uses a similar approach for low-income or homeless individuals who only carry cash. However, at times the business might refuse to charge the person altogether, an “unwritten” rule Hilton says has long been in practice.
“If you're homeless, and you come in looking like you're cold and you can't afford a coffee, we would have given you a coffee for free anyway,” he said.
But while most customers have been fine paying exclusively by card, a small minority take issue, says Hilton. One employee in Kits recalled a disgruntled customer who claimed it was illegal to decline physical currency. In fact, refusing cash is perfectly legal. According to the Bank of Canada, both parties to a transaction "must agree on the payment method."
Concerns over privacy and exclusion
While business touts the cost-saving efficiency of going cashless, and consumers enjoy the convenience only carrying plastic offers, some experts warn Canada isn’t ready yet for a cash-free economy.
For starters, consumer privacy is often overlooked, says Werner Antweiler, a professor at the UBC Sauder School of Business.
“Whenever you use an instrument like a credit card or debit card, you're actually sharing information about your transaction with a third party,” Antweiler explained.
“For example, Royal Bank has partnerships with Petro-Canada. When you use your credit card at the gas station, you get like three cents off, but then the bank shares your transaction information with Petro-Canada so they can target you for advertisements and other things.”
Apple and Google also provide apps that facilitate in-store purchases with a smartphone, allowing the tech giants to keep track of what people are buying and harvest that information without consumers knowing.
However, Hilton insists Grounds is not permitted to keep payment data and has “no means of doing so.”
As the country moves away from cash, the Canadian government needs to strengthen the country’s consumer privacy laws, says Antweiler.
He points to the European Union’s General Data Protection Regulation as a worthy blueprint. The comprehensive law, enacted last spring, grants EU citizens what Antweiler calls “informational self-determination,” giving people the right to access data companies possess about them and demand it be deleted.
Antweiler also echoed the concerns of those on the Drive who believe cashless businesses exclude low-income and homeless people without access to credit or debit.
“It's not just the poor, but it's also [certain age] groups that are marginalized because they are too young or they're too old, and maybe they feel they can't embrace these technologies as easily as younger people,” said Antweiler.
“We may need to consider regulation that requires these barriers be removed so that everybody can access an electronic payment device with little to no cost,” he added.
A cashless economy is inevitable, says Antweiler. Whether Canada will be ready is much less certain.