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There was a time, not all that long ago, when the primary options for making everyday payments were cash and checks. Those times are past. Julian Morris and Ben Sperry discuss the tradeoffs and consequences in “The Cost of Payments: A Review,” (International Center for Law & Economics Working Paper, August 28, 2024). They begin with this anecdote:

Atlanta’s Mercedes-Benz Stadium in 2018 became the first major sports venue in the United States to switch to a fully cashless payment system. At the end of the new payment model’s first year of operations, the stadium reported that wait times had fallen by 20 to 30 seconds and per-capita food and beverage sales had risen by 16%, while saving more than $350,000 in operating expenses.

The decline of cash as an instrument for transactions, mainly counterbalanced by a rise in credit cards, is all over the US economy.

The authors write:

The purpose of this white paper is to summarize the existing literature on the relative costs of cash, other paper-based payments (primarily checks), and electronic payments. In short, the evidence shows that, when all costs and all parties to a transaction are considered, electronic payments (debit cards, credit cards, and mobile payments) are more cost-effective than cash for most transactions. The main reason for this is that electronic payments enable consumers to spend more than they have in their wallet, which results in “ticket lift” for merchants. Card rewards, including cashback and merchant-specific loyalty programs, further increase this ticket lift. In addition, “tap-and-pay” contactless payments can reduce the time it takes to tender payment relative to cash, especially when cash payments are eliminated altogether. This increases throughput, improving the customer experience and reducing labor costs. Finally, electronic payments enable merchants to sell online, including for in-store pickup.

The authors then review in some detail the studies in recent decades on transaction costs from a merchant’s point of view, “ticket lift” of larger purchases, greater speed of payments, and so on. They emphasize that the trend away from cash seems likely to continue:

[T]here has generally been a reduction in the “breakeven” point for electronic payments. This has likely been driven by such innovations as the EMV Chip and contactless payments, which have reduced fraud and tender-time costs, and increased benefits to all parties. … [W]hile innovations in cash management have also reduced the cost of accepting cash in general, the cost of multimodal payment acceptance means that the relative cost of continuing to accept cash has increased, especially in locations where throughput is of the essence, such as ballparks and quick-serve restaurants. This has led some such merchants to drop cash acceptance.

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