Starbucks Doesn't Want Your Cash

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In this segment of the Motley Fool Money podcast, host Chris Hill, Million Dollar Portfolio's Jason Moser and Matt Argersinger, and Total Income's Ron Gross chat about the latest salvo in the war on cash: Starbucks (NASDAQ: SBUX) says "your money is no good here" to customers at one test location where you can only pay with plastic or an app. The guys like the trend, but taking away the cash option does not lack for downsides.

A full transcript follows the video.

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This video was recorded on Jan. 19, 2018.

Chris Hill: The war on cash may have a new ally. Starbucks has begun testing a cashless store in downtown Seattle. One Starbucks is now accepting only cards and mobile payments. Jason, if you are Visa, among others, I think you're doing everything you can to make sure that this test succeeds.

Jason Moser: Well, Chris, while I am a huge proponent of the war on cash, as we've discussed many, many times before, I actually don't agree with stores going completely cashless. And it's just from the perspective that it eliminates choice. And I think when you are a retailer or a service provider of any kind, you really want to give your consumers, your loyal consumers, as much choice as possible. So I think there are ways to steer people toward cashless transactions while still having that cash option. You just make it a little bit less explicit. But we've seen this with other restaurants. There was a piece in The New York Times that talked about some restaurants that were doing this as well. And I think it's taken some consumers by surprise. I think, generally speaking, payments are moving more toward the electronic side. But I think having the cash option is still probably pretty important.

Ron Gross: When is the last time any of us used cash at a Starbucks? Is that a big piece of their business?

Moser: I can't imagine. And again, I'm not arguing that at all. I think you simply want to have that option, because some people are going to use it, and God forbid your phone battery dies. You can't hack a $5 bill in my hand, right?

Hill: Going cashless also comes with some downside. Say what you want about cash, but there's no service fee attached to paying cash.

Moser: Yeah, the business is paying to do that. On the flip side, if you don't have to maintain a cash drawer, that's one less thing you have to worry about. Obviously, there are bank deposit runs you have to make. There are trade-offs either way. I think ultimately, really, you just want to try to give consumers as much choice as possible, typically.

Gross: Where will the bitcoin fit without a cash drawer?

Moser: That's a very good question.

Matt Argersinger: And I also think, for some people, fewer nowadays, but I think the anonymous factor of cash and not being tracked and recorded for every purchase you make --

Gross: Big Brother.

Moser: I can't tell you, in the golf business, how many times we'd see some of those guys come in to the shop around 3 o'clock in the afternoon. "Hey, aren't you supposed to be working?" And they'd be like, "Well, yeah, can I get a cart for nine holes? I'm going to pay cash."

Hill: Let's go to our man behind the glass, Steve Broido. Steve, where do you come down on the whole cash versus digital payment move?

Steve Broido: It always seems to make more sense to use debit or credit cards, typically credit cards with rewards when you pay them off every month, if you can get something back. But there are still a lot of people, certainly in Japan, it's a cash country, and that's not going to fly over there. So I think that's something to be considered.

Chris Hill owns shares of Starbucks. Jason Moser owns shares of Starbucks and Visa. Matthew Argersinger owns shares of Starbucks. Ron Gross has no position in any of the stocks mentioned. Steve Broido has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks and Visa. The Motley Fool has no position in any cryptocurrencies mentioned. The Motley Fool has a disclosure policy.

The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy.

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