Lead paragraph
President Trump’s proposal to eliminate the U.S. one-cent coin has re-ignited a long-running debate about the costs and distributional effects of low-denomination currency. Industry groups representing restaurants say the move would impose direct compliance and rounding costs totaling $168 million, a figure cited in public statements and reported by Yahoo Finance on April 11, 2026 (Yahoo Finance, Apr 11, 2026). Proponents of redenomination argue that pennies are costly to produce and yield negligible benefits in modern, increasingly electronic payment systems; opponents counter that rounding systems and implementation costs will fall disproportionately on small merchants and cash-dependent consumers. The policy discussion therefore hinges on quantifying three things: the production and handling costs of pennies, the real-world experience of markets that have eliminated small coins (notably Canada and Australia), and the likely behavioral response of consumers and firms when cash rounding is introduced.
Context
The United States has repeatedly grappled with whether to retain the penny. Unlike most macroeconomic policy levers, coinage policy mixes operational logistics with distributional politics: changes require statutory authority and practical rule-making at the Treasury and Federal Reserve, and they alter the micro-pricing environment at the point of sale. The immediate policy lever under discussion is to cease production of the one-cent coin and adopt a cash-rounding regime that would round cash transactions to the nearest five cents; electronic transactions would be unaffected. The restaurant sector has prioritized this debate, arguing the conversion would raise costs in point-of-sale programming, customer refunds, and cash-handling procedures — and they have quantified that claim with a $168 million figure communicated to the media (Yahoo Finance, Apr 11, 2026).
How that $168 million is calculated matters. It aggregates one-off costs (software updates, training, contract changes), recurring administrative costs related to increased coin handling and reconciliation, and estimated consumer friction losses. Those categories map into two measurable channels for investors and policymakers: (1) timing and magnitude of capex and OPEX for firms that will reprogram POS systems and retrain front-line staff, and (2) persistent micro-price rounding effects that could change average ticket sizes for cash transactions. The latter is particularly sensitive to consumer payment mix: if cash represents a declining share of transactions, the ongoing effect on sales and household purchasing power shrinks.
Data Deep Dive
There are three empirical anchors investors should examine. First, cash usage: the Federal Reserve’s 2022 Diary of Consumer Payment Choice reports cash accounted for roughly 19% of point-of-sale transactions by number and approximately 7% by value (Federal Reserve, 2022). That implies any change to coinage will primarily affect a subset of low-value, frequent purchases — categories where restaurants and quick-service outlets are concentrated. Second, the cost claim: restaurants cite a $168 million aggregate implementation and operational cost tied to cessation of the penny (Yahoo Finance, Apr 11, 2026). That figure should be benchmarked against the restaurant industry’s scale — for example, U.S. full-service and limited-service restaurant industry sales were approximately $1.2 trillion in 2025 (National Restaurant Association, 2026) — to understand relative impact. The $168 million claim equates to about 0.014% of industry sales, but the distribution is likely concentrated among small and mid-sized operators.
Third, international precedent: Canada eliminated the penny in 2013 and adopted a rounding system for cash transactions. The Royal Canadian Mint stopped distributing pennies in mid-2012, and the government implemented rounding in 2013; analyses by Canadian agencies and independent researchers found negligible macro-inflationary effects, typically measured at less than 0.05 percentage points in a year following the change (Statistics Canada; Bank of Canada reviews, 2013–2015). Australia withdrew 1-cent and 2-cent coins in 1992 and likewise reported minimal sustained price-level distortion. Those experiences suggest that, at the aggregate level, rounding does not necessarily produce material inflation; the primary effects are micro-level distributional shifts between cash payers and merchants or between different consumer cohorts.
Sector Implications
Restaurants and other low-ticket retail sectors are the most exposed in two respects: transactional exposure and customer mix. Quick-service and fast-casual restaurants have a higher frequency of sub-$10 transactions and a higher probability of cash usage relative to big-box retailers. If cash rounding skews in favor of merchants in a statistically significant way, average ticket sizes could rise slightly for cash payers; conversely, if rounding leads to rounded-down receipts more often, merchants would absorb the difference. The $168 million industry estimate suggests that restaurants expect net implementation and operational costs to exceed any rounding gains for a transitional period.
For large publicly traded restaurant chains, exposure is manageable: POS systems are centrally operated, and IT and compliance budgets can amortize one-off updates. Mid-size and independent operators bear the brunt of the one-off compliance cost and the ongoing accounting complexity. In addition, the shift would likely accelerate card and digital payment adoption among merchants and consumers. That payment migration carries strategic implications for firms with existing card-fee arrangements; firms may face higher effective merchant discount rates as a share of sales if interchange and processing fees apply to incrementally more transactions. Investors should therefore look at companies’ payment-processing arrangements and margins on card vs cash sales when assessing sensitivity to such a policy change.
Risk Assessment
Policy risk is multi-layered. First, legal and legislative risk: eliminating the penny requires statutory or executive changes that could be delayed, altered, or blocked by Congress, and any final rule will include detailed Treasury guidance about rounding mechanics. Second, operational risk for merchants centers on the accuracy and fairness of rounding algorithms, potential consumer complaints, and reconciliation discrepancies that could increase shrink or cash variance. Third, reputational risk: firms that appear to exploit rounding for micro-price increases could face consumer backlash in a politically charged environment, especially given the populist framing of coinage as a symbol of fairness for low-income households.
Macro risk is limited because cash’s share of transactions continues to decline. If the Federal Reserve’s 2022 data are indicative of a structural trend toward non-cash payments, the long-run market impact is likely muted. However, short-term volatility in foot traffic, consumer sentiment, or accelerated investment in POS upgrades could create transitory margin pressure for small operators. From a regulatory perspective, policymakers could counterbalance merchant concerns with mandated rounding rules and audits, compensation schemes for small merchants, or targeted transition credit — options that would alter the fiscal and distributional calculus.
Fazen Capital Perspective
Our contrarian read is that the headline $168 million number obscures a larger, slower migration of costs and benefits that will accrue unevenly across the payments ecosystem. While the number appears material in absolute terms, it is small relative to annual restaurant sales and negligible compared to system-wide savings from eliminating a product that many analysts argue costs more to produce than its face value. The real value transfer is from cash-dependent consumers and small operators to digital platforms and processing networks, which will capture more fees as payment mix shifts. We therefore expect an acceleration of investments in POS digital capabilities and loyalty-linked digital payments from larger chains as a defensive and revenue-enhancing response. This suggests a more subtle thematic trade: firms that monetize digital ordering and data (through loyalty programs, targeted offers, and subscription services) could offset or exceed any rounding-related revenue leakage.
Investors should not view the policy as a one-off cost center for the restaurant sector alone. The larger picture includes payment processors, software vendors, and fintechs that will benefit from accelerated terminal upgrades and migration to cashless payments. For example, incremental processing volume moving from cash to card increases the addressable revenue pool for acquirers and payment facilitators, even as merchant discount pressures persist. We recommend stress-testing models for restaurant operators under alternative adoption curves for digital payments (e.g., slow adoption retaining 15–20% cash share vs rapid migration to <10% cash within three years) and considering the asymmetric impact on small operators versus national chains. See our broader work on payments and consumer trends for additional context [payments](https://fazencapital.com/insights/en) and [consumer behavior](https://fazencapital.com/insights/en).
FAQ
Q: How would cash rounding actually work at the register?
A: Typical proposals apply rounding only to cash transactions, rounding to the nearest 5 cents at the final receipt total; individual item prices and card transactions would remain unchanged. That preserves price transparency for electronic payments while simplifying cash handling. The exact rounding convention — round-to-nearest-five, always-round-up, or merchant-determined rounding — is determined by Treasury guidance and influences distributional outcomes.
Q: Will removing the penny create measurable inflation?
A: Historical precedent suggests minimal macro impact. Canada’s 2013 penny elimination and Australia’s 1992 removal of 1c/2c coins produced negligible sustained inflation effects; independent reviews and central bank analyses placed any short-run price-level effect well below 0.1 percentage point (Statistics Canada; Bank of Canada reviews, 2013–2015). The inflation effect depends largely on merchant behavior, the rounding rule chosen, and cash prevalence.
Bottom Line
The restaurants’ $168 million cost claim frames a broader debate about distributional impacts of ending the penny; aggregate macro effects are likely small, but the microeconomic redistribution and operational friction will matter most for small, cash-reliant merchants. Policymakers and investors should focus on payment-mix trajectories and rule details that determine who bears the costs.
Disclaimer: This article is for informational purposes only and does not constitute investment advice.
