I think a lot of it is that small businesses focus on the business at hand and changing payment methods is friction they don’t want. I believe that contactless payments don’t have as high a charge anyway. I also think that the costs of processing card payments isn’t really what people think. A lot of banks will charge for handling cash and cheques from businesses anyway &, as you say, by the time you’ve factored in the hidden overheads of people time, etc, I suspect that it would be cheaper anyway.
One fun thing that caught out my son and myself when we went to Iceland earlier last year – I took no local cash at all by the way for the first time ever overseas – we couldn’t give our local walking guide a tip which I would have liked to have done since he was excellent – I wasn’t even carrying UK cash so had nothing to give him and he didn’t have a card machine. Hey ho.
In Sweden a couple of years ago, we shouldn’t have needed cash but found that there were a few street food stalls in Stockholm that only took cash.
I always carry some cash with me (notes only) in the UK but I only get anything out maybe once a quarter if that. As mentioned on Twitter, it is usually for the kids, not really needed but they sometimes prefer something in hand. My local barber and our favourite local Indian Takeaway were the last shops I use regularly with cash. The barber now takes cards though. Maybe the takeaway does as well, I haven’t actually asked recently.