Some state and local governments are moving to ban increasingly popular cashless retail stores, citing equity issues, but there are steps policymakers can take to increase access to non-cash payment options.
Many businesses are going completely digital with their point-of-sale systems, telling customers they want their money, as long as they do not pay in cash. Unfortunately, some state and local lawmakers have stepped in to halt this move toward a cashless society.
In March, Philadelphia Mayor Jim Kenney signed a law that makes it illegal to run a cashless store. The law prohibits consumer-facing businesses from refusing to accept cash or charging a higher price to customers who pay cash. While it has a few exclusions, such as for mail-order or online businesses, the vast majority of retail businesses in the city must comply.
Others have quickly followed suit. Legislators introduced similar bills in Chicago, New York City, San Francisco and Washington, D.C. And later that month, Gov. Phil Murphy signed a statewide ban in New Jersey, joining Massachusetts in prohibiting retailers from not accepting cash to purchase goods or services.
These moves have thrown up a major roadblock to a growing trend among stores and restaurants to abandon cash in favor of credit cards and mobile payments. Businesses have many reasons to go digital. First, it’s faster. During a busy lunch hour, the bottleneck at restaurants is often the cashiers, where one person searching for change can bring a line to a halt. Sweetgreen, a fast-casual locavore salad restaurant chain, found that switching to a cashless model allowed its team to process 5 to 15 percent more transactions per hour. Second, switching to cards and mobile payments is safer. Having cash on hand makes stores a target for robberies, and businesses must find secure ways to store cash on the premises and while transporting it to the bank.
Many consumers prefer alternatives to cash. In an annual consumer survey of payment preferences, 80 percent preferred credit or debit cards, compared to 14 percent for cash. And a 2018 survey from the Pew Research Center found that 29 percent of Americans report making no purchases using cash during a typical week. Indeed, the United States lags significantly behind many other countries in the adoption of non-cash payments.
The major objection to cashless stores, and the motivation for many of the recent bans, is the concern that some consumers will be unable to pay. But if the goal is fairness, the solution should be “progress for everyone” not “no progress for anyone.”
It’s a classic chicken-or-egg problem. The more stores adopt cashless payments, the more consumer demand there will be for different types of card and mobile payment options, including for low-income consumers. But there are steps that policymakers can take to increase access to non-cash payment options.
First, policymakers can make it easier for consumers of all types — including those who are low-income, homeless, elderly, formerly incarcerated or undocumented immigrants — to open bank accounts. For example, New York City created IDNYC, a free municipal ID card, and partnered with local banks and credit unions that will accept the card for new accounts.
Second, state governments can allow electronic benefit transfer (EBT) card users to add their own cash to their cards. Many government agencies provide residents with EBT cards for both food and cash benefits. However, many EBT cards do not allow consumers to load their own cash on them, either in-person or at kiosks at banks, convenience stores, or government offices. States should work with their card providers to make this a requirement.
Finally, policymakers should continue to make it a priority to support programs aimed at closing the digital divide. Increasing access to mobile phones, including mobile payment technology, can help increase economic opportunities for low-income individuals.
Non-cash payments are the future, and while policymakers should address issues of equity, they should not hold back progress.