The visitor to the tiny bookstore in the equally small town of Gualala on the rugged northern coast of California was clearly perplexed. He’d found the book he wanted, but now stood at the counter seemingly confused as to how to pay for it.
“You don’t have Apple Pay?” he asked, his tone indicating that he thought not being able to pay by way of a phone app to be as bizarre as the building not having electricity. When the cashier suggested he could pay with cash, he audibly huffed, turned and left the book on the counter, the idea of such a prehistoric method of buying goods and services apparently too much for him to take.
Although technology continues to move forward by leaps and bounds, situations like this prove one thing: While cash may no longer unequivocally be king, the technologies seeking to replace it have a lot more work to do to claim the throne. And while Apple Pay might not be available everywhere, the Big Apple is making sure the ability to pay with cash is.
By a 43-3 vote on Jan. 23rd, the New York City Council endorsed a proposal that will not only require retailers to accept cash, but will impose a $1,000 fine for first-time violation of the new law. Subsequent violations will garner a $1,500 fine.
There are a few caveats – stores will not be required to accept bills large than $20, nor will they have to accept cash for transactions conducted online – but for all intents and purposes everyone doing any kind of business with the public is going to have to make sure they have a working cash register. That is a big win for those who see this more as a social justice issue than one just of technology or even basic commerce.
“No longer in NYC will brick-and-mortar businesses have the right to refuse cash and effectively discriminate against customers who lack access to credit and debit,” said City Councilman Richie Torres (D), the bill’s sponsor. “The City of New York cannot allow the digital economy to leave behind the 25 percent of New Yorkers who are chronically unbanked and underbanked.”
A spokesperson for Mayor Bill de Blasio said the mayor is generally in support of the bill, but needs to review it. Most observers expect him to sign it into law.
Conversely, an editorial penned by Alex Armlovich of the Manhattan Institute, a pro-business think tank, in the Jan. 24th edition of the New York Daily News urged de Blasio to veto the New York City proposal. Armlovich cited the ready availability of inexpensive and reloadable debit cards, which he said allow unbanked consumers to spend only the amounts they wish while maintaining their financial privacy.
If de Blasio does sign the measure, New York will join Philadelphia and San Francisco and the states of Massachusetts, Rhode Island and New Jersey in barring eateries and retail operations from going cashless. Ongoing efforts are in progress in Chicago and Washington D.C., and Connecticut, New Hampshire, Oregon, Vermont and Wisconsin have introduced bills this year. A bill in Massachusetts, meanwhile, would overturn the Bay State’s longstanding mandate that retail outlets accept cash.
The debate over taking cash has grown more intense as a growing number of eateries and other retail outlets around the country have announced plans to go cashless. The proponents cite a number of advantages to kicking cash to the curb:
Less motivation and opportunity for robbery or other theft, both for consumers and businesses. And it doesn’t stop there: bribery, tax evasion, money laundering, counterfeiting, political corruption, and the financing of terrorism are all made easier with cash.
Easier currency exchanges for travelers and general payment convenience for consumers, who would no longer need to carry much, if any, cash.
Improved business efficiency, which in theory could mean better customer service.
But for every yin there is a yang, and with going cashless there are several.
One is without question the potential harm such a system would do to those who prefer or need to use cash on a daily basis. In a report released last year, the New York City Department of Consumer Affairs said that just over 11 percent of city households did not have a bank account, and that almost 22 percent were “underbanked,” meaning they had a checking or savings account but relied on something other than a bank to cash a check.
The report further noted that the people falling into those categories were “disproportionately in neighborhoods that have higher rates of vulnerable residents and residents struggling in other areas of financial health.”
Nationwide, the Federal Deposit Insurance Corporation (FDIC) estimates that around 8.4 million households are unbanked, with another 24 million underbanked. According to the Federal Reserve, around 13 million people in the U.S. are completely unbanked. Another 18 percent are underbanked, and the numbers are particularly bad for communities of color: as of 2017 only 52 percent of African-American and 63 percent of Hispanic people were fully banked.
Of course, not everyone who uses cash does so out of a lack of ability to use credit or Google Wallet.
“The use of cash is declining but it is still the leading form of retail payment, accounting for more purchases than either credit cards or debit cards, especially for small payments,” says J. Craig Shearman, Vice President for Government Affairs for the National Retail Federation.
In that regard, size definitely matters. According to the Fed, 55 percent of consumers use cash for purchases of less than $10. That number falls to 7 percent for purchases over $100, with 36 percent opting then for either a credit or debit card.
While eschewing cash might alleviate the immediate risk of a strong-arm robbery, it exposes consumers to the risk of being robbed by the modern version of the classic mugger – hackers. And even when not the victim of outright theft, you might have noticed the ongoing war in California, New York, Maine, Nevada and dozens of other states between consumer advocates and Big Tech over how the latter uses and sells the personal data they collect from your purchase history.
Even so, there is data that shows consumers are gradually using their credit or debit cards for smaller and smaller purchases. A recent analysis by the Harvard Business Review of millions of payment transactions made through the financial services company Square showed that in 2015 about 46 percent of their customers used exclusively cash for low-dollar items, with a cutoff at around $8. By 2019, about half their customers were regularly using their cards to pay for items costing as little as $4.50.
The cashless trend is also moving beyond retail outlets to toll operations and other transit providers, as well as rental car companies, dry cleaners and virtually any other business that would normally accept cash.
What happens now, however, remains unclear. According to the Harvard analysis, “Third-party research commissioned by Square shows that 51 percent of small business owners support government bans on cashless businesses, that 83 percent of small business owners in America never plan to go cashless, and 73 percent believe the U.S. will never be a fully cashless society.”
But while a fully cashless society seems unlikely, the Harvard analysis believes a “less cash” one does appear inevitable, with as much as a 70 percent cashless society more than possible. The tipping point, they say, “will come as younger, tech-savvy generations integrate their own digital payment habits into their own businesses in the future.”
And you can take that to the bank.
-- By RICH EHISEN
Some States Requiring Retailers to Accept Cash
At least eight states have introduced legislation in the 2019-2020 biennium prohibiting retailers from going completely cashless. One of those states, Rhode Island, enacted its measure (HB 5116) last year. New Jersey also enacted a bill last year (AB 591) that was introduced in 2018, the first year of its atypical 2018-2019 session.
Source: LexisNexis State Net