With many establishments moving away from accepting physical currency, a New York City councilman has proposed legislation that would prohibit businesses from going cash-free.
New York City Councilman Ritchie Torres (D–15) introduced a bill Wednesday that would make it "unlawful" for restaurants and retailers "to refuse to accept payment in cash from consumers." Businesses found to be in violation would have to pay a $250 fine the first offense, and a $500 fine for each repeated offense.
Torres told Grub Street he sees cash-free policies as "racially exclusionary in practice." According to a 2015 study from the Urban Institute, 11.7 percent of New York households had no bank accounts. The survey did not break down its results by race, though a national survey released last month by the Federal Deposit Insurance Corporation (FDIC) did: Roughly 6.5 percent of American households were unbanked last year, the FDIC said, including 16.9 percent of black households and 14 percent of Hispanic households.
Cashless businesses "gentrify the marketplace," Torres told Grub Street. "On the surface, cashlessness seems benign, but when you reflect on it, the insidious racism that underlies a cashless business model becomes clear," he added.
Torres' legislation, cosponsored by six other councilmembers, is actually pretty mild, all things considered. A similar bill proposed in Washington, D.C., earlier this year would have made it illegal for companies to either refuse cash or offer discounts for paying in cash, with both violations punishable by fines ranging from $1,000 to $8,000. A cash-free business ban introduced in Chicago last October, meanwhile, threatened daily fines of $2,500, as well as the potential revocation of offending businesses' licenses.
Both bans have yet to be enacted. In fact, cash-free businesses are largely legal in 49 states. Only Massachusetts has a law on the books banning establishments from refusing cash.
Yet the rise of cash-free businesses can be explained without resorting to accusations of racism. For one thing, there's a lot of time, effort, and money that goes into accepting and processing cash. "Cash has to be handled. It has to be stored in a [point of sale] system. It has to be counted at least every shift. At the end of the day it has to counted and tallied into a sales report," John Gordon, founder of Pacific Management Consulting Group, a restaurant consulting firm, told Reason's Christian Britschgi in October 2017, around the time that Chicago's ban was proposed. Gordon also explained that cash can be miscounted or stolen, and that some businesses need to pay for armored trucks to take their cash to the bank.
Many companies launch with cash-free payment models to protect their employees; the absence of cash transactions has long been cited as a safeguard for Uber drivers, for instance.
Going cash-free is easier for many types of businesses, but it can also make things easier for consumers. Non-cash forms of payment are getting faster by the day, meaning cash-free establishments can offer faster service. Plus, consumers can more easily keep track of what they're spending.
But what about the alleged discrimination against poor people and minorities? Well, as Britschgi argued in July, it's not as if retail businesses want to turn away paying customers. It is conceivable, though, that the businesses going cash-free are the ones where people rarely pay in cash anyway. For those establishments, it just makes more sense to eliminate cash transactions altogether.
It's also worth noting that cash-free establishments tend to be on the pricier side. Is going cash-free, then, a form of price discrimination? Maybe, but I don't see very many politicians trying to regulate how much restaurants can charge for food.
Moreover, statistics suggest the number of people without bank accounts is steadily decreasing. The 6.5 percent of unbanked households in the country as of 2017 is down from 7 percent in 2015, 7.7 percent in 2013, and 8.2 percent in 2011. In New York, meanwhile, the unbanked rate dropped from 14.3 percent in 2011 to 11.7 percent in 2013.
Businesses owners, not politicians, should decide what forms of payment they'll accept, and consumers who prefer to pay in cash can take their business elsewhere. The market is pretty good at these kinds of transactions, especially since private establishments have to compete to stay in business.