US cashless backlash: why punish retailers?

The US is behind some other parts of the world, perhaps, but it is trending in the same direction. According to recent research, almost a third of American adults use no cash at all for their weekly purchases (it was a quarter back in 2015). Conversely, a fifth of Americans says that make nearly all of their purchases in cash. Against this backdrop, it is no surprise that some retailers, in some locations, are starting to go cash free. Now, as far as I am concerned, that’s up to them. Writing in the CATO Journal last year — "Special Interest Politics Could Save Cash or Kill It" CATO Journal 38(2): 489-502 (Spring 2018) — Norbert Michel said “it seems risky, at best, to give the government so much control over the form of payment citizens choose, but that is exactly what many policymakers are hoping to do”. He was talking about laws to ban cash, but the argument applies both ways. Should regulators care whether you pay in cash or not and, if they do care, what should they do about it?

Here’s a specific example. In March, Atlanta’s Mercedes-Benz stadium, home of the Atlanta Falcons, stopped accepting cash for sporting events. Now, I imagine the people who run the Mercedes-Benz to be business persons who operate according to the principles of profit and loss. They're not making this decision because of some idealogical position about notes and coins. They wouldn’t be doing it unless they thought they would be better off without the costs of cash.

So: should they be allowed to do this, just as Tottenham Hotspur have done with their new stadium at White Hart Lane?

There is no US law on the subject. I see in Payment Law Advisor that the US Treasury Department has guidance on the issue, but it states that refusing cash may be allowable “on a reasonable basis, such as when doing so increases efficiency, prevents incompatibility problems with the equipment employed to accept or count the money, or improves security”. Security and efficiency are precisely the factors causing retailers to shift to cashless operators as far as I can see, so the Treasury guidelines seem to be working.

That does not, however, seem to matter to the State and City legislators who rising to the challenge of dragging America back into the 1950s, when the payment card was a notion restricted to future fiction and the concept of a mobile phone so alien as to be unimaginable. At that level there is a patchwork of regulation. Massachusetts apparently has a little-known 1978 law requiring retail stores to accept both cash and credit although it does not seem to be enforced and the legislature has yet to say whether it applies to restaurants. Food and drink are in the vanguard elsewhere, such as in Pennsylvania, where the head of the Pennsylvania Restaurant and Lodging Association says that there are lots of restaurants (as well as other businesses) that want to go cashless because "places that handle cash are less safe than those that don't have cash on hand” and that in a cash business "taxes aren't always paid".

Yet US legislators seem to be in favour of maintaining this costly and inefficient state of affairs. The New York Times reports that the New Jersey Legislature and the Philadelphia City Council have already passed measures this year that would ban cashless stores and New York City, Washington, San Francisco and Chicago are consider doing something similar. Their objection is that cashlessness marginalises low-income communities. If this is true, and I have no reason to doubt the sincerity of these lawmakers, then it is a problem with the financial system not retailing. Penalising retailers by forcing them to accept cash because the financial system does not make a reliable, secure electronic alternative available to low-income (or, indeed, any other) communities is peverse.

I don’t want to discuss the causes here - that’s for another time - but the specifically US problem around financial inclusion is the root cause of the problem and that’s what should be tackled. If low-income people in Somalia can buy produce in the local market using their mobile phones, you can’t help but wonder why low-income people in Philadelphia can’t do the same, much to the benefit of society as a whole.