Banning Cashlessness

No no cashAs of July 1, cashless stores and restaurants in Philadelphia will be no more. Existing cashless businesses will not be grandfathered but required to revert. Outside of a few exceptions such as parking lots, hotels, and car rental agencies, the Philadelphia City Council has deemed cashless businesses discriminatory. 

If you have a bank account, as I suspect most readers of this blog have, the discriminatory thing may at first blush be hard to see. It make more sense when you consider that, as U.S. News and World Report estimates, about 6.5 percent of adults in the United States, or about 14 million people, are unbanked. Cashless stores exclude them. And, according to the Federal Reserve Bank of San Francisco, about 18 percent more have bank accounts but still prefer cash transactions.

Not just Philadelphia is sticking up for the cash-inclined. According to New York Times, the city of brotherly love is in good company:

The New Jersey Legislature and the Philadelphia City Council have passed measures this year that would ban cashless stores. New York City, Washington, San Francisco and Chicago are weighing similar bills.

Eager as people immersed in the digital payments business (like me) may be for the ultimate demise of cash, there’s little reason to believe it will happen anytime soon. An article by Fiserv strategic partner ATM Marketplace, cited before in this blog, pointed out that studies …

… consistently show the hype about the decline of cash to be inaccurate and wildly overstated … Despite continuing growth in alternative payment options, consumers still rely on cash as their primary form of payment for gifts, food, personal care, automotive, entertainment and transportation services.

Were cashlessness ever to come about, there are a few scenarios as to how it might happen. In what could be called a libertarian scenario, the market would cheerfully abandon cash of its own accord. In more of a push scenario, merchants would opt to accept only card and digital transactions, forcing the market to abandon cash. And in what me might call an edict model, cashlessness would come about by government fiat.

As it stands, the edict model doesn’t look workable. One would be hard-pressed to name a nation more motivated than India to move attain cashlessness, yet, as NPR reported, India is finding the task “easier said than done.” Not least among impediments is that only 17 percent of Indians own a smartphone and only 20 percent have Internet access.

In the U.S., Visa has put some effort into the “push” model. Take for instance, its “Cashless Challenge,” in which …

… Visa put a call out to small businesses across the U.S. to tell us how going cashless could benefit their business … 50 winners were selected to receive $10,000 each for envisioning less-cash solutions as a means to more convenient, secure and easy transactions.

While one could—correctly—accuse Visa of interfering with market forces by helping make cash increasingly unusable, laws like the Philadelphia ordinance likewise interfere with market forces by keeping cash viable.

The libertarian scenario may be taking hold in Sweden. Yet according to the New York Timesthe Swedish government appears more concerned than enthusiastic:

Consumer groups say the shift leaves many retirees—a third of all Swedes are 55 or older—as well as some immigrants and people with disabilities at a disadvantage. They cannot easily gain access to electronic means for some goods and transactions, and rely on banks and their customer service. And the progress toward a cashless society could upend the state’s centuries-old role as sovereign guarantor. If cash disappears, commercial banks would wield greater control.

A few straw-clutchers contend that in the United States refusing cash is illegal at the federal level. From Finextra:

The ATM Industry Association highlights that every US banknote states: “This note is legal tender for all debts, public and private.” Says the group’s CEO Mike Lee: ‘Why decrease freedom of choice for citizens in a free market democracy?’”

But straw-clutchers they are. The U.S. Department of the Treasury, arguably an authority on the subject of legal tender, has put speculation on the federally required acceptance of cash to rest:

There is … no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services.

Meanwhile, comedians are having fun with the concept of a cashless society. In the UK, hosts Steve Punt and Hugh Dennis offered this satirical take on the March 8 episode of the BBC’s “Now Show”:

… No one is really ready for a world with no notes and no coins. It will change so many things. For a start, what are thugs going to throw at footballers? … ‘The match at the Emirates this afternoon was held up after someone in the crowd threw an iTunes gift card at one of the goalkeepers. The card turned out to be worth 50 pounds, but was unused as no one could find 10p to scratch the silver strip off with.’”

As for American football, who knows? The day may not be far off when games start with a gift card toss.

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