Lawmakers in New Jersey recently advanced a bill that would ban businesses from going cashless — a move that would put the state at odds with the global trend toward electronic payments but would bolster resistance from local officials who see no-cash policies as discriminatory.
But state and local officials say that restaurants and shops that adopt cashless policies have left some members of the community behind —— individuals without the means to open a bank account or who lack access to lines of credit or the mobile apps that power digital payments.
The New Jersey measure, which would apply only to face-to-face sales and would exclude Internet and phone purchases, comes as officials push similar efforts to bar no-cash rules in New York, Philadelphia and the District.
While cashless policies offer consumers the promise of convenience and provide businesses greater protection against theft and shoddy record-keeping, they also can exclude low-income consumers or undocumented immigrants, critics say.
According to FDIC estimates, 6.5 percent of American households were unbanked in 2017, meaning they did not have an account with an insured financial institution. Another 18.7 percent of households in the United States have a checking or savings account but still relied on financial services outside of a traditional bank — such as payday loans or check-cashing businesses — the estimate showed.
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“Cash-free businesses are discriminatory by design and pose challenges to low-income communities that may not have access to credit/debit,” New York City Council member Ritchie Torres said on Twitter last month when he introduced a bill that would ban the practice.
According to the Pew study, the decline in the use of physical currency is uneven among the population when race, age and income are accounted for. Pew found a significant gap in cashless adoption tied to annual household income, with adults making at least $75,000 more than twice as likely to make all their purchases without using cash in a typical week, compared with people who make less than $30,000.
The Pew findings suggest that the benefits of going cashless may come with a cost that only some groups of people will bear. Americans with lower incomes are roughly four times as likely than higher earners to make all or almost all of their purchases with cash, according to the study.
As CNBC has noted, business leaders such as Shake Shack founder Daniel Meyer have defended cashless policies by pointing to higher security and improved customer service and efficiency, even as they acknowledge their critics. “We know that some have raised concerns about the socioeconomic implications of operating a cashless business” Meyer wrote in a blog post earlier this year. “That’s certainly not our aim.”
Some advocates have focused on providing people who are underserved by the traditional banking system with more affordable options, attacking the root cause behind the criticisms of cashless payments. A partnership program between D.C. government and financial groups, for instance, has helped open 11,000 bank accounts for people since 2010.