Man hands woman standing at cash register a golden credit card.

Why Cashless Stores Aren’t Always Good News

On March 7 Philadelphia became the first major U.S. city to ban cashless stores. In our increasingly digital world, where nearly all businesses accept electronic forms of payment, it seems only logical to transition to a completely cashless system. So why did lawmakers ban businesses from refusing to accept cash?

In 2017, nearly 6 percent of the population of Philadelphia was “unbanked,” which are people who do not have a checking or savings account and only use cash. About 22 percent of the population was “underbanked,” which are those who have bank accounts but still use alternative financial services, such as check cashers. These statistics have remained virtually unchanged since 2015, according to surveys from the Federal Deposit Insurance Corp.

According to Philly.com, supporters of this legislation, which goes into effect on July 1, argued that cashless stores effectively discriminated against poor consumers. A report from the Federal Reserve found that the unbanked and the underbanked are more likely to have low income, less education or be in a racial or ethnic minority group.

This population is not unique to Philadelphia: according to the Fed, about 5 percent of adults in the U.S. in 2017 were unbanked and 18 percent were underbanked. Though these numbers have decreased in recent years, that is still about 13 million unbanked Americans who would be unable to access cashless businesses.

Businesses, such as Sweetgreen, have gone cashless in recent years in order to improve efficiency and reduce the risk of robbery. The National Retail Federation opposes the ban on cashless stores, saying that merchants should decide which payments to accept (or deny).

The conversion to a completely cashless system would also have a significant impact on cash-in-transit companies, who would lose a large customer base that no longer needs armored couriers to securely transport their cash. This could also affect banks who depend on their commercial customers for business.

Along with the Philadelphia City Council, the New Jersey Legislature has also passed a measure to ban cashless stores. New York City, San Francisco, Chicago and Washington are considering similar bills.

Some countries around the world are completely cashless: In Sweden, only 15 percent of payments involve cash transactions, and in the U.K. credit and debit cards and other forms of contactless payments are the most common forms of payment.