Is the Cashless Economy Shutting Out Low-Income Residents?

Sign in the window of a SweetGreen Restaurant in Washington, D.C.

Sign in the window of a SweetGreen Restaurant in Washington, D.C. Mitch Herckis (Route Fifty)

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Two cities are debating whether it’s a form of discrimination.

For many businesses, going cashless makes sense. Removing cash from transactions speeds up service, has the potential to make accounting easier, and reduces the chance of miscount or theft.

One issue not normally considered, though, is whether going cashless discriminates.

“By denying patrons the ability to use cash as a form of payment, businesses are effectively telling lower-income and young patrons that they are not welcome,” Washington, D.C. Councilmember David Grosso said in a statement introducing legislation to require food retailers to accept cash last month.

Grosso pointed out that not accepting cash effectively closes a restaurant’s door to the 10 percent of D.C. residents who are “unbanked,” meaning they do not have access to a bank or other mainstream financial institutions. It also is discriminatory against youth, who are “often unable to obtain a credit card,” according to Grosso. That argument apparently found solid ground among his colleagues, with 8 of the 13 city councilmembers signing on to cosponsor the bill.

In Chicago, a similar proposal was put forward by the city council’s Finance Chairman, Edward Burke. Burke’s ordinance cited similar concerns about equity, but also pointed out “a credit or ‘app’ only policy is especially egregious in the context of retail or restaurant sales, as the concept of having to incur debt or potential privacy intrusions for the sake of purchasing a cup of coffee offends common notions of sense and fairness.”

When the vote came before the council’s License Committee in December, though, it faced strong resistance from a number of powerful business groups, according to the Chicago Sun-Times.

Council License Committee Chairwoman Emma Mitts, who represents the 37th ward, said that she received a letter from a business owner who “chooses not to accept cash because of the amount of robberies he’s had in the past,” the article notes. Who the hardship should fall on was a matter of debate.

Ultimately, Burke postponed a vote on the bill.

One jurisdiction already has laws on the books banning businesses from requiring customers to pay with credit cards: the Commonwealth of Massachusetts. Since 1978, the state has required retailers to accept cash. Whether that has been followed in practice is another matter, though. As pointed out by the Boston Globe and Boston Magazine, the law isn’t actively enforced.

A 2017 study by the Federal Deposit Insurance Corporation found 5 percent of adults in the United States (about 13 million people), were unbanked. "The unbanked and underbanked are more likely to have low income, less education, or be in a racial or ethnic minority group," according to the study.

The FDIC found 11 percent of blacks and Hispanics are unbanked, versus just 3 percent of whites.

Mitch Herckis is Senior Editor and Director of Strategic Initiatives for Government Executive's Route Fifty. He is based in Washington, D.C.

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