Will other cities follow Philly in banning cashless stores?

Mar 11, 2019
Tom Ryan

Starting in July, Philadelphia will become the first major U.S. city to institute a ban on cashless stores.

The new law passed last week won’t apply to transactions that take place at parking lots or businesses such as Costco that operate through a membership model.

Cashless stores are encountering a backlash in some areas across the country on charges they discriminate against consumers without bank accounts or credit cards. According to the Federal Deposit Insurance Corporation, 6.5 percent of households in the U.S. were not affiliated with a bank in 2017. The rate is seen as much higher in cities with immigrant communities.

Consumers avoid bank accounts for a variety of reasons, including avoiding monthly charge fees or minimum balance requirements. Undocumented immigrants and those with poor credit face challenges securing credit or debit cards.

“Most of the people who don’t have credit tend to be lower income, minority, immigrants,” William Greenlee, a council member in Philadelphia, told The Wall Street Journal. “It just seemed to me, if not intentional, at least a form of discrimination.”

Cashless store bans could derail the “walk in, walk out” payment experience pioneered in the U.S. by Amazon Go.

But many stores and restaurants have touted the benefits of only accepting credit and debit cards, including speeding transactions for consumers. Employees in stores and restaurants are freed up from counting and depositing transactions and theft risk is reduced, advocates claim.

The cashless push started with Sweetgreen, Bluestone Lane and other fast-food concepts. Bonobos, Casper Mattress, Indochino, Everlane and Reformation are among some retailers not accepting cash.

Cash purchases have also shrunk to 30 percent of all retail transactions last year from 40 percent in 2012 as credit and debit cards usage increases and digital payments options like Apple Pay spread.

Finally, cashless advocates said bans would impede innovation. Amazon had threatened to scrap plans to bring Amazon Go to Philadelphia if the law was passed.

Massachusetts became the first and remains the only state that requires businesses to accept cash under a 1978 law. The state of New Jersey and the cities of New York, San Francisco, Chicago and Washington are considering similar bans.

DISCUSSION QUESTIONS: Should retailers be preparing for a backlash to cashless stores? How do you see the dispute playing out in the near- and long-term?

Please practice The RetailWire Golden Rule when submitting your comments.
"We can’t, as a society, exclude certain portions of the population from everyday commerce; we risk exacerbating an already-stark divide between the haves and the have-nots."
"I love the audacity of Amazon and others who don’t want to bother with cash so they deem it irrelevant."
"Our world has parallel white, grey and black economies – which is why government statistics are so suspect."

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31 Comments on "Will other cities follow Philly in banning cashless stores?"

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Ralph Jacobson

Sure, handling cash is a cost for retailers, however refusing to accept cash does exclude a shopper demographic. And those retailers that don’t accept cash must be aware of that exclusion and be willing and prepared to manage it.

Bob Amster

The answer is: Yes! The legislation will be more of a righteous gesture than an impactful law. Retailers are not stupid. They know (or should know) if their business relies on mostly cash customers or not. Blue-collar neighborhood bodegas can’t afford to not accept cash, even if there were no law banning the practice. Louis Vuitton won’t have to worry about running afoul of the law because most of their customers don’t know one side of a cash bill from the other.

Kenneth Leung

You will be surprised how many luxury goods purchases are done in cash. 🙂

Bob Amster

Yes, I think I would be. Probably by wealthy crooks trying to hide money.

Jeff Sward

Cash will die a death of natural causes at some point, but outright banning cashless stores seems extreme. There’s plenty of room in the market for both as this evolutionary process takes place. If a retailer wants to eyes-open exclude a segment of the market, the competing retailers can say thank you.

Paula Rosenblum

And Walmart will!

Mark Ryski

Cashless stores are an inevitability and lawmakers need to realize that consumers are changing. While I understand the requirement to force retailers to take cash as legal tender, ultimately the market should decide. Retailers who choose to not accept cash, are willingly taking a gamble that some shoppers will not be able patronize their stores – this should be their choice. For the foreseeable future, I don’t see this being a problem as there will always be some retailers who are willing to accept cash.

Evan Snively

It seems that as a first logical step if a cashless store wanted to skirt the rules it could just convert to a membership model. Even if there is no membership fee and a person just needs to sign up to be part of the program online or through an app. Certainly it’s not a good solution to capture business from the casual shopper, but if the core of customers are repeat/habitual, it could work.

Cathy Hotka

Whether retailers like it or not, every paper bill says “this note is legal tender for all debts, public and private.” We can’t, as a society, decide to exclude certain portions of the population from everyday commerce; we run the risk of exacerbating an already-stark divide between the haves and the have nots.

Ken Cassar

The U.S. is so far behind the rest of the world in consumer technologies that we can’t let an imagined issue of income-based inaccessibility slow us down. If we followed Philly’s reasoning nationally, we’d not have e-commerce, where cash isn’t a viable option.

Brandon Rael

While the majority of customers will be able to join the cashless, mobile first, digital payments commerce revolution, there is an element of discrimination if retailers and payment providers remove the cash option completely. We should expect some backlash to going cashless especially from cities and towns that are dominated by hard-working immigrants, who do not have the financial means to open a bank account or credit card.

Innovation and frictionless shopping experiences are one thing and will make your shopping experience a bit more efficient. However, it’s clear that we are not fully prepared as a society go completely cashless. An option for Amazon and other retailers to consider is to provide the capability for people to deposit cash into the retailer’s payment system, similar to what Starbucks does with their app, however, in this case with cash on-site.

Doug Garnett

I thoroughly agree that we must not eliminate the opportunity to shop from the lower income portion of the population. In fact, duality like this reminds me of when I traveled in Bulgaria before the wall came down — and those with money were able to shop in “dollar stores” to get better goods.

Should this be regulated by government? That’s the harder question. The rule of unintended consequences makes me cautious about regulation.

That there is this major problem with the hottest new tech-driven tactic (this isn’t a strategy) in retail is no surprise at all. Most of the “hot” tech ideas have been driven by those who’ve never had to wonder where their next meal was coming from. Empathetic understanding of society and customers is not a strength of the retail tech sector.

Ed Rosenbaum

I read this news earlier this morning in another publication. It upset me then, and upsets me now. I see not accepting cash as discriminatory, differentiating the haves from the have nots. This is wrong and should not be acceptable to the general public. I can read all the reasons someone prefers not to accept cash, even when they have to give up a percentage. But we can not start to put ourselves in a position of becoming an elitist country requiring, in this case, “plastic over paper.”

Art Suriano
There will definitely be more cities and states that will ban cashless systems going forward for the apparent reasons. It is a form of discrimination regardless of who is using the cash. Even myself if I go into a convenience store and buy a package of mints and the total is $3, I’d much rather pay with cash than go through the hassle of using a credit card or debit card. So it’s not just lower income or migrant immigrants. It’s common sense. Retailers are complaining about the fees that credit card companies are charging, and now there’s talk about the credit card companies raising their fees. So does it make sense for retailers to give them more business and in this case all of their business? Cashless is excellent as an option. It’s no different from the self-checkouts which are an option. Another example is Easy Pass. It’s taken years for the states to come up with an Easy Pass solution for those that don’t want it by sending bills in the mail. The… Read more »
Paco Underhill

Never in human history have we had more cash in circulation. Our world has parallel white, grey and black economies – which is why government statistics are so suspect. For banks and merchants banning cash eliminates labor cost, but ask any small contractor for a bid and you get two prices – the check price and the cash price – which is lower? Going cashless may work in the Nordic world, but for the time being in Philly and Detroit …

Dan Frechtling

Going cashless presents benefits for some brick-and-mortar retailers, despite the added interchange fees of e-payments. These advantages include speeding transactions, reducing fraud, reducing theft and money laundering risk and adding convenience to compete with e-commerce alternatives. Proponents would say it’s an operating model choice best left up to free markets to influence.

But there’s a problem with banning cash, starting with the statement, “This note is legal tender for all debts, public and private.” There’s also the well-known access issues for the unbanked. Regulators may prefer protecting citizens over modifying rules that complicate banks’ efforts to serve the unbanked.

Stores solely embracing e-payments might experiment with ways around the membership loophole and possibly (gasp) switching from fees for using plastic to fees for using cash. But most likely they’ll simply avoid Philly.

Dave Bruno

I do think market forces will drive cash out of most retail models. However, until there are guard rails to support those who do not have access to cashless forms of payment, I think we have to proceed with great caution. I believe the market will drive mainstream adoption a fair “cash card” solution at some point, but until that time, I don’t think we can discriminate.

Charles Dimov

We don’t restrict e-commerce stores requiring these to take cash. If so, why limit physical stores? If the retailer finds it more advantageous to go cashless, then they should have that option. At the end of the day, their customers will judge whether it is a good thing or not. If customer’s don’t like it, then they will shop elsewhere. There is NO need for another restriction, law or bylaw.

Gene Detroyer

Banning cash transactions means losing business for those retailers that depend on cash. They won’t do it. Involving government rules is a step backwards in progress.

Who are we trying to protect here? Those underprivileged who can’t get credit or those who use cash in criminal activities? I can not imagine a business that RELIES on low income people shutting them out nor a need for those same people going to high-end stores, restaurants, hotels, et. al. and not being able to have an electronic payment alternative.

The world is going cashless. Maybe the government should help develop programs to allow even the beggar on the street to transact electronically?

Marge Laney
14 days 17 hours ago

Thirty percent is a significant amount of commerce to turn your nose up to, retailers! Are you doing so well that this makes sense?

I love the audacity of Amazon and others who don’t want to bother with cash so they deem it irrelevant.

Cathy hit the nail on the head – Whether retailers like it or not, every paper bill says “this note is legal tender for all debts, public and private.” Deal with it!

Michael Decker

Yes, this one is clearly a case of discrimination and any retailer bent on denying cash payments would be wise to reconsider of face significant, social backlash — cash is “legal tender for all debts…” and says so on every note! Walk in/walk out retail concepts will simply need to position a “Cash”-ier alternative, something I’m quite sure the technology can accommodate.

Ryan Mathews

Of course they should. And those that believe cashless stores are inevitable should remember there are a lot of poor folks in this country and their ranks swell every year. Of course, one could argue that some form of “card” — maybe a variation of a pay-as-you-go card that can be reloaded — will replace cash in the pockets of the poor, but we are still a decade or so away from that. So not accepting cash will be portrayed as discriminatory behavior and — for the immediate future — that will force retailers to keep taking cash.

John Karolefski

“Cash on the barrelhead” is a practice that comes from the days when upended barrels served as both seats and tables in bars and stores. In other words, customers had to pay for their drinks and goods in full at the time of purchase by putting money on top of the barrel. The barrels are gone, but the concept still serves those not blessed with bountiful resources who need to pay in cash because they don’t have credit or debit cards.

James Ray

The problem addressed by this legislation is easy to solve with a kiosk device accepting dollar bills and loading value on a customer’s personal account. The stored value can reviewed, consumed, or supplemented using only a barcode paired with private PIN, unique fingerprint, or an UID identified smartphone as customer credentials. The popular kiosk equipped micro-markets found in the break rooms used by many employees working in many office buildings, factories, and warehouses are examples of cashier-less retail stores that have been in operation for many years. Accepting cash is easy enough, returning change is a bigger headache.

I don’t see this legislation being a significant deterrent to the industry trend towards self-service checkout and growing use of electronic payments, but I can understand why Amazon might lean in with political pressure to help curb any legal requirement for a device costing $5-10K each location.

Herb Sorensen

I didn’t review the constitution, but I do note, right on paper money, “This note is legal tender for all debts, public and private.” I do note that the state law makes exceptions for memberships, parking, etc. I’m sympathetic, but how is it legal for anyone to sell anything and demand non-cash payment? Checks, credit cards, or even your face make a lot of sense. But refuse cash? I think it is probably unconstitutional, even if a state authorizes it. Personally, I don’t see a resolution of this very sticky wicket!

Craig Sundstrom

While the claim that cashless stores don’t work for people who can only use cash is certainly true (how could it not be?) I don’t see some rush of similar legislation… largely because such stores are so rare.

But if nothing else, this presents a good opportunity to step back and analyze the concept rationally — as opposed to the boosterism we frequently see.

Ricardo Belmar

While I think it’s a bit extreme to be passing laws like the Philly one, there is a valid discrimination issue to be resolved. Some retailers will have no problem excluding a segment of the population from their potential customer base. Should they be forced by a new law to accept cash? Difficult to answer. I believe this should be left to market forces to naturally arrive at a conclusion. If we accept that this is more of an issue in urban areas with a certain demographic, then it becomes a function of whether or not those retail brands that want to go cashless choose to pursue that demographic or not. Forcing their hands with laws like this could produce a backlash in the opposite direction from the brands, and no one wins in that scenario.

Larry Negrich

A retail business should have the right to accept a certain type of payment just as a consumer has the right and choice of not frequenting that business or financing its existence.

William Passodelis
14 days 10 hours ago

Kudos to Philly! Detroit, Miami, L.A., Chicago, the New York Boroughs, and many others should do the same! So insulting and out of touch. I am so happy for all the Amazon
marketers and higher ups who are so well off that the thought of cash and dealing with it is ridiculous to them! How out of touch! There are a lot of people who do not have the ability to keep a minimum in a bank and avoid fees taking money out of a hard earned paycheck — and maybe it is difficult getting credit. Many, many people live paycheck to paycheck.

I guess that is the plan! The Amazon higher ups and maybe even some of the potential customers may not want to actually “deal” with this part of the population?

I am sorry, I am being mean and judgmental. But it makes me wonder….

Rich Duprey

Other cities (and states) will follow Philly in banning cashless stores and these Luddites will once again thwart innovation. There’s this crazy idea of a free market with competing business models and while some stores like Amazon Go will be cashless plenty of others will accept it because there will be profit found in serving customers others ignore. It’s ridiculous to think every single store will adopt this model; there would naturally being a mix of store types serving different customers. It doesn’t have to be a one-size fits all, but of course, backwards politicians can’t see that.

Fredrik Carlegren

The answer is not to ban cashless stores. More relevant, how will we empower disenfranchised consumers to participate in the future economy? A ban appears to be a band-aid rather than a root cause analysis — understanding and willingness to bring commerce into the 21st century for all people.

"We can’t, as a society, exclude certain portions of the population from everyday commerce; we risk exacerbating an already-stark divide between the haves and the have-nots."
"I love the audacity of Amazon and others who don’t want to bother with cash so they deem it irrelevant."
"Our world has parallel white, grey and black economies – which is why government statistics are so suspect."

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