The Progressive Case for Cashless Stores

Laws requiring stores to accept cash are counterproductive to solving the real issues facing disenfranchised people

On Monday, November 26th, Elgin Brack and his uncle Scott sat idling outside a Duane Reade in Queens. Around 3:30 AM, Elgin got out of the car and entered the store with a gun, where instead of robbing the store of its cash, he got in an argument with the cashier and shot him in the head. Elgin and his uncle would go from there to rob four more stores at gunpoint. Two days later New York City Councilman Ritchie Torres introduced legislation requiring all stores and restaurants in the city to accept cash.

It’s not that Councilman Torres’s bill doesn’t try to solve a real problem. Cashless stores like Sweetgreen and Dos Toros are becoming increasingly common, and they theoretically discriminate against people who don’t have access to cashless payment methods, a population that is poor and disproportionately black and hispanic. The dominant reason for this lack of access is that these people are unbanked: they don’t have a checking account. By requiring all stores and restaurants in New York City to accept cash, Torres hopes to ensure the unbanked won’t need to ever worry about not having access to these stores.

Unfortunately this new policy unnecessarily exposes retail & restaurant workers (a group that is also disproportionately poor and people of color) to the real risks of carrying cash, burdens the very businesses that employ the people Torres hopes to help, and fails to address the larger problem of unbanked people unable to access the online economy.

Instead of trying to resist the transition away from using cash, we should be focused on ensuring that unbanked people have cheap or free access to cashless payment methods to ensure that they continue to have access to the full economy, both physical and digital.

The Unbanked Problem

Source: FDIC

Everyone should be concerned about unbanked populations losing access to an increasingly cashless economy. 6.5% of the U.S. population is unbanked (and therefore lacks access to a debit or credit card), including 16.8% of black people and 14% of hispanic people. Over 50% of those who are unbanked say a reason is that they don’t have enough money to have a checking account.

While this population has been steadily decreasing (from 7.7% in 2013 to 6.5% in 2017), ensuring that this disadvantaged population continue to have access to the market should be of concern to both government leaders and the businesses that these people should have access to.

To this point, many people have pointed out that brick and mortar retailers that don’t accept cash discriminate against unbanked people. So far, it appears that the problem of access to brick and mortar businesses right now is mostly theoretical. In a February article in Eater, Christine Gianakis, the spokesperson for the NYC Department of Consumer Affairs, acknowledged that cashless establishments aren’t “something the DCA has received many complaints on.” The reality is that cashless businesses have self-selected such that their customers can already afford $5 coffees and $15 salads, and therefore unlikely to be unbanked to begin with.

Still, just because a problem doesn’t currently exist does not mean it won’t (it probably will!). Nor should we excuse a discriminatory condition even if it doesn’t appear to be currently causing harm. The question is, do we try to keep the status quo and force businesses to accept cash and its downsides, or do we work to accelerate giving unbanked people access to the cashless economy?

Cash Isn’t Safe

Unlike cases where unbanked people can’t buy things at cashless stores, examples of violent robbery of restaurants and stores are not hard to find. There’s the Target in Manhattan where robbers forced themselves into the back office and the manager handed over $45,000 at gunpoint. Or the Sweetgreen (now a cashless store) in Union Square where Johnell Turner pulled out a gun and said “You really don’t want to die for Sweetgreen. Or the Baltimore cafe that went cashless after being robbed five times in four months.

Source: D&D Daily

In 2017 retail businesses in the U.S. saw 5,651 robberies, 60% of which were armed. 208 people died violent deaths that year as a result. Many of the people who died were the the retail sales people, the cashiers, or the store managers, who are disproportionally people of color and often make minimum wage.

Until recently cash was a required part of a functioning economy; the crime surrounding it a necessary evil of a growing and prosperous economy. For most businesses this remains the reality. But with a cashless economy we have an opportunity to reduce the real risk that retail workers are put in every day, and forcing businesses to accept cash would be an unmitigated step backward in improving the safety of retail workers.

Cash Isn’t Fast

Perhaps the most obvious case against cash is that it has become a relatively slow form of payment. It requires the manual counting of cash by both the customer and the cashier and the shuffle of giving change and putting it away. Chef Nelson German, owner of San Francisco restaurant AlaMar, estimates that transactions without cash are 7 seconds faster than those without.

It may not seem like much, but for high-volume restaurants and retail stores those few seconds can significantly impact their business. Sweetgreen estimates that since going cashless they’re able to serve up to 15% more customers per hour. When a business depends on the lunchtime rush this can have a huge impact on its ability to survive and grow.

The reality is that most of these fast-casual restaurants going cashless disproportionately hire low income and people of color to staff their stores. The more customers you can serve, the more staff you need. The more successful your stores, the greater your ability to expand and hire (and promote!) even more workers. Any policy that affects these small and medium sized businesses risks unintentionally harming the people that work at them.

Cash Isn’t Digital

Amazon, Wish, Brandless, and the NYC Government: all online experiences that require cards.

When looking at the disadvantages faced by the unbanked, the largest problem is that the modern economy is rapidly shifting online, where cash cannot be accepted at all. The inability to shop at discount stores like Amazon, Overstock, and Wish limits access to goods that are often cheaper than those in brick and mortar stores. Additionally, there are now a class of products that aren’t even sold in stores: a new breed of businesses like Dollar Shave Club, Everlane, and Brandless are offering superior products for less by skipping retail altogther and selling their goods directly online.

Moreover, government services themselves are increasingly being provided over the internet. In New York City those of us who have a debit or credit card can conveniently pay their parking ticket online. If you’re unbanked you’re required to take the trip to pay your ticket in person, taking valuable time they could use supporting themselves or their family.

Between a lack of access to cheap products, products that aren’t sold in stores, and government services provided online, it’s clear that the unbanked are increasingly being excluded from our economy in a much more real way than not being able to buy a $12 burrito at Dos Toros. Requiring cash acceptance at restaurants to combat unfair treatment of unbanked people is like putting a band-aid on a broken arm. While requiring stores and restaurants to accept cash certainly can’t hurt unbanked people, it seems unlikely to actually help them and risks distracting from solving the real problems they face in accessing the online economy.

So What?

Even accepting all of the above, it still leaves us with the very real problem that the unbanked population in the U.S. is set to become increasingly disadvantaged as the economy moves more and more toward cashlessness. However, instead of holding back the real progress of removing cash from everyday transactions, we should be working to enable unbanked people to participate in the modern digital economy.

Debit and credit cards issued by banks aren’t the only way that someone can make cashless transactions — prepaid debit cards and other alternatives provide an easy and widely distributed alternative to traditional checking accounts. Many convenience stores already stock Visa and American Express gift cards that can easily be used in cashless transactions. Better yet, new services like Bluebird by American Express allow for anyone to have many of the benefits of a traditional debit card without the need for a permanent address or a social security number. In fact this is already starting to happen: 26.7% of the unbanked population is already using prepaid debit cards of some kind.

While we’re still in the early stages of a transition to a cashless economy, policy makers like Councilman Torres should focus on ensuring unbanked people have access to the cashless economy. This could come in many forms — requiring cashless businesses to have vending machines for free prepaid debit cards, subsidies for access to debit card alternatives, or requiring banks to offer products that reduce or remove the barriers that the unbanked are facing. By increasing access to cashless payment methods we will both solve the problem of discrimination in cashless stores and address the much larger problem of access to the online economy.

What doesn’t make sense is a well-intentioned but misguided policy that solidifies our dangerous and inefficient reliance on cash and doesn’t actually address the core issues creating disenfranchisement of unbanked people.

Lukas Thoms stuided Economics and Political Science at NYU, started his professional career working in retail at the Apple Store, spent many years selling things online, and now builds technology that helps people buy stuff and do stuff. He’s most frequently found on Twitter or walking his dog Odin.