Do Contactless Payments Impact Vulnerable Consumers?

Many brick-and-mortar merchants have implemented tap-to-pay systems during the pandemic. Customers and employees, fearing the spread of the coronavirus, are wary of handling cash and coins.

Starbucks, Chick-fil-A, and Lululemon have recently banned the receipt of cash. Many other businesses are refusing to accept cash or are pressuring customers to pay by tapping credit cards or smartphones. This shift away from cash is extraordinary. It wasn’t too long ago that merchants complained about the high costs of accepting credit cards.

There are other reasons, beyond Covid-19, why some merchants are eliminating cash receipts. Accepting cash, it turns out, can be more costly than paying interchange and other credit card fees.

But refusing cash payments has societal implications as it assumes all consumers have access to a smartphone or credit card.

Starbucks is one of many companies that have eliminated cash payments during the pandemic.

Starbucks is one of many companies that have eliminated cash payments during the pandemic.

Cost of Accepting Cash

There are costs for accepting, storing, and transferring cash.

  • Accepting cash requires registers. Simple cash drawers cost approximately $70, but most merchants need multiple drawers with locks, which typically integrate with the merchant’s point-of-sale system. Each register, all told, can cost several hundred dollars.
  • Businesses that accept cash must create related policies and procedures. Coins and bills have to be counted before, during, and after each shift. Transferring cash from the store’s safe to the registers involves additional bookkeeping, ledgers, and oversight. Cash, in other words, requires diligent accounting.
  • Merchants must keep sufficient bills and coins to provide change to customers. Counting coins and bills, and frequent trips to the bank, are time-consuming but necessary.
  • Cash requires enhanced security. Cash has to be stored safely and transferred securely. Not every merchant needs a Brink’s armored truck. But many do. Cash-accepting businesses must install safes or vaults and take precautions when moving cash to and from their bank. Security cameras, door access control (key fobs, badges, or codes), and alarm systems are common.

Impact of Banning Cash

At first glance, banning cash appears to be an appropriate response to combatting Covid.

But such a ban creates humanitarian hardships. Refusing to accept cash impacts vulnerable consumers, the people that have been hit hardest by the pandemic.

Roughly 6 percent of U.S. and Canadian residents do not have a bank account, and 20 percent have little or no access to credit cards. The policy of eliminating cash implicitly denies access to goods and services to those consumers, provoking the ire of governments, politicians, and special interest groups.

In January 2020, New York City passed legislation requiring businesses to accept cash from customers and preventing businesses from charging more for that form of payment. The bill’s sponsor wrote, “No longer in New York City will brick-and-mortar businesses have the right to refuse cash and effectively discriminate against customers who lack access to credit and debit. The marketplace of the future must accommodate the needs of vulnerable New Yorkers.”

New York City’s ban on cashless businesses echoes similar laws enacted by San Francisco, Philadelphia, and the states of Massachusetts, Connecticut, and New Jersey.

More recently, two U.S. senators, Robert Menendez (D-New Jersey) and Kevin Cramer (R-North Dakota), introduced a bill called “The Payments Choice Act.” This proposed legislation would prohibit physical-store businesses across the U.S. from declining cash payments.

Refusing Consumers?

The pandemic has forced brick-and-mortar merchants to think differently about how they accept payments. Bills and coins may carry the coronavirus. And managing cash is expensive. However, in the rush to eliminate cash, some merchants may be unintentionally refusing consumers with no access to tap-to-pay smartphones and credit cards.

Mike Eckler
Mike Eckler
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