Cashless retailing represents one of the most promising innovations in retail’s quest to reduce friction, but the technology is facing pushback from some governments. New Jersey made it mandatory for retailers to accept cash as payment on March 18, while Philadelphia’sversion of the law will take effect in July, according to NJ.com. Massachusetts has required all retailers to accept cash since 1978.
The New Jersey law requires most stores and restaurants to accept cash at their brick-and-mortar locations, though car rental companies, parking garages and some airport retail shops are excluded. Retailers can still require electronic payments for web, mail or phone orders.
The Philadelphia ban has its own list of exceptions, including wholesale clubs that use a membership model, car rental companies, hotels and parking garages, according to The Wall Street Journal. The law also includes an exemption for “transactions at retail stores selling consumer goods exclusively through a membership model that requires payment by means of an affiliated mobile device application,” which would allow Amazon Go stores to operate in the city.
Lawmakers in both Philadelphia and New Jersey noted that totally cash-free stores could disenfranchise consumers that don’t have bank or credit cards. The claims are not without merit: 6.5% of all U.S. households, totaling 14.1 million adults, did not have a bank account in 2017, according to a study by the FDIC. Additionally, 26% of Philadelphia residents live below the poverty line, which can affect their ability to access cards.
However, the FDIC study also noted that the “bankless” rate was down from 7% in 2015 and 8.2% in 2011, indicating that more consumers are gaining access to payment cards. The arguments for cashless stores include reducing wait times for shoppers and improving the safety of transactions. Market forces may push the industry towards more cashless experiences, though the process would take some time.
“I do think market forces will drive cash out of most retail models,” said Dave Bruno, Marketing Director at Aptos in a RetailWire discussion. “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 of a fair ‘cash card’ solution at some point, but until that time, I don’t think we can discriminate.”
For now, cash still accounts for the largest number of transactions: 30% of payments made in the U.S. in 2017 were in cash, compared to 27% through debit, 21% through credit cards and 22% through other options, according to the Federal Reserve Bank of San Francisco. Cash was used for 55% of transactions for purchases of $9.99 or less, though that figure quickly dropped to 32% for purchases between $10 and $24.99, and fell all the way to 7% for purchases over $100.
However, the increasing adoption of cards isn't a one-way street — shoppers are also interested in using cash for purchases currently dominated by other payment methods. In Mexico, retailers are already introducing "hybrid payment systems" that let shoppers make e-Commerce purchases with cash.
"With more and more stores going cash-free, there is a rising concern over the marginalization of consumers who don't own debit or credit cards," said Lucie Buisson, Head of Product at Contentsquare in comments sent to Retail TouchPoints. "In this case, what one group of retailers and consumers sees as convenience is a barrier for another group, essentially preventing them from participating in what is an increasingly digital economy. In a country like Mexico, where cash is king, retailers have developed innovative ways of incorporating cash into the digital marketplace. Not only is this approach inclusive, it also reflects the modern consumer's willingness to blend physical and digital as part of their shopping routine."