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Philadelphia just banned cashless stores. Will other cities follow?

Cashless stores are convenient, but they also marginalize low-income shoppers.

A man holds a smartphone with Apple Pay application on July 13, 2018, in Hong Kong. S3studio/Getty Images

Shop at a trendy, millennial-oriented business like Sweetgreen or Everlane and the odds are pretty high that it won’t let you pay with cash. Instead, you’ll have to pay with credit card, an app, or Apple or Google Pay.

That’s because these companies are pushing out cash payments, arguing that touchless pay makes shopping hassle-free.

Lawmakers and public advocates, on the other hand, have long said this concept marginalizes low-income shoppers who might not be tech-savvy or have access to credit lines. Now these cashless stores are starting to come under scrutiny.

Philadelphia just passed a bill banning stores from going cashless. The law won’t apply to businesses like parking garages, stores with membership models like Costco, or transactions that require a security deposit, like rental cars. But come July 2019, all stores in Philly will have to give customers the option to pay with cash.

Mayor Jim Kenney signed the bill last week, making Philadelphia the first city in the US to take legal action against cashless stores. Massachusetts has had a law against cashless businesses since 1978, but other American cities are trying to follow in Philadelphia’s footsteps. Last year, Chicago tried to ban cashless institutions but did not succeed. In February, on the other hand, similar legislation passed to make cashless businesses illegal in New Jersey (although New Jersey’s governor has yet to sign a bill), and New York City politicians are pushing laws against cashless stores as well.

Some oppose the idea that a city can take such a stance; one top official from Philadelphia’s Commerce Department complained that “modernization is going to happen with or without Philadelphia,” and Amazon had already warned the city that passing such a law would “impede” its plans to open an Amazon Go store in Philly.

But others are supporting this move, and this disagreement represents a wider schism between those pushing for technological innovation in retail and those who argue that it’s exclusionary.

Why cities are pushing back against cashless stores

William Greenlee, a council member in Philadelphia, told the Wall Street Journal that he decided to introduce this bill against cashless stores after finding that simple sandwich shops in major urban areas within Philly, like the Center City District, wouldn’t accept cash.

“Most of the people who don’t have credit tend to be lower income, minority, immigrants. It just seemed to me, if not intentional, at least a form of discrimination,” said Greenlee. Now, he said, these stores have “to do what businesses have been doing since Ben Franklin was walking the streets of Philadelphia.”

But where did this idea come from in the first place? Although it isn’t the only company exclusively pushing for this sort of tech, Amazon heavily subscribes to the idea of going cashless. Its bookstores don’t take cash and instead encourage shoppers to set up Amazon accounts, where they can link their credit card and pay with automated payment machines that are set up via kiosks.

Many restaurants, especially in New York City, are cashless, too, as are digital-first brands like Drybar and Reformation. These stores argue that it’s better for their business, and that “digital payments are the future,” as the Sweetgreen founders wrote in 2016 upon announcing their switch to cash-free payments.

A sign in the window of a Sweetgreen location in Washington, DC. The salad chain is one several businesses that have gone cashless.
Jahi Chikwendiu/ Getty Images

“Going cashless at our storefronts frees our employees from collecting, counting, recording, and depositing transactions,” one restaurant executive told Eater.

“Cash transactions are a big source of loss when not monitored regularly against petty cash reconciliations,” the accountants at Cornwell Jackson have written. “Cash is the most coveted form of theft, particularly for employees who suddenly experience an outside issue or concern that requires quick payment.”

But going cashless also marginalizes shoppers — specifically unbanked and low-income ones. In a city like Philadelphia, for example, more than 400,000 residents live below the poverty line, according to the Pew Research Center, and many don’t have bank accounts. Per the Federal Deposit Insurance Corporation, 6.5 percent of households in the US weren’t affiliated with a bank in 2017, so cashless stores would essentially be closing their doors to these shoppers.

“Not everybody is able to buy a smartphone,” one falafel shop owner told the Washington Post last year, explaining why he was opposed to going cash-free. “But they are hungry too, and have $10 in their pockets and they would like to spend their legal American form of tender, known as cash, with you. As society and technology evolves, we must ask ourselves always, not just ‘can we’? But ‘should we’?”

Cities with immigrant communities also tend to have higher rates of unbanked residents, like Los Angeles, where 8.6 percent of the population doesn’t have bank accounts. People avoid financial institutions for numerous reasons, including in order to stay away from monthly charge fees, overdraft penalties, or minimum balance requirements. Some people also don’t have credit cards if they aren’t documented or don’t have a strong enough line of credit.

“They pay for utilities, medical services, and their children’s education needs all through cash,” Melany De La Cruz-Viesca, the assistant director of the UCLA Asian American Studies Center, told Southern California Public Radio. “If we keep moving in this direction of a cashless system, what I see happening is a lot of the low-income immigrant groups in LA will fall out of the economy.”

Philadelphia’s new law ensures that this won’t happen to any of its residents. Now perhaps the rest of the country will follow suit.

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