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As COVID-19 spurs cashless purchases, Congress mulls a limit

Lawmakers seek to reverse trend of companies refusing to accept cash, saying the pandemic heightens the urgency to help consumers retain choices

Rep. Donald M. Payne Jr., D-N.J., attends a House Transportation and Infrastructure Committee hearing in the Capitol Visitor Center on Feb. 7, 2019.
Rep. Donald M. Payne Jr., D-N.J., attends a House Transportation and Infrastructure Committee hearing in the Capitol Visitor Center on Feb. 7, 2019. (Tom Williams/CQ Roll Call file photo)

Like other businesses, Southland Beer decided to go cashless when COVID-19 struck.

The owner of the craft beer bar and bottle shop in Los Angeles’ Koreatown neighborhood, Timothy Sturm, said the change was “mostly just for sanitary reasons — not wanting to touch money, not wanting to have things exchanged between customers and employees.”

As thousands of businesses took steps like Sturm’s to slow the spread of the disease, some members of Congress seek to block their path and simultaneously reverse a trend of companies refusing to accept physical cash. They say the pandemic heightens the urgency to help poorer, unbanked consumers retain choices as consumers. 

Rep. Donald M. Payne Jr., D-N.J., has a bill that would ban cashless stores. His bill was introduced before the pandemic upended daily life, but Payne says COVID-19 has only drawn more attention to the issue. “Unfortunately, because of the pandemic, it’s gained a bit more interest,” he said.

Payne’s bill has attracted a cross section of support — 10 of the 41 co-sponsors are Republicans, including Rep. Warren Davidson of Ohio, a member of the House Freedom Caucus and one of Congress’ loudest supporters of cryptocurrencies. “The U.S. dollar is rightly recognized as legal tender in the United States,” he said. “It is the U.S. currency, and I think that means you have to accept U.S. dollars everywhere — that’s the point of a sovereign currency.”

Technological tension

The pandemic has dramatically underscored a tension between technology, including for financial transactions, that has the potential to help contain the spread and a view that segments of the population risk being excluded from basic consumer transactions because they lack the technology.

As the virus spread in March, restaurants converted into takeout-only spots, relying on delivery apps like Postmates and Grubhub to handle orders. In Philadelphia, Philly Style Bagels went from cash-only to Venmo-only.

Analysis from Cardlytics found that card spending on restaurant delivery increased 65 percent year-over-year in March and April, even as overall spending dropped 20 percent. The company also found online-only spending increased 34 percent. And a survey by Paysafe, an online payments processor, found that 54 percent of U.S. shoppers went online because they couldn’t reach stores. For a quarter of U.S. consumers, this was the first time they shopped online, and 65 percent said they tried a new payment approach for the first time, the survey found. 

At the same time, cash use has declined dramatically. Cardtronics, the world’s largest ATM operator, saw U.S. withdrawals drop by nearly a third year-over-year in early April and remained down into May, with the largest drops found in COVID-19 hot spots like New York, Los Angeles and Washington, D.C.

“We’re seeing the use of cash decline as people become very conscious about what they touch and how they engage with each other,” said Jodie Kelley, CEO of the Electronic Transactions Association. “Relatedly, obviously, we’re seeing an increase in e-commerce.”

“I don’t know if I’d be so bold to say that cash will go away, but I think it is inevitable that the trend that we are already seeing, which is the move away from cash and that we’re now seeing accelerating, is going to continue,” Kelley added.

The cashless trend is continuing even as the economy tiptoes cautiously back to normality. Early reports that the coronavirus could survive on surfaces for hours haven’t helped cash’s market share.

After closing its 30 cafés on March 17, La Colombe started piloting one of its Philadelphia locations as a cashless store on May 26.

“We are taking seriously the advice of our medical advisors who recommend that we reduce physical touch points within our space for the health and safety of our customers and team members; this recommendation includes the tough decision to temporarily go cashless at our prototype café,” CEO Todd Carmichael said in a written statement.

Safety or opportunism

Cash’s public relations hit as dirty money during the pandemic has angered those who still rely on physical money.

“This whole thing smacks of opportunism,” said Jim Link, a lobbyist for Cardtronics. “It’s really, ‘Wow, we can take advantage of this health crisis’ to push an agenda that really has nothing to do with health — it has to do with payments.”

Cardtronics is backing Payne’s bill.

For Payne, cash is an equity issue. Six percent of Americans are unbanked, meaning they don’t have a checking or savings account, according to the Federal Reserve. The unbanked are more likely to be younger and poorer. They are also more likely to be black or Hispanic than white or Asian.

Some merchants say they go cashless because of the convenience. While credit card companies charge merchants 1 to 2 percent of the bill and a flat per-transaction fee of 5 or 10 cents, cash comes with its own costs. “At the end of every night, we have to count the register, I need to tip out, it’s 10 to 15 minutes a night,” said Sturm, at Southland Beer.

Sturm said he doesn’t miss the twice-weekly trips to the bank and worrying about theft. And he guesses he’s only turned away two or three people over the past two months who wanted to use cash and didn’t have a card.

He tried to go cashless a year ago after a trip to Scandinavia, where cards and e-payments have become the norm. But his staff balked, pointing to the bad press others received, so he dropped it. For him, going cashless is a choice for the businesses to weigh the pros of convenience and time saved against the cons of driving away potential customers.

Payne also says the issue is about choice.

“What about the people that can’t get credit cards? What then?” he said. “When do the American people ever win? We’re at the behest of these businesses that want us to do business with them, but then have all of these stipulations on how they’ll accept payment on their goods or services.”

The pandemic may encourage going cashless, but the massive economic downturn, putting more than 40 million people out of work, may do the opposite. Cash use went up in the last recession, as did the number of unbanked and underbanked Americans. As the Great Recession ended in 2009, the percentage of unbanked American adults was 7.6 percent, rising to 8.2 percent in 2011 before ebbing again, according to the FDIC. 

The primary reason households went unbanked was lack of money. Most bank accounts have a $100 minimum to open or avoid charges. More than half cited not enough money for going unbanked, and a third called that the main reason. 

Many of the businesses that went cash-free during the crisis will go back to taking cash afterward. “As soon as we can safely go back to accepting cash, we will,” said Carmichael, the La Colombe CEO.

But for some, cashless is the new way of doing business, and it’s here to stay.  

“I think I’ve got my opportunity,” Sturm said. “I don’t intend to go back to accepting cash.”

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