Do “cashless” stores and places of business have a downside?

Because it does not rely on Internet connectivity, cash isn't susceptible to technological malfunctions like other payment systems. Cash is thus vital to a resilient economy, providing an important firewall against both manmade and natural disasters. However, resilience is not the only reason that cash acceptance is critical, as digital-only retailers also do disservice to the public.

But aren’t digital payment systems more convenient for people?

Many people enjoy the ease of electronic payments, but when businesses require them, it marks discrimination against “unbanked” individuals (those lacking a checking or savings account), a population that is growing in many countries around the world. Significant barriers often exist for individuals trying to climb out of poverty to obtain or maintain a bank account:

• A lack of a steady income;

• Receiving money only the form of cash (from panhandling, for example);

• Banks may require secondary proof of identify for an account, such as a utility bill, which the homeless can’t provide.

Bureaucratic barriers and identification requirements can prevent many poor, elderly, and undocumented people from participating in cashless economies.

Refusing cash could put an undue burden on people who depend on cash as a means of payment. — Bank of Canada

Besides discriminating against the “unbanked,” what are examples of how cashless businesses do harm?

It represents a hardship for people who find it hard to use digital services, such as individuals with physical or mental health challenges and the elderly. It also represents the loss of a critical lifeline for people who must turn to cash when escaping a difficult situation or abusive relationship, such as a victim of domestic violence who wants to pay in cash to prevent a record of his or her whereabouts. It also creates higher prices for those unable to benefit from online services or direct debits; and can cause people to fall get deeper into debt, as budgeting is easier with cash.

What is the impact of migrating to “cashless”?

A cashless society leaves people more susceptible to economic failure on an individual basis: if a hacker, bureaucratic error, or natural disaster shuts a consumer out of their account, the lack of a cash option would leave them few alternatives. It is also harmful on a societal level, as the current credit card system effectively serves to transfer money from poor households to high-income households, according to a study by the U.S. Federal Reserve.

Is cash also a matter of consumer freedom?

There are multiple reasons why a consumer may wish to conduct transactions in cash, including a desire for anonymity. Cash provides a sense of anonymity that digital payments can't and unlike digital payments, cash doesn't generate data about transactions for third parties. 

Household budgeting is another reason. Cash provides an uncomplicated way for families to budget, and for those narrowly making ends meet, cash is a safer way to budget than to risk overdraft fees while maintaining a bank account with no cushion.

Cash is the best transactional tool for increasing community and individual autonomy that we have invented so far. – MIT Technology Review, “In praise of the dollar bill,” April 2022

Are consumers fighting for their right to use cash?

They are. In Australia, where business owners can reject customers based on their payment preference, a “Cash Only Week” movement garnered traction on social media. In the U.S., a lawsuit was recently filed against the country’s National Park Service for operating a cashless entrance-fee payment scheme at multiple national sites. The lawsuit does not ask the NPS from accepting card or digital payments, but instead asks to require the NPS to restore freedom to citizens to pay in cash if they need or choose to. It is a recent example of a growing backlash against discriminating against consumers who prefer to tender payment or deal in cash.

Are the number of cashless stores becoming problematic?

One consequence of the global pandemic was decisions by retailers to stop taking cash payments. In one survey of 2,000 consumers by a UK consumer group, 1 in 10 shoppers said they’ve been turned away by a store when trying to make a cash purchase. Combined with a small but growing number of automated cashless stores worldwide, the trend threatens to further marginalize low-income people. Some analysts predict that cashless retail stores, which account for 1% of brick-and-mortar stores today, could increase to 10% in a few years.

What role should governments play in protecting consumers?

Laws regarding requirements for businesses to accept cash payments vary around the world. The move by many retailers to refuse cash during COVID-19 unearthed a lack of legal protection that took many citizens by surprise. Canada, like many countries, leaves the method of payment entirely up to the seller. In the US and UK, cash must be accepted to pay a debt, such as parking ticket, but no federal law requires businesses to accept cash for an exchange of goods or services.

Awareness campaigns to support and promote support for a robust cash infrastructure are helpful, but additional legal protections for cash may be required as the global marketplace is enticed by non-cash payment schemes. Countries should take proactive measures to protect the use of cash and prevent businesses from discriminating against people who lack financial tools such as credit cards, checking accounts, debit cards, and payment apps.

The word’s governments may not be able to leave the issue up to the marketplace, as those already most disadvantaged—and with the least political clout—would suffer most in a cashless society. A cash alternative should always be available due to concerns over privacy, security, and resilience; and to prevent discrimination against individuals who—for a variety of reasons—are unable to clear the hurdles necessary to participate in electronic payment networks.