Market forces are taking America cashless but local politicos, like the luddites destroying machines that replaced craftsmen, are throwing up roadblocks.
Most folks purchasing a Curry Chickpea Bowl at Sweetgreen or a Nora Roberts novel at an Amazon brick-and-mortar stores reflexively pay with a credit or debit card or an app—they would be frustrated if they tried offering a portraits of Andrew Jackson.
Those “Legal Tender for All Debts Public and Private” are no longer accepted at a growing list of restaurants and retailers because with the vast majority of customers preferring plastic, offering two payments systems—electronic and physical money—is cumbersome and inefficient.
Credit, debit and third-party apps require merchants to pay transactions fees to banks and services like PayPal or Apple Pay but cash requires daily visits to banks to obtain small bills and coins to make change and end-of-day return hauls or expensive daily visits from Brink’s trucks to discourage late night holdups.
Cashless restaurants say checkout lines move more quickly during rush periods, though that depends on the speed of the connection to the payment service. At Thomas Sweet—Washington’s premier purveyor of ice cream—a sign firmly suggests cash on hot summer evenings. And who wants to be melting instead of indulging.
Paper money is dirty—a great conveyor of germs—and enables the grey market for tradesmen and merchants who sometimes forget to report all their sales to the IRS and local sales-tax authorities. And dark money enables terrorists and more ordinary criminals.
The Bank Secrecy Act requires bank tellers to report to the Treasury’s Financial Crimes Enforcement Network unusual withdrawals exceeding $2,000 —without your knowledge.
Twenty years ago, many folks routinely paid for a shopping spree at high-end stores with cash but these days withdrawing large sums from the banks for that purpose invites an enquiry from someone as warm and cuddly as Joe Friday on the trail of a counterfeiter.
Local politicians in places like New York are complaining—or at least trolling for votes among preciously minded, left-leaning professionals and grey marketers —that cashless stores discriminate against the poor, homeless and illegal immigrants.
Massachusetts and Philadelphia have passed statues requiring merchants to accept cash—though the City of Brotherly Love carves out parking garages and membership stores like Costco. The latter seems more likely the product of good lobbying than any genuine justifications—none would be competitively disadvantaged, made safer or more democratic than for example small convenience stores or gas stations if required to accept cash.
A proliferation of such laws—in New York City Councilman Ritchie Torres is pushing one—would stifle innovation and the build out of artificial intelligence with its potential to boost productivity growth and raise wages.
At Amazon Go stores, shoppers register their mobile device and payments app when entering, software keeps track of what they put in their cart and they leave without passing a checkout line—faster, cheaper, better.
As that model proliferates, stores will become less expensive to operate and competition will drive down prices for consumers—poor folks as well as rich.
In China, reliance on cashless transactions is way ahead of the United States. Services like Alibaba’s Alipay and Tencent’s WeChat Pay are supplanting banks and forming partnerships across Europe and expanding in South Asia.
By smothering the domestic market, local protectionism could stifle the development of similar American technologies and erode the competitiveness of U.S. banks that are developing services similar to Apple Pay.
The federal government issues food stamps through debit cards. It would not be a big leap to make those more widely available and usable for more purposes than groceries. And to require banks and supermarkets to recharge government cards and transfer funds among cards—much as the subway systems transfer credits from expiring to new cards.
Tax refunds and paychecks could be issued via debit cards with funds transferable to other cards or bank accounts at physical locations or online.
Instead of pandering to voters by shackling progress, liberal politicians would better serve the interests of the poor by enabling them with mobile payment systems.
Peter Morici is an economist and professor at the Smith School of Business of the University of Maryland. He tweets @pmorici1