The cost of going cashless
By Pamela Paul
Six dollars and 50 cents is a lot to pay for a scoop of ice cream, no matter how artisanal. But that’s the cost at Van Leeuwen’s 20 ice cream shops in New York City. It’s especially egregious when you consider that a full pint of Van Leeuwen, which contains 2 1/2 servings of ice cream, depending on your self-discipline, costs only a few dollars more.
But some people haven’t been allowed to pay for Van Leeuwen’s ice cream, be it vegan or French, at all. For nearly two years after New York City banned retail stores from being cashless, Van Leeuwen shops in New York refused to comply. The company bore down on this defiance with a brazenness that felt almost ideological. Not only did signs warn customers that its stores did not take cash — until last month, when it finally acquiesced after threat of legal action — it violated the law at least 90 times and declined to show up for administrative hearings. The company also declined to respond to repeated requests for comment.
“Nobody should be discriminated against because they only want to or can pay with cash,” Vilda Vera Mayuga, commissioner of New York City’s Department of Consumer and Worker Protection, told me after Van Leeuwen finally conceded defeat. “It’s not for the business to decide who they want to serve.”
Maybe you didn’t need that serving of Royal Wedding Cake ice cream with elderflower and lemon anyway. Lots of people like to avoid scrounging for pennies at the bottom of their bags or standing behind someone in line who does. Many businesses prefer cashless transactions too. What’s the problem?
Clearly a cash-free economy has its beneficiaries, foremost banks and credit card companies: Visa and Mastercard reap $138 billion from participating merchants in service fees a year. According to a recent report in The Economist, Visa and Mastercard are two of the most profitable companies in the world, with net margins of 51% and 46% last year.
It’s also easy to pick up the rich scent of Silicon Valley. In the rose-metallic vision of libertarians like Peter Thiel — who of course, co-founded PayPal — operating in a cash-free world is easier and more convenient than handling grubby lucre. Amazon has also been a notable opponent to cashless bans in states like New Jersey; in the company’s original vision for its Go stores, paper money was not an option.
Many people believe cashless is the wave of the future, citing Sweden as an example. Countries such as India and South Korea have also made a strong push toward a cash-free future. According to an analysis of sales data by payment platform Square, the share of cashless businesses nearly doubled in the United States, the United Kingdom, Australia and Canada between February 2020 and February 2021; in the United States, cash payments dropped more than 8 percentage points in that period. And while the United States is far from the vanguard on going cash-free, here consumers use either credit or debit cards for 57% of transactions. As of 2022, 41% of Americans say they go cashless in a typical week, up from 24% in 2015.
So who’s paying for all this? While cash-free means profits for credit card industries and efficiencies for merchants in terms of training workers and managing their time, it isn’t cost-free for everyone. One recent study found that merchants increase their prices by approximately 1.4% to offset the interchange fees they pay to credit card companies; for those earning miles, that may not matter — but those who pay cash pay the price. Moreover, many cashless venues use tablet payment systems that automatically ask consumers to tip for a retail service that was long standard. If you’re like me, that screen may leave you flummoxed: Are the workers being paid less than minimum wage because these are now tipped jobs? Will this barista think I’m a jerk for not tacking on 20% percent or 30% for a muffin?
Consumers also pay in terms of privacy. Do you want your payment app or credit card company to share exactly how many beers or Big Macs you’ve bought in the past week with its data partners or to know every item you picked up at the pharmacy? And while a cash system is subject to crime, like employee theft and robbery, digital payments aren’t without their own risks, including double charges and identity theft.
But the most significant objection to a cashless system is whom it shuts out. Whereas cash enables everyone, no matter their age, credit history, immigration status or income, to pay directly for goods or services rather than use an intermediary, credit cards generally require a bank account. Not everyone — including 301,700 households, or almost one in 10 households in New York City — has one. And even those who do don’t necessarily want to add to their credit card debt. Regardless of whether they have a choice, teenagers and people earning less than $30,000 a year are more likely to use cash. This is also disproportionately true for minorities.
In response to these disparities, Philadelphia, San Francisco, New York City and the state of New Jersey have passed legislation forbidding most merchants from refusing to accept cash. But that’s a tiny fraction of the country. Chicago’s proposed ban failed to pass in 2019. Though the U.S. Treasury notes on all bills, “This Note Is Legal Tender for All Debts, Public and Private,” there is no federal law mandating that all businesses accept cash. In the absence of an explicit law stating otherwise, merchants can decline any form of payment they like.
Going cashless sounds so sleek and shiny and tech-forward, but like many high-tech initiatives, it doesn’t necessarily translate into progress for all. Given this country’s ongoing inflation, given the persistence of its profound wealth disparities, given the paycheck-to-paycheck lives of many Americans, widening another divide between the haves and the have-nots isn’t the cost-free leap forward proponents make it out to be. Someone always pays the price.