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Will pro-cash legislation halt the march towards cashlessness in the U.S.?

Massachusetts blazed the trail in 1978, making it illegal for businesses to refuse cash payments back when debit cards and credit cards were still rare and digital wallets were the stuff of science fiction.

But as cashless payments have proliferated, a flurry of states, cities, and local administrations across the U.S. have taken their cue from the Bay State and passed similar pro-cash laws, with several others planning to follow suit.

And while there's still no nationwide ban on completely cashless bricks-and-mortar stores, a bill dubbed the Payment Choice Act is under consideration in Congress and enjoys strong bipartisan support.

But can legislation prohibiting businesses from refusing cash halt the nation's march towards cashlessness?

Or will the US inevitably go the way of countries like Sweden, Finland, and the UK?

A two-tier society

Massachusetts' pioneering pro-cash law — and many other pro-cash laws across the nation — frame businesses' refusal to accept cash payments as a discriminatory practice.

Bill Greenlee, a city councilman in Philadelphia, which banned cashless stores in 2019, puts it this way:

"It seems unfair to me that I can walk into [salad chain] Sweetgreen, get a salad, but the person behind me that has the monetary unit the United States of America has used for centuries cant get that same product...

It's hard to disagree with Greenlee. While, for many of us, swiping or tapping our card or smartphone at the cash register has become second nature, it puts those who are already vulnerable at risk of falling further through the cracks.

According to Morning Consult, which surveyed 4,400 adults in 2021, the roughly 35% of Americans who are unbanked or underbanked and, thus, rely on cash to pay and get paid, are typically younger, on low incomes, and come from minority backgrounds.

These people are already struggling. Allowing businesses to refuse cash payments would make it harder — if not impossible — for them to buy everyday items and increase social inequality.

A threat to freedom?

The ability to pay in cash can be literally a matter of life and death for people who don't have access to traditional banking services. But even for those of us who are willing and able to go cash-free, a completely cashless society isn't necessarily desirable.

For starters, where cash payments are, by their very nature, private, digital payments always leave a trail.

Some might argue that "unless you've got something to hide, that isn't an issue." But, actually, it is. Lack of privacy can — in fact, already is — creating ethically problematic situations.

Way back in 2009, American Express drastically lowered a customer's credit card limit despite his excellent credit score and payment record. The reason? They weren't comfortable with some of the outlets he shopped at because other customers that patronized them had poor credit records.

More recently, tech giants have entered into agreements that give them access to 70% of the country's debit and credit card transactions, putting them in a position where they can take advantage of highly sensitive personal information for financial gain.

Jay Stanley, a senior policy analyst at the ACLU, sums things up this way:

"When a middleman becomes part of the transaction, that middleman often gets to learn about the transaction — and under our weak privacy laws, has a lot of leeway to use that information as it sees fit."

But there's also a less talked about and far more critical downside to going completely cashless: what happens if the technology fails?

Texas got a taste of this in 2021, when snowstorm Uri caused widespread power outages. With most of the state's financial infrastructure offline, people had to turn to cash to pay for essentials.

The lay of the land: how close to cashlessness is the U.S.?

According to our latest Lost in Transaction data, the dangers of going completely cashless aren't lost on consumers.

While cash usage dipped during the early stages of the COVID-19 pandemic, the shift to cashless payments doesn't look like it's going to be permanent. Only 10% of those we surveyed said they plan to be completely cashless moving forward. And 40% will be paying as many as 25% of their transactions in cash.

That said, the reality is that cash usage is declining.

More to the point, while pro-cash laws might protect consumers' right to pay with notes and coins in physical settings despite cash's waning popularity, those who don't have access to digital payments are still mostly excluded from the online economy.

How eCash can bridge the digital payments gap

Given that every 1% increase in eCommerce means around 80,000 bricks-and-mortar stores have to close — and that eCommerce is growing at a rate of 14.55% a year — being unable to shop online could soon have serious repercussions for vulnerable groups.

For this reason, while pro-cash laws are important when it comes to ensuring everyone can participate in the economy, they're not enough on their own. Equally important, we need to re-think cash and make it fit for the digital age.

This is where eCash has a crucial role to play.

Allowing customers to pay digitally even if they don't have access to a bank account (or don't want to use digital payment methods because of privacy or security concerns), will ensure everyone can continue to access what they need. And it'll ensure they're able to do so regardless of accelerating digitalization or a looming retail apocalypse.

But eCash has compelling benefits for merchants too:

  • Unlike credit and debit card payments, there's no risk of chargebacks or payment declines. In fact, by accepting eCash, merchants can boost conversions by offering customers an alternative should a card payment fail.
  • For bricks-and-mortar stores, acting as an eCash payment point can bring in additional business from customers coming in to complete payment.


Digital progress shouldn't create exclusion

Much of the debate around cashlessness focuses on its benefits — convenience, speed, and security. But we should be having a frank and open discussion about its downsides too.

As U.S. Rep. Donald Payne Jr, the congressman behind the Payment Choice Act, notes: "We can't reject [vulnerable people's] needs because they don't have a credit card or Apple Pay." Nor should concerns about privacy and what happens in the event of man-made or natural disasters be dismissed.

While we may not be able to halt digitalization's progress, we can take steps to maintain fairness, peace of mind, and choice for all consumers.

Pro-cash laws are a significant step in the right direction. But, if we're to ensure nobody is left behind, it's time for cash to evolve. With eCash, everyone can continue being part of the economy, regardless of whether payments go fully digital or not.