The Cashless Catch

Lawmakers in Washington and around the country have been stepping up to yet another of the myriad challenges generated by technology — how to run a cashless economy for the good of all.

The advent of credit cards, smart cards and online payment has provided consumers with an array of different options to carry out their transactions. This has obviously provided great convenience for millions of people, allowing them to choose between cash versus other methods of payment. The flexibility is a boon unknown to previous generations.

But cash always remained an option. Indeed, in the popular mind, dollar bills and coins are the real thing, “real money,” and nothing could be better, or even as good, especially for the seller. The attitude was reflected in such old sayings as “cash on the barrelhead,” and “in G-d we trust, all others pay cash.”

Not anymore. The once-universal preference for cash has given way, in some places, to more than a preference, indeed an insistence, on non-cash payments. Welcome to cashless stores.

In fact, according to a Pew Research Center survey released in December, 29 percent of Americans said they made no purchases using cash during a typical week, up from 24 percent in 2015.

Businesses that have gone cashless did so for several reasons, among them reducing the risk of being robbed and the headaches of handling cash, such as having to make change and watching out for counterfeit bills. And for the customer there is the benefit of being less vulnerable to incurring debt by the all-too-easy use of credit cards.

But not everybody is a card-carrying member of the cashless society. The working poor, in particular, are often unbanked and lack access to credit.

Hence, the peculiar (though increasingly familiar) incident chronicled a few weeks ago by the Philadelphia Inquirer:

“Hembert Figueroa just wanted a taco.

“So he was surprised to learn the dollar bills in his pocket were no good at Dos Toros Taqueria in Manhattan … where customers can only pay by card or smartphone.

“Figueroa, an ironworker, had to stand to the side, holding his taco, until a sympathetic cashier helped him find another customer willing to pay for his meal with a card in exchange for cash.

“I had money and I couldn’t pay,” he said.

It’s for hard-working, cash-wielding folks like Figueroa that U.S. congressmen Donald Payne (D-N.J.) and David Cicilline (D-R.I.) introduced competing bills last week that would keep cash from going extinct.

Both follow legislation already passed in New Jersey, Philadelphia, New York, Chicago and elsewhere that ban the phenomenon of cashlessness.

As Payne, the author of the Payment Choice Act, put it, “There is a movement underway across the country to ensure our increasingly technological world does not lock out low-income, minority, and immigrant populations. This bill is part of that movement. We have to ensure that technological convenience for some doesn’t mean economic hardship for others.”

Cicilline’s bill, though much the same, has a different title: He calls it The Cash Should Always Be Honored (CASH) Act. (Both bills exclude from the requirement to allow cash payments for online transactions and those done over the phone. There are other exceptions as well, mentioned further on.)

While these bills address important practical concerns, there is the broader principle of government intervention in private transactions to consider. With perhaps the best of intentions, lawmakers have stepped in on behalf of those who are disadvantaged by cashless stores. But should they?

Is it really the business of government to tell a company what manner of payment it should accept? The question of enforcement compounds the problem. Cicilline’s proposal would give that job to the Federal Trade Commission. The FTC would write the regulations, including the penalties (more on that shortly).

Just what we need, more government, more regulations, a bigger bureaucracy to guide the citizen (by force, if necessary) in how best to live his or her life.

As Harvard economics professor Kenneth Rogoff argued, while the government should play a role in regulating the transition to a more cashless economy, these bills are “a very heavy-handed intervention.”

This is what some say is the hardest type of question, where two manifest goods conflict. When it’s good versus evil, the choice is clearer. But here, the legitimate interests of both businesses and consumers conflict. What to do?

In Philadelphia, the new law exempted parking lots, garages, and wholesale shopping clubs from the ban; in New Jersey, car rental companies and retailers inside airports are still allowed to go cashless.

Perhaps this approach could be incorporated in the federal bills.

A way should be found to preserve the rights of customers to pay in cash, while mitigating the restrictions to be imposed on businesses.