The Great Debate: Are Cashless Stores Discriminating?

As more and more Americans demand convenience and speed in their everyday lives, it makes sense that debit and credit cards — which have boosted these features for many consumers and businesses — have become hugely important to commerce in the U.S.

But some lawmakers have suggested that retailers like Amazon that have been quick to adopt contactless payment options — requiring that customers use only mobile apps and credit or debit cards to shop their businesses — may inadvertently disenfranchise low-income families. The debate — which pits retail innovators such as Amazon against lawmakers looking to maintain access to goods and services for all members of society — has been picking up steam.

Philadelphia this month becoming the first major city to ban cashless stores and, just this week, New Jersey joined the fray when Governor Phil Murphy signed a bill banning cashless retail stores and restaurants across the entire state.

Experts believe the trend could gain momentum across the U.S. as council members in New York and elsewhere lull similar measures — expressing concerns over the future of millions of Americans who don’t have banking or mobile access.

According to FDIC’s 2017 National Survey of Unbanked and Underbanked Americans, 8.4 million U.S. households (or 6.5 percent) — made up of 14.1 million adults and 6.4 million children — were unbanked in 2017. (Unbanked, per FDIC, means no one in the household had a checking or savings account.) Meanwhile, another 18.7 percent of American households were “underbanked” in 2017, meaning that the household had an account at an “insured institution” but also received financial products or services outside of the banking system.

“Unbanked and underbanked are largely comprised of individuals who have no access to traditional financial services and typically pay their bills in cash,” explained Stephen Harkey chief marketing officer at ViViPAY, a U.S.-based financial technology company that aims to foster digital inclusion of basic banking services for Americans. “If they need to borrow money it is usually from a local money lender at an elevated interest rate, and the vast majority of this population pays steep interest rates when they are able to secure a line of credit, especially from a retailer.”

What’s more, according to the FDIC, unbanked and underbanked rates are consistently higher among these households: lower-income, less-educated, younger, black and Hispanic, working-age and those with volatile income. (More than half, or 52 percent, of Americans who were unbanked in 2017 cited “not having enough money to keep in an account” as the main reason.)

For lawmakers expressing concern, those factors are difficult to ignore — particularly in urban cities like Philadelphia where the unbanked rate has held at 6 percent for several years despite a slow but steady decline nationwide.

When Philadelphia councilman Bill Greenlee introduced the bill for the city’s cashless ban last October, he expressed concern that cashless businesses were inherently discriminatory as well as have the potential to put more Americans in debt as they are compelled to use credit cards to make purchases.

“This practice negatively affects poor people and immigrants who are unable to obtain credit cards, and do not have a bank account,” he said. “Businesses who use credit only are sending a message to poor people that they do not want their business. People should have a right to use cash if they so choose.”

He added, “Requiring cards for payment will lead to people over extending their credit. Additionally, many people have serious security concerns about the is probability that a financial institution could be hacked and data could be manipulated, deleted or stolen. Cash is tangible and safe.”

Similarly, New Jersey Gov. Phil Murphy and New York City Council member Ritchie Torres — who is pushing a cashless ban in that state — have referred to cashless businesses as discriminatory against minorities and low-income families.

Meanwhile, as e-tail behemoth Amazon grows its brick-and-mortar presence through its bookstores and “four-star” outposts — which offers products that have been rated four stars and higher as well as new and trending items on its website — it has been a pioneer of the cashless business model across the industry. The company now has 11 cashier-less AmazonGo locations in San Francisco, Chicago and Seattle and intends to open 3,000 over the next few years.

The company reportedly pushed back against the law in Philadelphia to no avail. However, Harkey suggests that it is not retailers that should be tasked with solving the complex challenges of evolving commerce without disenfranchising the underprivileged.

“This issue is not one that should be on the shoulders of retailers,” Harkey said. “There is nothing wrong with innovating their businesses and implementing new technologies that emphasize convenience and efficiency.”

What’s needed instead, said Harkey, is more attention from state and federal regulators and the financial infrastructure to “allow financial technology firms to provide their own innovative programs to the unbanked and underbanked so that they can enjoy the same financial freedoms, services and ecosystems that everyday consumers get to enjoy.”

Philadephia’s cashless ban takes effect on July 1 and New Jersey’s is effective immediately.

Amazon declined to comment.

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