Fears voiced over hackers and loss of privacy

(PHOTO / CHINA DAILY)

There was a time when cash was king, but a growing number of businesses worldwide are now refusing to accept payment with bank notes or coins.

In the United States, the move toward a cashless society has sparked a backlash amid fears that digital payments marginalize the poor, especially the 8.4 million households - 6.5 percent of all households in the country - that do not have a bank account or access to a credit card, according to Federal Deposit Insurance Corp.

The People's Bank of China, the central bank, has cracked down on merchants who refuse to accept cash. But the move comes as the nation's digital economy accelerates, with 1 billion people regularly paying for items on their mobile phones.

Sweden could be completely cashless by 2023, but about 1 million Swedes are not ready for digital payments, according to Christina Tallberg, president of the Swedish National Pensioners' Organization.

Some 600,000 elderly Swedes forced to use digital currency when using a public restroom or parking a car are some of the biggest opponents in the Scandinavian country of a cashless society.

Many banks in Sweden will not handle notes and coins, meaning some elderly people are forced to pay more when they use cash or a check, Tallberg said.

In the US, officials in San Francisco voted on May 8 to require brick-and-mortar retailers to accept cash, joining Philadelphia and New Jersey.

Last month, two major US companies - Amazon and the Sweetgreen salad chain - said they would start accepting cash.

Amazon said it would accept cash at more than 30 of its brick-and-mortar stores, including Amazon Go convenience stores and its bookshops. Sweetgreen will start accepting cash again at all of its 94 locations in Washington by the end of the year.

In 2016, Sweetgreen said it would only accept payment by cards. The move was aimed at improving employee safety by reducing cases of robbery, to cut down on the use of bank security vehicles, use less paper and speed up service.

However, the company said in a statement it had also "had the unintended consequence of excluding those who prefer to pay or can only pay with cash".

Violators face fines

Arguments against a cashless society include the loss of privacy, as some high-tech companies track every purchase made digitally or by credit cards, and the possibility of computer networks that handle such payments crashing or being hacked.

In the US, federal law does not mandate the use of cash by businesses, but in 1978 Massachusetts became the first - and so far only - state to prohibit retailers from discriminating against cash buyers.

In March, Philadelphia became the first major US city to order stores to accept cash. The order will take effect on July 1, with violators facing a fine of up to US$2,000.

Philadelphia councilor Bill Greenlee, coauthor of the bill, said: "Killing cash creates 'us' and 'them' places. I could walk into a coffee shop with my credit card. Someone standing behind me in line with the same amount of money in their pocket, but in cash, cannot buy that product. That seems wrong."

On March 18, New Jersey Governor Phil Murphy followed Philadelphia's move and banned cashless stores with immediate effect. Violators face a fine of at least US$2,500.

In San Francisco, brick-and-mortar businesses are required to accept cash for goods and some services. Pop-up stores and internet-only businesses such as ride-hailing companies are exempt, as are food truck businesses, which say they lack the resources to handle cash.

Other US cities, including New York, Chicago and Washington, are considering barring cashless stores to ensure that everyone - including the poor, the homeless and the elderly - can shop with cash.

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In New York, Ritchie J. Torres, a councilor for The Bronx, is spearheading the campaign. The Democrat introduced a bill last year that would ban businesses in the city from refusing to accept cash. It has not yet been voted on.

A spokesman for Torres said, "He introduced the bill because there had been a rise in cashless businesses opening specifically in gentrified areas throughout the city. This can have the effect of excluding people, particularly those on low incomes, the underbanked and unbanked in New York from frequenting these establishments.

"If you don't have access to a credit or debit card, then you're not able to use some restaurants. The bill would require restaurants to accept cash. We've received positive feedback, particularly from senior citizens who may be concerned about it because they are used to using cash all of the time. They are supportive of the legislation. In terms of pushback, there has not been much."

Joel Berg, CEO of Hunger Free America, said, "We need to get low-income people long-term access to financial resources that people who are not poor enjoy.

"In other words, enable them to get credit cards or bank cards so that they can bank without high fees, so they can be mainstream members of a modern electronic society like everyone else. The bigger problem is that lower-income people are just totally detached from the modern electronic economy."

As elected officials and those campaigning against going cashless seek to ensure businesses do not exclude certain groups, one expert in consumer behavior, marketing and retail trends believes that stores are simply following consumers' lead by accepting more credit and debit cards along with mobile payments, instead of cash.

Kristen Regine, a retail and marketing professor at Johnson and Wales University in Rhode Island, US, said, "There has been a shift in consumer behavior over the past 20 years, where we are just using more plastic than we are cash.

"When people go out to a restaurant with friends, who has cash? Everyone uses a card. ... Once that happened, it opened up a whole new world for consumers."

A study by the Pew Research Center last year found that fewer dollar bills and coins were being used in the US. The study polled 10,683 adults, with 29 percent saying they made no purchases with cash during a typical week, up from 24 percent in 2015.

But a Federal Reserve report in November said, "Cash continues to be the most frequently used payment instrument, representing 30 percent of all transactions and 55 percent of transactions under US$10."

The report said that while online shopping continues to grow, 77 percent of payments were made in-person, with e-commerce representing fewer than 10 percent of all retail transactions.

According to global media company Forbes, a decade ago, six of every 10 retail transactions in the US were in cash. Now three in 10 are in cash.

Regine said millennials are most likely to use digital payment platforms along with Generation Z members (those reaching adulthood in the second decade of this century).

"But Generation X (those over 40) and baby boomers are using more plastic than cash. So, while millennials lead in this and the over-60s are using more cash than the millennials, the boomers are also using plastic."

Large notes withdrawn

According to a GSMA Mobile Economy Report last year, of the 7.7 billion people in the world, 5 billion used mobile services in 2017. The series of reports provides the latest insights on the state of the mobile payment industry worldwide.

It is estimated that the number of global mobile subscribers will reach 5.9 billion by 2025 - some 71 percent of the world's population - which could lead to more people using their phones as payment devices with stored cards in apps.

In India, the government is withdrawing large banknotes in favor of digital wallets such as Patym to reduce corruption, but there are fears that the move will hit the poor.

In the United Kingdom, at least 70 percent of transactions in 2017 were digital, and debit card use surpassed that of cash. However, 1.3 million Britons do not have a bank account.

A report in December titled Access to Cash Review, drawn up by a cash machine network operator, included interviews with 100 businesses and charities across the UK. It warned that if mobile payments continued to surge, about 8 million consumers - 17 percent of the population - would struggle to cope in a cashless society.

Banks worldwide are paving the way for the end of cash and checks by closing ATMs and branches and encouraging customers to bank online.

In the US, large financial companies support the wider use of credit cards.

JPMorgan, the largest credit card issuer in the country, said it would soon add contactless technology to its payment cards.

In 2017, Visa declared "a war on cash", and said there would be 100 million contactless cards in the US by the end of that year. It pledged to give small businesses US$10,000 worth of incentives to push digital payments because it receives a 2 or 3 percent fee for every payment made on its network.

Retail giant Walmart believes that one way to help the underbanked embrace the digital economy is to sell them prepaid cards - paid upfront with cash and not dependent on credit.

Regine, the retail and marketing professor, said this is a timely move, as this year alone US shoppers will spend US$190 billion through cashless transactions.

Despite the rapid charge to a cashless society, cash is still used more frequently in the US, ahead of payments made electronically, by credit or debit cards, or by check.

Regine said: "You're always going to have people who have cash on them, but they're carrying less. I recently saw a store in Florida with a sign that said, 'No cash' If a small vendor does not accept a card, it runs the risk of losing sales. ... But a big store like Macy's is not going to say anytime soon that it doesn't accept cash."

belindarobinson@chinadailyusa.com