Congress

House panel asks whether legislation can keep cash as king

Electronic payments taking greater market share

Rep. Donald Payne, D-Md., is backing legislation to ban cashless stores. (Tom Williams/CQ Roll Call file photo)

At some uncertain point in the future, printing cash may be a waste of money. As Americans increasingly rely on credit cards, online transfers, mobile apps and cryptocurrencies to complete transactions, a House panel debated Thursday the promise and potential pitfalls of a cashless society.  

In recent years, some stores have decided they’d rather not ask “paper or plastic?” to customers at checkout. Instead, they’ve gone cash free, accepting only smartphone apps like Apple Pay, mobile payments like Venmo, or debit and credit cards.

That’s led to a legislative response, with left-leaning cities and states banning cashless stores and a bill  from New Jersey Democrat Donald M. Payne Jr. that would do the same across the country.

The House Financial Services Committee’s task force on financial technology heard witnesses tout how new payment technologies would save consumers time and money, while others warned that that innovation alone would not solve the systemic problems keeping the American dream out of reach for many.

“Too often, we see these companies claiming to eliminate banking deserts or empowering communities when in fact they are perpetuating segregation in our banking system,” said Deyanira Del Rio, co-executive director of the New Economy Project. “This is not to malign innovation or technology. They’re not intrinsically bad or good, and that’s the point.”

Cash may have once been king, but in 2018 it lost its crown as top payment method. Debit cards were used that year in 28 percent of U.S. transactions to cash’s 26 percent, according to the Federal Reserve. Credit cards and electronic payments have also seen their shares grow in recent years.

That’s led some businesses to stop accepting cash. While merchants have to pay transaction fees on card and mobile payments, cash isn’t free, either. Physical money means regular trips to the bank to make deposits, making change, reconciling cashier tills and risk of theft. As electronic payment transaction times have dropped, high-volume retail businesses can move customer lines quickly relying just on electronic payments.

But not everyone has adopted the new technologies, almost all of which rely on the user maintaining an active bank account. According to a Federal Deposit Insurance Corporation survey in 2017, 6.5 percent of the nation is unbanked. Lower income and minority populations are more likely to rely on cash than to use cards or electronic payments.

“To me, it’s about choice,” said Payne. “What happens to that segment of the country that does not come along with this move towards other currencies? What happens to the grandmother that just can’t learn all of this rigmarole on the phone?”

New Jersey instituted a cashless ban last year, as did Philadelphia and San Francisco. New York City passed its own ban last week. Massachusetts, which has had a ban on the books since 1978, is considering a repeal.

But whether to take cash should be a choice for companies, too, Republicans on the task force contended. Some companies have decided that it’s worth losing some cash-only customers to save the headaches of dealing with physical money. It would be folly, Republicans said, to stifle innovation and adoption of new technologies with overly broad regulations.

“By acting before we really understand what we’re dealing with, we have a tendency to drive innovation — and, more importantly, the entrepreneurs responsible for it — out," said Tom Emmer, R-Minn., the ranking member of the task force.

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