The advent of digital technology has significantly spurred the growth of cashless businesses nationwide and in L.A. County. Fueled by the convenience and efficiency of online transactions, more enterprises are embracing cashless operations, marking a dynamic shift in the business landscape.
Cashless transactions, facilitated through digital wallets, credit cards, mobile payment applications, and online banking, offer quick, secure, and hassle-free payment options for vendors. Business owners who have gone cashless say that it increases safety and reduces theft because cashiers aren’t handling bills.
However, there are millions of Americans who are unable to obtain bank accounts or have been denied access to credit, preventing them from being able to engage in consumer transactions unless they are able to pay for goods and services in cash and to that end Councilwoman Heather Hutt (CD-10) has introduced a motion to ban cashless retail businesses in Los Angeles.
“Cashless businesses create an economy in our City that is not inclusive and accessible for all people,” said Hutt. “There are many unbanked groups, including BIPOC and low income communities, that rely on cash to pay for goods and services.”
Not accepting cash payments in the marketplace systematically excludes low-income communities of color, young people who do not meet the age qualifications for credit or debit cards, seniors who have not transitioned to card or digital payment modes and the undocumented. As businesses increasingly move towards cashless transactions, these communities face potential exclusion from the digital economy.
A 2021 FDIC national survey found that an estimated 4.5 percent of U.S. households (approximately 5.9 million) were “unbanked” in 2021, meaning that no one in the household had a checking or savings account at a bank or credit union. However, unbanked rates were higher among lower-income households, less-educated households, Black households, Hispanic households, working-age households with a disability and single-mother households.
A 2019 study by the Federal Reserve revealed that 34% of Black and 17% of Hispanic individuals in the U.S. made all or most of their purchases with cash.
Hutt was prompted to introduce the motion when she was out with a friend who couldn’t make a purchase because the business did not accept cash.
Said Hutt, “You start thinking about what happens to folks if they don’t have cash. 7% of the population in California is unbanked and 20% are underbanked. That means everyone cannot participate. 7% of the unbanked households feel like they don’t have enough money to keep an account open, because there are minimums and if you buy a prepaid card, you’ve got to pay a fee on the card and then you’ve got to pay the transaction fee”.
Such a transition can create a barrier for individuals who lack access to banking facilities or digital literacy, making it more challenging for them to access goods and services in a predominantly cashless market.
As of 2021, several cities and states across the United States have enacted ordinances requiring businesses to accept cash payments, including San Francisco, Berkeley, New Jersey, Colorado, Massachusetts, Washington D.C. and New York City.
Philadelphia made history in 2019 as the first city to have a cashless retail prohibition with a spokesman for the Mayor Jim Kenney, stating that, “In a city with a 26% poverty rate, it is critical we do what we can to support equal opportunity for all residents.”
In 2020, New York City begin requiring businesses to accept cash with businesses that failed to comply facing fines of up to $1,000 for a first violation and $1,500 for any violation after that. Businesses were also barred from charging a fee for accepting cash.
New York City’s Department of Consumer Affairs reported in 2019 that one in nine New York households did not have a bank account, and that one in five were “underbanked.”
Most recently, Seattle’s county seat voted to require businesses in unincorporated parts of the county to accept cash of up to $200.
Such measures reflect a growing trend that reflects the need for inclusive financial policies that consider the diverse needs and circumstances of all communities.
Hutt expects that the motion will move through committee to the floor over the next couple of weeks given that she hasn’t had any pushback from her City Hall colleagues.
“I believe that the outpouring of emails will help my colleagues understand how important it is to make this equitable,” said Hutt. “As a city that has promised to be a safe and fair place for all, we must be proactive in ensuring that all our systems create fairness and equity for each and every individual.”
If the motion passes, an ordinance requiring businesses to have a cash option could be in place as soon as the first quarter of next year.