The New York City Council just passed a bill banning “cashless stores,” and Mayor de Blasio should veto it. New York should continue to reach out to the unbanked, but the resources already exist for anyone to freely or cheaply access debit card services. Reloadable debit cards like Green Dot, MyVanilla Visa and Amex Serve are available at stores all over the city, providing instant, private financial access to people who don’t want to open a traditional bank account. And the new law is an unjustified imposition on business owners, who are in the best position to decide how to accept payment.
Anonymized debit cards sell for a few bucks, and most carry no monthly fees in New York State. Citizens, permanent residents and the 50% to 75% of undocumented immigrants who legally file taxes with the IRS can register the cards with their tax information to reload them with cash, establish direct deposit or mobile check deposit, and more — just like a normal bank account. A wide variety of social service organizations, and some local credit unions like the Lower East Side People’s Federal Credit Union, are available to assist undocumented immigrants who still need to register with the IRS.
The mayor already has a sterling record on eliminating legal barriers for the unbanked. One of the mayor’s signature first-term initiatives was IDNYC, the municipal ID available free to New Yorkers regardless of immigration status. A dozen local banks and credit unions — and one big bank, PNC — have agreed to accept IDNYC as identification when opening a bank account.
There are solid reasons for going cashless. Employees handling cash face the risk of robbery or embarrassing discrepancies about how much cash was supposed to be in the register at the end of the day. Businesses must assign senior employees to handle cash management during business hours and pay for armored cars to pick up the cash. Tap-card and chip payment that no longer requires a signature is faster than fumbling for cash and change, boosting cashier productivity and getting you through your morning bagel line faster.
Beyond reducing the costs of payment processing, some macroeconomists like Ken Rogoff say that reducing cash economywide could eventually assist monetary policy when interest rates are low, and hinder tax evasion and organized crime.
The growing cashless economy makes a lot of sense, and it’s not just private businesses getting in on the trend. The MTA’s bridges and tunnels are already cashless, and transit is gradually going cashless, too, with the new OMNY tap-to-pay system, which you may have already seen on express buses and at a growing number of subway stations.
It may seem weird that some businesses are going cashless while many, mostly independent businesses remain cash-only. But all-cash businesses “manage” their reported sales for tax purposes. Some businesses also have commercial leases that determine part of their rent based on sales, called “percentage rent”, so massaging their sales figures helps them dodge both the taxman and the landlord. And if a business has decided for legitimate reasons to keep accepting cash, the flip side of the fixed-cost logic of accepting cash pushes in the all-cash direction. You’re not getting rid of your armored car costs or eliminating robbery risk, so the roughly 3% interchange fees paid to card processors aren’t saving money.
In sum, the cashless economy is fine, and the government should let businesses participate in it. When even the MTA has seen the light on reducing the burdens of cash payment, it’s hard to deny the idea’s time has come. It’s not a question of ideology, either — one of Bernie Sanders’ favorite social democracies, Sweden, has pioneered cashless payment.
Perhaps cashless businesses should be required to put up a poster to spread awareness of these public and private services available to help people access banking and basic electronic payment services, but the answer is not to give up on financial inclusion by simply mandating cash.
Mayor de Blasio: Veto this bill and use the opportunity to inform more people of your successful IDNYC financial inclusion initiative.
This piece originally appeared at New York Daily News
Alex Armlovich is a fellow at the Manhattan Institute. Follow him on Twitter here.
Photo by Nattakorn Maneerat/iStock