Businesses don’t use cash, but risk alienating low-income people


Just over a year ago, Linmay Studio in Evanston joined the growing number of business owners across the country who no longer accept cash.

The number of cashless businesses in the United States has increased in recent years, peaking at the start of the pandemic in an effort to minimize people-to-people contact and mitigate the risk of infection.

Square, the mobile payment service used by Linmay Studio, reported that on March 1, 8% of businesses using its products were effectively cashless, meaning they accepted 95% or more of their credit card transactions or of debt. By April 23, that number had risen to 31%, indicating an increase in the number of businesses switching to a contactless model during the pandemic.

Lindsay Mayuga, colorist and owner of Linmay Studio, said she made the switch to beef up security and modernize the salon.

“I didn’t want to work alone as a woman in the living room and bring in people knowing I was keeping money there,” Mayuga said. “It just elevated the experience professionally so that everything was like technology and not so old fashioned.”

For Mayuga, the cashless movement appeared to be a logical step in terms of security. However, the lack of cash has come under heavy criticism. Some activists and policymakers argue that the lack of cash discriminates against people who depend on cash or do not have access to banking services. In fact, Philadelphia, San Francisco, and the state of New Jersey banned cashless stores in 2019.

In Illinois, Representative Edgar Gonzalez (D-Riverside) introduced Bill 5255 to the state legislature in February. The bill would prohibit businesses from refusing cash for goods or services, displaying signs indicating that cash is not accepted, or charging higher prices for cash payments.

According to a 2017 Federal Deposit Insurance Corporation survey, 25% of U.S. households are unbanked or underbanked, which means they don’t have a bank account or have a bank account but are still using financial services outside the banking system such as payday loans. .

Cashless businesses are also reportedly disproportionately affecting black and Latino households – another point of contention with opponents of the movement. A 2019 FDIC survey showed that about 14% of African American households and 12% of Hispanic households do not have a bank account, compared to less than 3% of white households.

Sue Loellbach, advocacy manager at Connections for the Homeless, said her organization works with many people trying to open bank accounts, which are needed to get housing or employment. But there are challenges. Banks can charge fees or penalties for balances that are too low, and many people don’t trust banks, she said.

“For people who don’t have a stable income, a bank account might not make a lot of sense,” Loellbach said.

Associate professor of economics Scott Ogawa has said he supports the lack of cash and believes people who prefer cash come from a libertarian perspective of distrust of the system. In order to sustain cashlessness, he said, you have to buy from modern institutions and banks, and have to accept that your purchases are tracked.

“I am a cashless person. Zero. Like I literally haven’t touched a dollar bill in months, ”Ogawa said. “If you are somehow very suspicious of this whole system, then somehow you prefer cash.”

According to Ogawa, economists generally take a positive view of the lack of cash because it reduces transaction costs. He said the lack of cash is a purely lucrative decision companies make when they decide that the money saved in streamlining transaction processes exceeds the number of potential customers lost.

But for Mayuga, the colorist, her business didn’t have to sacrifice customers. She said the decision to change was made in accordance with her studio’s lofty and streamlined design that caters to the “modern-day professional woman.”

Mayuga said the lack of money brought more professionalism to her hair coloring business.

“I consider myself to be an artist and a professional,” she said. “I felt like it somehow belittled the industry that I am a part of which is already working very hard to be taken seriously and as a craft.”

Mayuga said her customers are used to constant upgrades and are open to change as they almost always pay with a card. She trades on an iPad using Square and does not keep a cash register in her store.

“My target audience is just not someone who would be put off by this,” Mayuga said. “They’re all about convenience. “

Ogawa said that while he thinks there should be a greater incentive for not having cash, he recognizes that this is creating a new problem in an area of ​​society that lacks access to services. banking.

According to Loellbach, Connections hasn’t heard many complaints about cashless businesses from homeless people, but if people start taking less money with them, beggars could be negatively affected. She said she always makes a point of taking cash with her in case someone asks.

If cashless businesses start preventing homeless people from shopping, Loellbach said Connections will work with them to address the issue, but so far that doesn’t appear to be a threat.

“In terms of a cashless economy, they may have to start adjusting. They haven’t had to do it yet, but maybe the time is right, ”Loellbach said.

E-mail: [email protected]

Twitter: @samanthaagu1lar

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