May 2, 2022
3 Reasons Going Cashless Is Destructive
In 2019, San Francisco issued a “cashless” ban that required small businesses to accept cash payments. Other cities, including Philadelphia, New Jersey, and Massachusetts, are considering similar policies, despite the growing popularity of online shopping and contactless payments.
Why? In many of these cities, not all residents have access to a bank account or credit card. Going “cashless” is disproportionately harmful to underbanked communities, leaving basic goods and services unattainable to millions of people.
Today, over 30% of U.S. Family households are unbanked. In some rural cities, such as North Star, Texas, that number approaches 60% while in urban areas like New York City, the underbanked represent over 37% of the urban population. These families already spend billions of dollars per year in unnecessary financial service costs - and cashless payments drive these numbers even higher for families looking to make ends meet.
A purely cashless network would require complete network stability - which is not the case today. According to Ponemon Institute’s State of Cybersecurity Report, 66% of small businesses have experienced a cyber attack in the last 12 months. In the event of a security breach or system error, the only way a business could collect payments from customers is in cash. Overall, cash remains a great backup plan for businesses and customers alike.
Removing cash payments disproportionately affects people of color: per The Federal Reserve, Black and Hispanic families are more likely to be underbanked than any other socioeconomic group in the United States. In Mississippi, 1 in 5 people do not have a bank account.
Overall, as our workplace becomes more conscious and inclusive it is important to implement these efforts in financial transactions as well.
Although adding some cashless efforts has positive benefits, going completely cashless will exclude a significant part of the US population from being able to make purchases and receive essential services. It’s important that we consider financial inclusivity as part of our social efforts, and keep a close eye on FinTech companies working to help underbanked families and businesses.
