To require businesses to accept cash or not—that is the question.

> Posted by Sonja Kelly, Director of Research, CFI

handsome smiling african american barista taking cash payment on bar counter in cafe

In Washington, DC—where much of the CFI team is located—more and more restaurants and small businesses have moved away from cash—some going so far as to not accept cash at all. In response, according to the Washington Post, some city lawmakers have suggested a new law that would require businesses to accept cash as a form of payment. The proposal asserts that not accepting cash is a form of discrimination against the poor.

Financial exclusion in DC is certainly not as pronounced as it is in many emerging markets. Nevertheless, according to a 2015 FDIC report, bank account ownership in DC is lower than in most other places in the U.S., with 11 percent of the population unbanked. And 27 percent of people in DC do not have credit at all (including credit card, bank loan, or other forms of credit). This population—unless they gain access to a prepaid card—would be unable to purchase a salad at Sweetgreen, a taco at Surfside, or a frozen yoghurt at Menchie’s.

How does the retailer weigh going cashless against accepting cash? Jetties sandwich shop told the Washington Post that 20 percent of its customers paid with cash. Jetties decided to stop taking cash, under the assumption that some of those customers would shift to using cards. But other similar restaurants that have employees paid in tips opted to continue to accept cash.

People choose to use cash even when they do have access to a full suite of financial services. Paying with cash is a common budgeting strategy, for example, ensuring that people only spend what they have physically available in their wallet. It’s also a way to pay with anonymity, protecting purchases from being known by credit card companies. (I personally pay cash sometimes around holidays when I don’t want my husband to see his gift on our joint credit card statement.) Consider some of these responses from DC residents via Twitter:

On the business side, going completely cashless might make financial sense. Credit card companies charge fees of around 3 percent to merchants. The cost of cash, on the other hand, includes employee time to count and manage money before and after opening hours, the cost of security when transporting cash to and from the business, and the cost of employee fraud or miscounting. Going cashless could mitigate these operating costs.

The debate over moving cashless is not limited to Washington, DC. Around the world, countries have—either naturally or with policy pressure—shifted toward eliminating or at least limiting the use of cash. In Sweden, five out of six major banks refuse to interact with cash—and businesses have quickly followed. Sweden is predicted to become the world’s first cashless country. The Economist reported last year that in many shops in Europe, only tourists pay with cash. United Nations-based Better than Cash Alliance’s goal is to move individuals, companies, and governments toward electronic payments and away from cash.

Some governments like this approach because eliminating cash drives shadow finance and informal financial activity into the formal sector. Eliminating cash from the formal financial sector makes moving cash from the informal sector to the formal sector much more difficult, driving down the use of cash in the informal sector as well.

While it may be the next step in our modern global economy, eliminating cash without making sure that everyone is able to meaningfully participate in digital finance can be discriminatory. For some city lawmakers, this is the primary concern. They recognize that full inclusion is a precondition to making a cashless economy work for everyone. Maybe one day we’ll see a cashless DC, but first we need to make sure all people in DC can participate.

I’d love to hear your perspective—are you Team Long Live Cash or Team Time to Let Cash Go? Leave your response in the comments.