Policymakers should ensure that cash is always acceptable before its use in retail transactions is further threatened by technological advancements, a new study urges.
The use of cash continues to decline, eclipsed by the growth of debit and credit cards and online transfers. There are now retailers that elect to not accept cash for in-store transactions. Canadian research group Options consommateurs’ report Will Cash Soon Be a Thing of the Past recommends that the Currency Act require merchants to accept cash offered by consumers before the practice of cashless stores becomes more widespread.
The cashless retailer has become more common in the United States, so much so that policymakers have begun to react. New York recently announced plans to ban cashless businesses, following the example of San Francisco, Philadelphia and the State of New Jersey which now require brick-and-mortar retailers to accept cash.
The advantages to “cashless” businesses are reduced transaction costs and better security, since electronic transactions would become more traceable. Report author Alexander Plourde suggested the real winner in cashless economies would be the financial institutions. “Banks will make more money from the fees generated by electronic transactions. And they’ll save money because there will be fewer paper bills in bank machines and banks to manage.”
The report notes that the end of cash would risk excluding economically disadvantaged people, as the biggest users of cash are low-income consumers and those with lower levels of education. It would effectively discriminate against people who do not have access to, or do not wish to use, cards: seniors, people without bank accounts such as many indigenous people and the homeless, recent immigrants and refugees.
While many consumers believe laws are currently in place to require merchants to accept cash, Plourde notes it is not that clear. Although Canadian laws may state that cash is legal tender, in common law, a transaction is interpreted as a contractual agreement between parties, so one of those parties could state in the contract that they would not accept money.
Moreover, Plourde said: “A merchant who refuses cash won’t suffer any consequences. Canada has no legal sanctions in place for a merchant who refuses cash.”
To effect the recommendations in Canada would require a more integrated approach. Monetary policy is a federal responsibility, while merchant refusals to accept cash would involve both provincial contract law and federal regulations, as well as an assortment of consumer protection provisions that could apply.