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In our opinion: Clumsy solutions for a cashless society


On its face, New York City’s new ordinance requiring restaurants and retail outlets to accept cash as an optional form of payment or face stiff fines seems ridiculous. We doubt many people who could afford a fancy restaurant, for instance, do not have a credit card.

But the truth is New York and a few other cities with similar laws have touched on a problem the nation needs to confront as it moves quickly toward a cashless society — poor people are being left behind.

Those cities may have confronted this in a clumsy way but, for the poor and the elderly, there is much more clumsiness in how the digital economy is progressing.

Want a ride with Uber or Lyft? You need an app for that. Want to fill up your car after hours at many gas stations? You need a card. A lot of smaller services — piano lessons, lawn care, etc. — are handled by apps such as Venmo or Paypal. The list goes on.

Low-income people who, for whatever reason, are denied bank accounts and credit, and elderly people who simply can’t understand how the world has changed, often find themselves on the outside looking in.

The Deseret News confronted this problem last year in a report that said only about one-third of transactions in the United States are done in cash these days and that, for those in their 20s and 30s, the figure is 21%.

Now a new report by Brookings Institution fellow Aaron Kline outlines how this new divide, not the so-called digital divide people worried about 20 years ago, poses the biggest risk in the new economy.

Kline argues the current economy has become a “reverse Robin Hood.” If today’s payment system were a ladder, people at the bottom are quietly sending their money to the people at the top. This happens because, while every customer may be charged the same price for an item, only those who qualify for certain cards may receive cash-back rewards. Those at the bottom tend to pay the most overdraft fees, while those at the top receive free debit cards.

Meanwhile, a lot of goods and services are falling into a cashless category, meaning they can be purchased only with cards.

For the most part, markets are abandoning cash voluntarily, free from any government policies or incentives. The reasons to do so are plentiful. Cash tends to be the lingua franca of criminals, who use it because it can’t be traced. Cash also is a carrier of diseases. It can be stolen or counterfeited. The digital economy poses risks associated with identity theft, but its transactions also tend to be far more transparent than cash, making them less appealing to criminals.

Some private-sector ventures have begun trying to deal with the problem of universal access to a cashless economy with limited success. Kline argues that government may have a role to play.

“For lower income consumers, in particular (importantly not just the un-banked, but the underbanked as well), to truly benefit from the digital economy, cheap and reliable digital payments are a necessity,” he writes. This is a significant and growing problem. It may require government policies that provide resources and set stronger rules mandating different options and availability for Americans of all financial levels.”

That cannot be accomplished through city ordinances that impose blanket requirements on businesses to accept cash. Solutions will require much more thought and innovation.

And yet solutions are important. In the emerging cashless world, low-income people should not be relegated to a place from which they have little chance for escape.