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Foodservice industry hit by cashless ban in New York

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New York City becomes the latest in a string of US cities to ban stores from refusing cash payments

Restaurants in New York City will be legally required to accept cash after the city council voted to ban ‘cashless’ operations, branding it elitist.

The bill, which was passed by a 43-3 majority on 23 January, prohibits food and retail establishments from refusing to accept cash from consumers, charging cash-paying consumers a higher price than cashless consumers, and imposes fines of $1,000 to $1,500 if they fail to comply.

It follows in the footsteps of both Philadelphia, which became the first US city to introduce a cashless ban in February 2019, and San Francisco, which did the same in May. San Franciscan politician Vallie Brown advocated for the ban, saying that a “no cash” sign was tantamount to a “not welcome” sign.

The state of New Jersey also brought in a cashless ban for the majority of brick-and-mortar stores in 2019 and in Massachusetts accepting cash has been a legal requirement since the 1970s.

While the bill has received approval, it won’t come into effect for another nine months. It also allows for businesses to offer customers the option to use a machine that will convert cash into a prepaid card that can be used to make unlimited purchases on any priced item, at no additional cost to the consumer.

Additionally, addressing the concerns of smaller businesses in particular, stores do not have to accept bills larger than $20 and transactions taking place completely online, by phone or mail are excluded.

Marginalizing the unbanked

The New York bill was first put forward by Ritchie Torres in November 2018 and has since garnered the backing of several other council members. When introducing the motion for debate in July 2019, co-sponsor Rafael Espinal drew attention to the unintended consequences of new cashless technologies.

“In a modern financial hub like New York City it might be easy to assume everyone has easy access to banking facilities and technologies that allow cashless transactions – unfortunately however this is not the case,” he said.

Across the city there are large populations who are disconnected from formal bank institutions. In 2013 close to 12% of the city’s population were completely unbanked and more than 25% were underbanked, meaning they rely on services such as payday loans or check cash facilities rather than traditional banks.

Limiting innovation

The news may come as a blow to a number of foodservice outlets that are currently operating cashless stores in the city. These include Dos Toros, By Chloe and Mulberry & Vine, who testified in opposition to the proposed cashless ban at a public hearing prior to the vote.

Vegan burger joint, By Chloe, currently outlines on its website that all of its NYC, Providence and LA locations are cash-free. “Going cash-free means faster service for you, reduces our carbon footprint and lets us embrace new technology. Leave the card at home when you download and pay through our app!” it says.

The benefits of moving towards a cashless economy include reducing theft and improving the safety of employees, along with speeding up lines due to facilitating more efficient transactions. It may also help some business save on labor costs, argues Arlene Spiegel, president of restaurant and hospitality consulting firm Arlene Spiegel & Associates, based in New York.

“Going cashless, along with other automatic service charges versus tipping are hot, controversial topics today. The roots of both of these initiatives are to address a serious labor situation,” she says. “Going cashless eliminates the need for actual cashiers at $15+ per hour and also has the benefit of the operator capturing data on the customers behavior through digital purchases.”

As the popularity of cashless interactions grows and technological innovations move forward, the NYC Hospitality Alliance has highlighted that the city’s leaders need to shift their focus away from the restaurant to policies that encourage more New Yorkers to become banked.

“We understand the positive intent of the legislation, and while only a small percentage of restaurants have gone cashless for the operational and safety benefits, this ban will pose challenges to those businesses that will have to begin accepting cash. Regardless of the cashless ban, our elected leaders need to support polices that get more New Yorkers banked, because technology is advancing and mobile payments are the way of the future,” said the NYC Hospitality Alliance.

Liz Cooley

 

Listen to Arlene Spiegel FCSI’s podcast episode on the future of customer service and hospitality, here.