As the city council polishes up a piece of legislation that would ban “cashless” retail, an early adopter of card- and app-only transactions has indicated it will be reversing course.
The fast-casual eatery Sweetgreen announced in a blog post on Thursday it would transition away from its cashless policy, which its stores adopted two years ago. The national chain has 22 locations in the New York metro area, centered mainly on Manhattan and in parts of Brooklyn.
Opponents to the practice complain the policy is discriminatory to customers who rely on cash—typically poorer and older residents. Similar to measures adopted by Philadelphia and the state of New Jersey last month, New York City’s bill would require retailers and restaurants to accept customers’ cash, or else face fines ranging from $250 for first offenses to $500 for all subsequent occurrences. The council’s Committee on Consumer Affairs and Business Licensing took testimony on the proposed bill back in February, and a polished copy is expected back this summer.
Businesses that have decided to go cashless are concerned that the ban would be just one more item on top of the already high cost of doing business in New York, including rising rents and the city’s $15 minimum wage. Several business owners came forward at February’s hearing in opposition to the bill, saying they had transitioned away from cash at their stores for financial reasons. Among the costs of handling cash, they cited armored car and bank fees, overhead for registers and equipment, and time lost for day-end accounting and staff training.
Safety was another reason some shops say they have dispensed with cash: “We believe it is safer for our team to not deal with cash,” the restaurateur Leo Kremer told the committee. Kremer runs Dos Toros Taqueria, which has 17 locations across Manhattan and Brooklyn. “We’ve been robbed twice previously and not once since we’ve been cashless.”
During her testimony, Annamaria Perenez from By CHLOE, a cashless vegan dining chain, noted that a Sweetgreen location in Midtown had also been robbed at gunpoint, back in September 2016. That restaurant chain had at the time already been experimenting with cashless service at some locations, and made its companywide transition to plastic- and app-only in 2017.
When Sweetgreen announced its decision to go cashless in a Medium post in December 2016, workplace safety had not been among the expected benefits it listed—though in its reversal of the decision last week safety was first among the reasons the company initially gave for making its policy. At the time, like other restaurants that have gone cashless, the company focused instead on consumer trends, increasing productivity, and overall cost savings.
While credit card companies and financial institutions do charge a small percentage for every transaction, Andrew Rigie, executive director for NYC Hospitality Alliance, explained in an op-ed for Forbes last fall how the transactional costs of using cards are outweighed by a variety of benefits of going cashless. “Cash is still king for many businesses, but the trend of going cashless is growing, especially in the fast-casual segment of the restaurant industry. Multiple restaurateurs I’ve spoken with say this trend is influenced by operational efficiencies,” he wrote.
High among these efficiencies is volume, with credit cards and mobile payments thought to be faster than accepting cash and returning change. For fast and casual dining spots in particular, the logic goes that by cutting out cash they are then able to serve more customers through mealtime rushes by speeding up their lines. Sweetgreen had come to the same conclusion, estimating its locations were able to process between five and 15 percent more customers an hour.
Rigie argued that a move away from cash transactions would also help reduce employee theft, and eliminate shortfalls brought on by associates making incorrect change. Losses in the food service industry from thievery can be hard to estimate, but a commonly cited figure from a 2004 study puts annual losses at between $3 to $6 billion.
While bank cards have become a favorite way to shop among most types of retail—cash only accounting for 15 percent of sales at gas stations and supermarkets, or eight percent of department store purchases—in the food service industry it holds less sway. The credit card processor Total System Services found that while most American diners preferred to pay using debit or credit—especially in dine-in restaurants, with only 19 percent paying with cash in such establishments in 2017—hard currency still remains a popular form of payment in coffee shops and fast food places, making up more than a third of all transactions.
Meanwhile, a 2018 report put out by the personal finance website ValuePenguin found that consumers are willing to spend considerably more when using a credit or debit card to pay than with cash—by as much as 83 percent for splurge items like basketball tickets, and by 10 or 20 percent for more mundane purchases. The report suggested a variety of psychological and social factors that would influence this behavior, with customers less likely to consider electronic payments in real terms.
Operating on tight margins, restaurants stand to benefit from freer spending habits. An oft-cited study by Dun & Bradstreet from a decade ago suggested people are willing to spend 12 to 18 percent more on meals when paying by debit or credit. Card-carrying customers were found to tip more generously as well, as much as 28 percent higher than a cash payer would for a $17 meal.
Restaurants are not the only businesses experimenting with cashless shopping. The online retail giant Amazon turned heads last year by proposing a series of cashierless – and cashless – Go stores, which allow consumers to pick up items and pay as they go without the need for lines. The first location opened in Chicago in September, with stores also popping up in Seattle and San Francisco. But like Sweetgreen, the company this month announced it would start accommodating cash.
The trend toward cashless has social costs as well as its benefits, prompting a public backlash. When Councilman Ritchie Torres proposed New York’s bill banning cashless retail earlier this session, he said it was because cashless policies effectively discriminate against those lacking debit or credit cards. While the proportion of Americans lacking access to established financial institutions has been shrinking, in New York City a significant number of residents still rely on cash, with around 12 percent of New Yorkers lacking any sort of bank account and a further quarter considered underbanked. While such households can be found throughout the city’s neighborhoods, the highest concentrations are found in East Brooklyn and in the Bronx, which Torres represents on the council.
Testimony on Torres’ bill from businesses was not all negative— Brian Bailey, the vice president for ATM operator Cardtronics, spoke in favor of the ban on cashless retail. Which makes sense, given the firm operates 3,754 cash-dispensing machines in the New York metro area. Dollars and cents notwithstanding, the heart of Bailey’s statement echoed concerns expressed by consumer advocates like the New Economy Project and NYC Consumer Affairs, or labor organization Retail Wholesale and Department Store Union: “When merchants mandate cashless payment policies, they are preventing cash customers from participating in commerce, effectively dividing consumers into the haves and the have-nots. These policies are particularly harmful to lower income and unbanked and underbanked New Yorkers, who rely more on cash for their daily purchases and payments.”
That was a conclusion Sweetgreen also acknowledged in its statement this week: “Going cashless had … positive results, but it also had the unintended consequence of excluding those who prefer to pay or can only pay with cash.”
After undergoing its public hearing, Torres’ legislative office confirmed last week that the bill is still undergoing the redrafting process—one of the city finance department’s concerns had been its wording, which could be more expansive than intended – before coming back to the City Council later this session. The bill will remain focused only on restaurants and most retailers, but not to other cash-forgoing services, like ride sharing companies Uber and Lyft.
If adopted, New York would follow a lead set last month by Philadelphia, which became the first U.S. city to ban cashless retail. New Jersey also signed into law a statewide ban against the practice, making it the second to do so after Massachusetts, which has had a similar law on its books for over four decades.