From indie cafes to popular food chains, more and more restaurants are deciding to go cash-free. The choice can offer some upsides to the businesses, including, so they say, lower insurance rates, easier accounting, and safer employees. But what it’s doing the most of is cutting off access to food for people who can’t, or prefer to not, use credit and debit cards. This can include young people, international travelers, and the “unbanked”; the latter group includes many of our society’s most vulnerable people, who already face enough difficulties as it is.

Photo – AmericanBanker.com

This past October (2018), the FDIC released their most up-to-date report on “unbanked” and “underbanked” households in the U.S. According to their report, around 6.5 percent of American households qualify as unbanked, meaning that no person in the family has a checking or savings account. Furthermore, while more than half of surveyed persons said they didn’t have a bank account due to insufficient funds, other reasons included predatory banking fees, lacking legal documentation to bank in the U.S., and distrust of the banks themselves.

There are lots of other types of people in the unbanked population, including kids under 17 who may not qualify for their own bank accounts and credit cards, people who get paid in cash, identity theft victims, and people who feel unsafe leaving an electronic trail.

“Cashless restaurants are not illegal in most of the U.S. But when it comes to courting customers, not accepting cash is classist and discriminatory,” Melissa McCart wrote on Eater.com. “And the topic is not being questioned or examined enough by the people who support causes that strive for equality.”

So why are so many restaurants cutting off paying customers just because they choose to pay in cash? Because these businesses are making a bet that the revenue they may lose by turning away “would-be” cash customers is less than the costs and risks associated with running a cash-handling business.

Photo – Dumbo.is

“The safety of our employees comes before accepting cash,” Nicolas Jammet, the co-founder of the salad chain Sweetgreen, told Eater.com. Sweetgreen made the switch to cash-free at all of the company’s locations (outside of Massachusetts, where restaurants are legally required to accept cash). This came after an armed robbery of a New York City location.

Due to the risk of theft, businesses that operate with cash are obligated to maintain more security measures, including safes, alarm systems, and cameras, all of which can be costly.  Some business owners have even cited higher insurance rates associated with operating a cash-accepting business, though that’s been refuted by some insurance agents.

Cash is also seen as an annoyance to restaurant managers due to the fact that all cash transactions must be carefully recorded and reconciled, which could require hiring an accountant. Plus, there’s the matter of an employee being required to physically leave the business to deposit the money or pick up small bills for change-making. This can be exceptionally inconvenient for a very small restaurant.

On the other hand, credit card processing companies charge fees on every transaction, averaging two to five percent, whereas the business keeps 100% of all cash transactions.

Card transactions are also usually faster than their cash alternatives, especially for high-volume cafes. And since restaurants are notoriously small-margin businesses, that can mean creating a faster, more seamless experience for customers, which could encourage diners to return and translates to higher income for the restaurant.

I think customers are very happy to trade off their ability to use cash to get this service in return,” Rice University marketing professor Utpal Dholakia told the Los Angeles Times.

For most restaurants, it ultimately comes down to a question of hospitality. When only a small number of customers want/need to pay in cash, should a restaurant make accommodations for them? And should it be taken into account that those same cash customers are already the most likely to struggle with the availability of healthy food options?

Photo – GrubStreet.com

Either way, going cash-free may be a trendy business move right now, but the downsides (and discrimination aspects) are leading to government intervention. New legislation was introduced in San Francisco, Philidelphia, and New Jersey recently banning cash-free restaurant operations. Philidelphia’s city council voted to ban these cash-free establishments on the grounds that they’re discriminatory alone. Time will tell if more cities and states will issue bans in the future.