House task force weighs retail cash mandate in the digital age

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Payment industry players are expected to present testimony on Capitol Hill before a House financial technology task force on Thursday that’s weighing a bill to prohibit stores from refusing to accept cash.

The hearing, focused on the rise of mobile payments and how it’s affecting cash access, could align U.S. law with various states and cities that recently banned cashless businesses.

New York City this month finalized a law requiring local businesses to accept cash, joining New Jersey, Philadelphia and San Francisco in blocking a trend where cerain shops trying to streamline checkout—including Amazon Go stores—have eschewed cash at the expense of some consumers that lack payment cards.Executives from PayPal, the U.S. Faster Payments Council, the Brookings Institute and Consumer Reports are on the docket to testify in a live webcast about how mobile payments have altered the security and speed of everyday transactions.

The hearing, “Is Cash Still King? Reviewing the Rise of Mobile Payments,” looks at security and challenges surrounding mobile payments, but its main thrust is the need to preserve consumers' ability to use cash, according to a U.S. Committee on Financial Services memo promoting the event.

An existing federal law specifies that U.S. coins and currency are legal tender for all payments, but it does not require private businesses to accept cash, the memo noted.

“Recently, an increasing number of commercial entities such as restaurants, retailers and gas stations have taken advantage of the absence of the federal requirement to accept cash by requiring that their customers pay using credit or debit cards,” the memo said.

This trend presents difficulties for vulnerable segments of the population who are unbanked or underbanked and rely more heavily on cash, the memo noted.

The risks mobile payments pose to consumer privacy and security from companies sharing data or cybercrime are also under examination in the task force hearing, along with the role faster payments could play in preventing consumers from overdrawing their account because a deposit didn’t immediately settle.

“Faster or immediate payment processing could potentially reduce or eliminate costs incurred by individuals facing this situation,” the memo said.

The memo points to a bill Rep. Donald M. Payne, D-N.J. introduced in May 2019 called the Payment Choice Act, which would prohibit retail businesses from refusing cash payments, charging higher prices to any customer who pays by cash. The bill so far has gathered 34 cosponsors in Congress.

Currently more than 75% of cash transactions in the U.S. are for purchases under $25, underscoring the ubiquity of cash despite the growing popularity of digital payments online and within mobile apps, the memo noted.

As mobile payments expand, poor, young, elderly and rural Americans are at risk for getting shut out of access to retail services, said Aaron Klein, a Brookings Institution fellow, in testimony submitted to the task force.

"As the economy digitizes, those without access to low-cost, reliable digital payments are increasingly unable to participate and share in the benefits," Klein said.

While cash still dominates in the overall payments landscape, overall its use is decreasing, countered Kim Ford, executive director of the U.S. Faster Payments Council, in testimony submitted in advance of the hearing.

"Almost 80% of consumers own a credit or debit card," Ford noted, adding that the U.S.'s steady movement toward real-time electronic payments is increasing security and accountability by retailers and others, versus dealing in cash.

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