Explained: As India pushes digital payments, why is New York forcing businesses to accept cash

The Bill has the backing of Mayor Bill de Blasio. It will take effect 90 days after it is signed into law.

Once it becomes law, violations will attract a fine of $1,000 (Rs 71,000) for the first offence, and up to $1,500 for repeat offences

The law specifies certain exemptions. Businesses can refuse to accept currency notes of value higher than $20, and they can stay cashless as long as they have a machine available that can load cash to a pre-paid card. Purchases made online and over the phone are obviously exempt.

Why has such a law been brought?

New York lawmakers are convinced that cashless business models are discriminatory. Shops and eating places that refuse to accept cash discriminate against poor people who do not have bank accounts or credit cards, as well as minors, they say.

“The City of New York cannot allow the digital economy to leave behind the 25 per cent of New Yorkers who are chronically unbanked and underbanked,” Democratic Councilman Ritchie Torres from the Bronx, who was the sponsor of the Bill, said.

“The marketplace of the future must accommodate the needs of vulnerable New Yorkers,” Torres told reporters ahead of the vote in the Council.

It is also about the people’s freedom to choice. “Whatever your reasons, consumers should have the power to choose their preferred method of payment,” Torres said.

What is the size of the beneficiary population that the Bill targets?

Torres described the Bill as a victory for New York’s working class members.

According to a research brief released by the city’s Department of Consumer and Worker Protection (DCWP) on October 2, 2019, some 3,54,100 of New York City households (11.2%) have no bank account, and another 6,89,000 households (21.8%) have a bank account, but use alternative financial products for some banking needs.

The numbers of these unbanked and underbanked households are disproportionately high in neighbuorhoods that have higher rates of vulnerable residents, and residents struggling in other areas of financial health, the DCWP said in a news release.

“DCWP encourages anyone who needs help opening a bank account, reducing debt, strengthening their credit score, or more to visit an NYC Financial Empowerment Center for free, one-on-one financial counselling,” the release said.

How have people reacted to the Bill?

The Bill will most impact no-cash establishments such as the burrito outlets chain Dos Toros and the vegan restaurant chain By Chloe.

ABC News quoted Dos Toros co-founder Leo Kremer as saying during the hearing on the Bill in February that the chain’s only concerns were to keep a tight control on finances and provide quick service: “We are only interested in being cashless because it allows us to make our restaurant more seamless.”

However, the salad chain Sweetgreen, which had gone cashless, started accepting cash again last year. A report in The New York Times quoted the company as saying that limiting how customers could pay “had the unintended consequence of excluding those who prefer to pay or can pay only with cash”.

But the same NYT report also quoted Kalman Yeger, a Democratic Councilman from Brooklyn, as criticising the Bill’s “overreach”. “We are inserting ourselves in the business of business in a way that we don’t have the right to,” Yeger said.

Is New York the first city in the US to take this step?

No. New York City has followed in the footsteps of New Jersey, Philadelphia, and San Francisco, all of which approved this measure in 2019. Several other cities are considering doing the same, American media have reported.

Massachusetts has had a law since 1978 under which businesses are obligated to accept both cash and credit.

But isn’t cashless the way to go around the world?

The advantages of digital payments are obvious.

It is faster and easier, and safer than carrying and handling cash for both customers and businesses. In countries like India, the non-availability of cash is seen as a deterrent to petty crime like snatching and burglary, or more serious armed robbery.

Indians are also familiar with the problem of loose change not being available, which sometimes forces businesses to hand out toffee in place of a few rupees or paise. Electronic payments are seen as an easily available solution.

India also has a problem of tax evasion and black money, and the push for electronic payments was intended to tackle those. Unlike in the US, where credit structures are strongly exclusionary, the Indian government has made efforts at helping common people make payments electronically, either by cards or through mobile phone applications.

Countries like South Korea and Sweden, whose governments also have a reputation for being sensitive to the needs of all sections of society, are almost entirely cashless.

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