Cash or Credit?
Paco Underhill - Cash or Credit - The Robin Report

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New York City recently voted to ban retail businesses from credit card-only operations. City Government has stated that it is discrimination against New Yorkers who either don\’t have credit cards, or who simply want to pay in cash. Tender Greens and Sweetgreen\’s — both millennial-focused food service operations – have been credit card-only businesses and they have been given nine months to change; reports are that the store managers are livid. They are not alone. The trend to cashless retail is growing. Across many cities in Europe and Asia, the escape from cash has liberated retail design and reduced both operational headaches and risk. However, there are two sides to the issue.

Cash Surplus

Never in the history of the U.S., or the world, has more cash been in circulation than today. With the exception of the Nordic markets, the white, grey, and black economies are alive and kicking. The recent emigrant population in Southern Europe is largely dependent on grey and black economies as employers try to skirt EU employment laws. For global economists, the explosion of cash has made tracking employment and commerce issues all the more difficult. What are the real unemployment numbers, much less missing tax revenue?

[callout]For global economists, the explosion of cash has made tracking employment and commerce issues all the more difficult.[/callout]

Shades of Grey

Deal with almost any small contractor in the U.S. and you have a white market price if you are paying by credit card or check, and a lower grey market price if you pay in cash. When the price tag for the purchase gets to three figures, many independent merchants are willing to make deals. A friend in the prom dress market has mothers and daughters that choose cash layaway payments for the dresses – not for tax reasons, but because it helps put the purchase below the family finance (read Dad\’s) radar screen.

Off the Grid

Paying in cash is a very simply way to control personal expenditure; if the cash isn\’t in your wallet, you can\’t spend it. A woman who does part-time gardening work for us in the summer and drives a school bus the rest of the year has no credit cards. She has no bank accounts; all her bills are paid in cash. She may have a secret place where she keeps her savings; she like many others have gotten off the banking grid. In the USA, much less NYC, it is hard to measure the number of households that function off the banking, much less, credit card grid; a conservative estimate is north of 6 percent.

Years ago, Walmart applied for a banking charter in the U.S. in an attempt to serve the great un-banked. It was turned down. It does have a financial services window in many locations and serving a cross-section of customers including illegal aliens sending money home to their families and to America\’s underclass. The image of Buddhist monks standing in line at a Financial Center in a Walmart in a rural Georgia location is one of my favorite images of a shrinking world.


Costco takes one but not all credit cards. Like other stores that take only cash, it has ATMs on location.

Transaction Aesthetics

Many retail tech stores, where the vast majority of transactions are in the three figures, associates run your card on their phones right in front of you. By contrast, luxury retail sales associates typically process your payment in the back room. This approach is all about optics maintaining an aesthetic of elegance; overt transactions for a Kelly bag seem vulgar. Yet many urban dwellers have had the experience of trying to buy a cup of coffee or newspaper at the corner store and fume as the millennial person ahead in line fumbles with a credit card for a two-buck purchase. This is where the small convenience stores that accept only cash can help, including an ATM on location.


Get past the small purchase, and the design and operational constraints of the cashwrap drive many of the store design options for small merchants. The cashwrap takes up space, it is generally unappealing visually and there are hard and real security considerations. The decision to forgo accepting cash is liberating – but is it discriminatory? We can ask the rhetorical question, \”if they don\’t have a credit card do, they have a mobile phone?\” Again, across much of the world, the mobile phone is the bank in your pocket. Over 15 years ago working for DoCoMo in Japan we noted the number of families that chose to load up their children\’s phone rather than give them cash as a way of both controlling and monitoring their purchases. Travel on the Japanese subway and you can use your Metro Card to make purchase in the retail businesses in the subway system.

In a Parisian bakery near the Sorbonne in the student district I saw a transaction machine accepting both cash and cards. Having such a kiosk it isn\’t a perfect solution to payment options, but it does save space and labor for the retailer.


For the Greater Good

To what degree can a government make decisions for its citizens that it believes are for the greater good? In New York City, legislating how retail transactions should happen is a bad idea. Perhaps a more progressive piece of legislation would be a tax credit for merchants to upgrade their technology. And to make the transactional playing field fair to all consumers, eliminating cash will unfairly punish small retailers – for the moment. For New Yorkers with only cash in their pockets, there is no shortage of places very willing to accept their money. And as mobile pay services expand, many more of us may be kissing our credit cards goodbye and catching up with the 21st century.



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