Accept cash, credit card or mobile payment? Government wants a say

When shoppers reach the cash register, they typically have an array of payment choices.

They can charge their purchases to a variety of credit cards. They can pull out a debit card, a prepaid card or a gift card. Mobile payment apps are often an option. So are old standbys like cash and personal checks.

If the merchant refuses to accept a particular payment method, the shopper can decide to shop elsewhere. These market forces may explain why there has historically been little government regulation of which payment types retailers must accept.

But in an age where payment options have multiplied, and newer technologies offer key advantages to merchants, the dynamics appear to be shifting. More businesses are refusing to accept older payment methods, including cash but also credit cards, and those decisions are sparking a backlash.

Dania Maxwell/Bloomberg

So far this year, two major U.S. cities and one state have passed legislation that requires stores to accept cash.

And in the burgeoning electric vehicle industry, a policy spat has emerged over the payment options available at charging stations, whose operators generally encourage customers to pay via mobile apps.

“We’ll face these battles for a while,” predicted John Thompson, the chief program officer at the nonprofit Financial Health Network.

Thompson acknowledged that newer payment methods are more efficient than older ones, but he said that government-imposed guardrails may be necessary to preserve access for some segments of the U.S. population.

A Pew Research Center survey last fall found that 29% of U.S. adults with annual household incomes of below $30,000 use cash for all or almost all of their purchases, compared with just 7% of adults with household annual incomes of $75,000 or more.

If any part of the U.S. retail economy is well positioned to rely exclusively on next-generation payments, it would seem to be the electric vehicle industry, whose customers have already demonstrated a willingness to embrace new technology.

Unlike gas stations, which lean heavily on card payments, many charging stations do not accept plastic. One likely factor in their reasoning is that credit cards are more vulnerable to fraud than mobile payments. Charging stations that accept card payments may be particularly susceptible because they are often located in remote locations with limited staffing.

“This provides an opportunity for criminals to install malicious devices without being easily detected,” a recent report on the security risks associated with card payments at electric vehicle charging stations stated. “Skimmers and shimmers — small, easy-to-obtain devices engineered to steal credit card data — are a rampant problem today.”

But critics of the charging networks argue that their payment models run the risk of leaving some drivers stranded, unable to recharge their vehicles. The networks often encourage drivers to sign up for monthly subscription plans, which may have the effect of tying consumers to a particular network of charging stations, and can also make it difficult for nonmembers to recharge.

“Can you imagine pulling up at a gas station and finding out you can’t use your credit card, have to download an app, call an 800 number, or be a member of some club or network, and on top of all of that not know what price you are paying for fuel?” groups including Plug In America and Sierra Club California wrote in a letter to state officials last month.

“And that is assuming that one has cell coverage, which is intermittent and spotty outside of the urban areas.”

The California Air Resources Board recently released a proposed regulation that would require charging stations to accept chip-enabled credit card payments. The agency said in a staff report that the ability to use standard payment methods will simplify transactions and improve access to charging stations.

“The current situation is confusing to consumers,” Dave Clegern, public information officer at the Air Resources Board, said in an email.

A similar debate is unfolding on the Eastern seaboard, where a body with representatives of states from Virginia to Maine recently adopted model language stating that card payments should be required at public charging stations.

The group, Northeast States for Coordinated Air Use Management, noted last month that while 77% of U.S. adults own a smartphone, only 10% of consumers under age 45 use mobile wallets as a payment method.

Companies in the charging industry are opposing the proposed regulations.

“We certainly don’t think that the regulations should specify a single specific technology,” Will Barrett, director of sales at ClipperCreek, a manufacturer of car chargers, told an industry publication.

“Technology in the industry and the solutions that are available are evolving — we shouldn’t regulate a specific type of payment as being the only way to facilitate open access.”

The situation at charging stations has parallels with the recent push in various cities and states to ban cashless stores.

Many merchants, particularly mom-and-pop businesses, have long been wary of noncash payments because of the fees they absorb.

But at larger retailers the calculus is often different. One benefit of electronic payments is that they can help attract repeat business. Note, for example, the proliferation of retailer reward programs that are linked to mobile payment apps.

A second advantage is that electronic transactions can be processed more rapidly than cash payments, which leads to shorter customer wait times in crowded shops and restaurants.

It may also be the case that consumers spend more money when they pay with credit cards, because it hurts more psychologically to part with cash.

In March, Philadelphia became the first U.S. city to ban cashless stores. The measure was introduced by Councilman Bill Greenlee, who argued that such stores negatively affect poor people and immigrants.

The city of San Francisco and the state of New Jersey soon followed Philadelphia’s lead. Similar proposals have also been introduced in New York City, Chicago and Washington, D.C.

The pushback from state and local governments may be having an effect on corporate decision-making. In April, the upscale salad chain Sweetgreen said that it was reversing its earlier decision to stop accepting cash. And around the same time, the retail behemoth Amazon said that it will start accepting cash at its cashierless stores.