Noah Billing

English 1102
Dr. Martin
April 25, 2019
Effects of a Cashless Society on Businesses

As the technologies and products of our world advance, so do the ways in which we pay

for them. The government has always kept a close eye on the ways that the citizens of the

United States have gone about their transactions, always evaluating who is most benefited but

sometimes overstepping its ground. In New York City, a legislation was proposed that would

force businesses to accept cash in their stores. Although it may inconvenience some consumers,

the local government should not step in to prevent business from only accepting credit because

it would prevent certain businesses from thriving and being able to support the area around

them, ultimately negatively effecting the economy and small communities.

The government has always kept a close watch and had a major influence in our

economy. In a lot of ways, the government leaves the flow of the economy up to the

consumers, letting competition drive the everchanging market. Competition is important

because it encourages businesses to keep moving forward and to keep prices low in order to

attract more customers. Because consumers are in control of their own money, they can

choose where it is spent which encourages businesses to make their products seem more

attractive than a competitor’s similar product. This “free market” system has boosted the

United States ahead of many countries in developments because of how competitive

companies with the same products are with each other, fighting to stay ahead of the game. This

is good for the country because it encourages growth, new ideas, and cost-effective solutions to

problems.
 Shopping, especially in the United States, has become an inevitable part of the life of the

average American in our world today. Our economic system in the United States as well as

technological advancements have allowed us to get just about whatever we want, whenever

we want it. Many of the goods and services we have gotten used to spending money on have

integrated cashless transactions so well that consumers don’t bat an eye at them. Some of

these services including Amazon, Netflix, online stores and music subscriptions have become so

familiar to us that we sometimes don’t even think about the money that is being transferred

from one account to another. Credit and debit cards have become so popular and common that

many people see no difference in carrying around cash and carrying their debit card. “In the era

of credit cards and debit cards, we do not see, nor do we touch money. We book hotel rooms

through mediator booking companies. We have health insurance; we have retirement savings;

we have housing savings. We spend the money we have not seen for things we cannot touch

and we cannot use for years. The image of money and the usage of virtual money determine

our lives. Banks pay us interest for being allowed to use our money: the money we have earned

but have never seen, because when our salary arrives at the end of the month, it automatically

arrives to our bank account. Money is constantly being moved in a transparent digital arena”

(Deli and Nemeth 3).

So why does a big city like New York potentially want to go against the common trend

and increase the gap between cash and noncash methods of paying? This is still unclear. Maybe

the officials are looking at reports from India, where a group of researchers Got together to

perform a study. Chattopadhyay, Gulati and Bose have interesting findings from their study,

“Despite a good degree of awareness about cashless transactions, the majority of the small
retailers are neither sufficiently prepared nor overtly eager to participate in cashless

transactions, yet. It is an indication that mere awareness amongst the merchants and retailers

is not sufficient to trigger their shift towards cashless. As the retailers want to engage in more

of cash based transactions and find cash based transactions easier, for they are more habitual

with it, the marketing campaign and efforts should be focused towards changing habits and

attitude towards cashless than to barely create awareness” (12). India, however, does not look

the same as the United States Economically so this may not be a good indicator of businesses

readiness for cashless monetary models.

Small businesses are becoming exponentially more popular especially in cities like New

York, where there are so many people all the time. There has never been a better time to start

your own business than modern day America. With easy access to the latest technology and

information, anyone can start a business doing whatever they want. Especially in a big city,

there is always a nook for business creators to test out their business ideas. Small businesses

are also a really positive thing for the area around them. As these small, local businesses pop

up, it encourages residents to form relationships with the people who are selling them their

products, creating stronger bonds and ultimately stronger communities. These local businesses

also help the community by providing jobs for the residents. This proposed legislation by the

New York Government would be damaging to small businesses which are playing a detrimental

part in the building up of communities.

A large benefit to businesses is the fact that cashless transactions have become much

more secure as time has progressed. With introductions in the market of technologies such as

Apple Pay, Android Pay, Square and Venmo, cashless transactions both online and in store have
become easier and more secure. Suddenly we can have access to our bank accounts right from

our phones bypassing the need to even carry our card. Companies in charge of these services

have worked tirelessly to ensure that the data behind the transactions are encrypted and as

safe as possible. Apple has disclosed how they use an encryption process such that when

consumers use Apple Pay in a store, the store’s system doesn’t actually obtain the customer’s

information from the card. Therefore, if the store’s system were to get hacked, the hackers

wouldn’t have the card information of anyone who had used Apple Pay. A study conducted by

Professor Emir Husni tested a data encryption process called Dynamic Rule Encryltion (DRE) and

said this,

“Dynamic Rule Encryption (DRE) algorithm is designed as a security element of a

mobile payment application. In this paper, DRE serves to secure sensitive data as

well as the authentication token when trading.

From the distance tests performed in this study, DRE has a good level of security

because the average Hamming distance between the input and the output code

words is about half of the length of the data being input. Thus, it will not be easy

to trace the plaintext from the ciphertext. From the time of testing result, it is

found that DRE is lightly used on mobile devices because it has a fair execution

time, not less than 24 ms” (16).

One of the major counterarguments regarding this topic is the fact that lower income

families are being discriminated against since they may not have access to a bank account and

therefore a credit or debit card. Though it is true that there are some lower income families

who might be negatively affected by cashless stores in their area, putting this legislation into
place will do more harm than good. The number of people who use banks is increasing every

year which is not surprising considering there are over 6,799 FDIC Funded banks in the United

States. It has never been easier for citizens to have access to credit or debit cards. Another

choice for lower income families is to invest in the temporary cards that consumers can go to

the store and load money onto. This solves the problem of not having or maybe wanting a bank

account but still being able to go to cashless stores.

Dr Erwin A. Alampay, a professor of research at the University of the Philippians who

was studying cashless methods of money transfer, specifically conditional cash transfers (CCTs)

among low income families in the Philippians said,

“As currently implemented, with m-money technology not integral to its

delivery, the GCash Remit CCT system is not substantially different, in terms of

efficiency or security, from other modes of sending remittances (e.g.,

pawnshops, rural banks, Philpost). Meanwhile, m-money CCT systems have been

successful in other countries (see Aker et al., 2011), and a temporary m-money

CCT process has already been conducted in the Philippines by the UN through its

aforementioned use of SMART Money to pay for Typhoon Yolanda rehabilitation

work (see Lee-Brago, 2013). DSWD was also part of this UN-funded m-money

implementation, making scaling up this model for long-term CCT purposes a

seemingly viable proposition. (Interviewee L. Villanueva of SMART

Communications did not say whether SMART intended to bid in future DSWD

CCT conduit tenders [L. Villanueva, personal communication, 2013])” (11).

 Some people ask why these “cashless” stores are even here at all. They will say that it

would be more useful to fill storefronts with stores that everyone can use. And while it is true

that there are pockets of the population who cannot always shop in these “cashless” stores,

this is the beauty of economics in a free market. If customers in the area do not like the fact

that they cannot always shop at a certain store, they can simply stop going there. If enough

people stop going there than the business will lose money and will eventually have to move.

Our economic system is set up so that the consumers in a specific area have a big say as to what

is there because they spend their money on the services they like and they don’t on the

services that they don’t like.

Safety is obviously a topic of massive importance when talking about cashless

transactions. As we have seen however, the United States has been seen to house secure

solutions to these problems. “At the individual level, the World Bank reports that 17 per cent of

unbanked adults do not have a bank account because of a lack of trust and concerns about

fraud and high costs” (Nair 9).

It is important to encourage banks in the current state of our economic system. As more

and more money is being entrusted to banks, the banks want to be ensured that their

customers will continue to use their services. Stepping back from cashless transactions does not

ensure the bank that their services will be of much use in the future. In order to support the

banks, the government should be encouraging the use of banking services including the use of

credit cards and checks. Electronic money is a part of our daily lives already if we use checks,

credit or debit cards, savings and checking accounts and more. Daniel Reiss, a researcher at the

Central Bank of Brazil said, “E-money may be granted a higher status than cash as ICT
[information and communications technology] advances. Nonetheless, money, as a

representative form of a quantifiable and tradable value, has transformed from a physical

representation of bullion to a digital record kept at trusted institutions. During this

transformation, e-money has become more convenient and has reached a broader group of

users. Money is already digital” (6).

The economy in the united states has been able to thrive because of the system first put

in place by our founding fathers; a system where everyone has a shot. The proposed legislation

in New York City forcing businesses to accept cash is a step in the wrong direction for our

economy. It steps away from the input of the people and seems to assume a “government

knows best” kind of mentality. Our country has thrived because times that the government has

overstepped its ground, the people have called it out. This time should be no different. The

research presented in this paper not only show that the United States is ready for cashless

stores, but that it is already thriving with them.

 Work Cited

Alampay, Erwin A., and Charlie Cabotaje. "M-money as conduit for conditional cash transfers in
the Philippines." Information Technologies & International Development, vol. 12, no. 2,
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