Loomis International and The Brinks Company are two of the most widely recognized companies on the same side as the ATMIA. In 2014, both companies (along with others) sponsored a report titled “The Case for Cash,” aimed at dispelling myths surrounding the anti‐cash movement (Currency Research 2014).5 Though perhaps lesser known to the general public, both Cardtronics (the world’s largest ATM operator) and Payment Alliance International (a leading provider of payment‐processing solutions) have publicly promoted the benefits of cash.
One of the more powerful trade groups that could end up influencing the outcome of this debate is the National Federation of Independent Business (NFIB). The NFIB represents more than 300,000 small businesses and certainly influences legislative outcomes. The NFIB has not, however, taken an official position on whether cash should be banned. On the basis of conversations with NFIB representatives, it appears likely that the NFIB will only weigh in on the debate if its members push it to do so. A similar approach is being taken by the Retail Industry Leaders Association (RILA) and several state and local retail trade associations contacted for this article—all are unlikely to take sides in the debate until their members push them.6
As anyone who observed the legislative battles over the Durbin Amendment—the price control that Dodd‐Frank instituted on debit card swipe fees—can attest, retail trade associations can undoubtedly sway members of Congress on important financial legislation votes. The National Retail Federation (NRF), for instance, played a pivotal role in convincing Republican members to strip a repeal of the price control from the Financial CHOICE Act, a bill that ultimately passed the House of Representatives. The NRF, and other groups, were successful even though they were pitted against many bank trade groups (Kharif 2016).
In the debate over banning cash, the NRF has not yet taken an official position, but a recent article indicates that the NRF is unlikely to support anything like a full ban on cash anytime soon. NRF Senior Vice President Mallory Duncan argued that many retailers prefer cash transactions because cash still provides 100 cents on the dollar versus the 97 to 98 cents on the dollar they receive from card network transactions. Duncan noted that these swipe fees far outweigh the cost of handling cash, and stated, “From a cost standpoint for most retailers of any size, cash is still king” (Greene 2016). If any member of Congress makes a serious effort to ban cash in the near future, the NRF seems likely to mount an opposition campaign.
Last but not least, it is unclear what role the banking industry will ultimately play in this debate. It is true that Chase, the nation’s largest bank, recently stopped allowing customers to use cash to make payments on credit cards, mortgages, equity lines, and auto loans, and also prohibited the storage of cash in safe deposit boxes (Murray 2015). Though it would be easy to argue that “the banking industry” is beholden to federal regulators, and is simply carrying out more controls on cash at regulators behest (Burton and Michel 2014), the industry is actually quite fragmented. For instance, the CEO of Iowa’s Northwest Financial Corp, Jeff Plagge, argues that the cashless society may be “overhyped,” and that he sees “a less‐cash society rather than a cash‐free society” (Epstein 2017). In general, community banks take a very different view of regulation than the largest banks—even when it comes to the cash‐unfriendly know‐your customer rules. It is unlikely, for instance, that JP Morgan Chase’s CEO would make a statement similar to Plagge’s.
There is, of course, no doubt that all banks would be at the mercy of their federal regulators should the federal government decide to crack down on cash even further, but the largest banks stand to gain the most by policies such as negative interest rates because they hold such a large percentage of customers’ deposits.7 The true wildcard in this debate, though, is the Federal Reserve. Should the Fed decide that implementing monetary policy requires a move to a digital‐only world without paper currency, it will become very difficult to stop the ban—especially if current trends continue and people continue to rely less on cash. Nonetheless, powerful special interest groups regularly affect the outcome of policy battles, and there is no reason to think that the assault on cash will play out any differently. Still, if the use of cash continues to diminish, then the interest groups that currently oppose banning cash will hold less sway. If history is any guide, groups that want to preserve consumer choice in forms of payment should waste no time redirecting federal efforts toward solving real economic problems and directly stemming criminal activity. Otherwise, the long‐term trend of central banks taking over monetary functions from private markets will surely continue.
Throughout the world, there has been a steady shift away from paper‐based payments during the last few decades. This change has occurred as technology changed, thus making it easier to facilitate consumer exchanges electronically. If the federal government would simply allow those changes to take place, there would be no particularly unique problem—the trends toward a less‐cash society would likely continue. Criminals may find it more expedient to transfer money anonymously via the Internet, but they have surely found it easier to commit crimes with the advent of better automobiles, computers, and communication devices.
There is certainly a strong public interest in preventing terrorist attacks and prosecuting fraudulent behavior, but there is an equally strong public interest in protecting law‐abiding citizens’ personal and financial privacy. And there is simply no reason that these factors cannot be properly balanced without banning cash and forcing all citizens to use only one form of money. Virtually no U.S. banker would object to, for example, providing legitimate criminal suspects’ transaction records to the proper authorities. There is no need to criminalize cash itself to prosecute someone engaged in criminal activity, or to ignore law‐abiding citizens’ right to personal and financial privacy.
Even some of the staunchest supporters of banning (or limiting) the use of cash acknowledge that doing so will not eliminate crime. Furthermore, at least one prominent supporter of banning cash acknowledges that “the biggest threat to the value of the currency is often the government itself” (Rogoff 2016: 19). It seems risky, at best, to give the government so much control over the form of payment citizens choose, but that is exactly what many policymakers are hoping to do. At the federal level, there is no doubt that special interest lobbying will influence whether the government successfully bans cash. As citizens continue to rely more on digital payments and less on cash, it will become more difficult for trade associations to resist the federal push to ban cash. If history is any guide—central banks have taken over nearly all of the monetary functions that private markets used to handle—it is critical that policymakers soon redirect their efforts at the source of real economic problems and criminal activity.
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1In several cases, policymakers are seeking to ban both cash and coin in favor of digital alternatives.
2Citizens in other countries, such as Argentina, shun official paper currency because they do not trust the government (Saks‐McLeod 2014).
3Interestingly, one of the most vocal proponents of banning cash, Harvard’s Kenneth Rogoff, casts doubt on the effectiveness of mitigating certain crimes in this manner. For instance, Rogoff states that “Obviously there are better ways of reducing drug‐related crime” and “Eliminating cash would hardly eliminate drug cartels.” (Rogoff 2016: 69). Similarly, Citigroup’s Willem Buiter, who has argued for eliminating high‐denomination paper currency, states that “even though hard evidence is hard to come by, it is very likely that the underground economy and the criminal community are among the heaviest users of currency” (Keohane 2015).
4The 1970 Bank Secrecy Act, and its concomitant know‐your‐customer rules, certainly makes it more difficult to use cash. The bill is rightly viewed as a major turning point in the war on cash in the United States. However, the bill did not ban the use of any particular denomination of U.S. currency, and it was originally aimed at deterring foreign banks from laundering criminal proceeds and helping people evade federal income taxes (Burton and Michel 2016).
5The report was published by Currency Research, an “international organization,” that represents many financial institutions and other organizations within the “currency and cash handling industries.” See http://currencyresearch.com/about.
6A partial list of associations, with no official position on the cash debate, contacted for this article includes the following: Colorado Restaurant Association, Maine Restaurant Association, National Restaurant Association, Restaurant Association of Metropolitan Washington, National Association of Convenience Stores, the American Beverage Association, and the National Pawnbrokers Association.
7It is tempting to think that the largest banks have the most leverage with government regulators, but community bank trade groups, such as the Independent Community Bankers of America, hold enormous sway on Capitol Hill. And, many members view large banks negatively. Exactly how this dynamic influences the debate on banning cash will depend on how (and when) events unfold.