Cashless Stores and Cash Users
Working Paper 2019-11b
May 2019 (revised August 2019 and February 2021)
The emergence of cashless stores has led several cities and states to ban such stores. This article investigates this policy issue by characterizing consumers who pay cash for in-person purchases and banked and unbanked consumers who do not have credit or debit cards. Using a random utility model, I simulate the effects on consumer welfare caused by a hypothetical complete transition to cashless stores. The simulations show that the burden from this transition on consumers with no credit or debit cards is seven times higher than the burden on consumers who have both cards. The conclusion lists policy options for alternatives to cash that may be needed before all brick-and-mortar stores become cashless.
JEL classification: D9, E42
Key words: cashless stores, policy options for alternatives to cash, banning cashless stores, consumer payment choice, in-person purchases
The author thanks Fumiko Hayashi, Kim Huynh, Alex Shcherbakov, Zhu Wang, and participants at the Conference on the Economics of Central Bank Digital Currency, organized by the Bank of Canada and Sveriges Riksbank, Ottawa, October 17–18, 2019, for most helpful comments, suggestions, and discussions on earlier drafts. The views expressed here are those of the author and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the author's responsibility.
Please address questions regarding content to Oz Shy, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470.
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