Chaun Reynolds spent decades working as a cook in restaurants before injuring his back and ending up on the streets. He now lives with a friend in Imperial Beach and helps foster dogs as part of his income.
He doesn’t make a lot of money.
To get around, Reynolds relies on the Metropolitan Transit System. Because he doesn’t have a debit or credit card, he can’t top up his Pronto account, the new digital pricing system, over the phone. He has to find a kiosk while he is shopping and feed him cash. But it’s Not possible on the bus.
Instead, Reynolds walks to the nearest streetcar station, which is over 2 miles away. He ends up spending $2.50 to get there and another $2.50 to get home.
“The only way for me to add money is to take the bus and pay twice,” he said.
Although Reynolds did not know it at the time, there was nearest kiosks at his disposal. To expand its reach, MTS has begun partnering with some 90 retailers and is working on an agreement with two grocery store chains.
The switch to Pronto was well intentioned. By allowing users to store value on their MTS cards over the long term, it solved an existing problem when it was released last year. The agency was trying to be more attentive to all the ways people pay for public transit.
But Reynolds’ experience using the new fare system also reveals a blind spot not just in public transport, but in commerce more generally – one that threatens to deprive the poorest of the poor of access goods and services that others take for granted.
It is difficult to quantify the true scale of the cashless trend, but during the pandemic i started to notice more and more companies refusing to take money. Rightly or wrongly, public health professionals were concerned at the time that COVID-19 could spread to physical currency.
Buyers and sellers of new forms of technology often present it as innovative, inevitable and worthless, as if the creation of a more equitable social order were a simple engineering question. Being able to swipe a card in a cafe, for example, is definitely handy. But gains at the top don’t trickle down automatically, especially for those that exist outside the traditional banking structure.
A 2019 survey by the Federal Deposit Insurance Corporation, an independent agency created by Congress, found that 5.6% of California households do not have a checking or savings account. Locally, this number is 4 percent – which may not seem like much. But there are 1.3 million homes in the San Diego-Carlsbad area alone, so we’re talking about over 55,000 people.
People of color are disproportionately represented in this group. In 2020, the California Senate Committee on Business, Professions, and Economic Development found that black and Latino residents were five to seven times more likely be “unbanked” than white people.
The main reason for not having a bank account? People cannot meet the minimum balance requirement.
As a musician, Ezekiel Morphis was able to survive on money for years. He deferred a bank account because he was worried about spending more than he could afford and being hit with overdraft fees. He considered it a form of self-discipline.
Then the pandemic hit. Dozens of times, he recalls, he walked into a business — a hardware store, a gas station — and was turned away.
Morphis opened an account with a credit union, in part because he thought it would get him unemployment benefits faster. But even that took some effort. He needed proof of residence, two pieces of identification and other documents.
“It’s quite difficult to establish yourself if you come out of a hole,” he said.
Several states and major cities ban cashless shops for a similar reason – it can marginalize low-income shoppers – although there are exclusions in some places for certain types of businesses, such as car parks. A group of California lawmakers tried to follow suit in early 2020, weeks before the pandemic hit, but the bill didn’t go far.
It was passed by one Senate committee and died quietly in another.
Assemblyman Randy Voepel, a Republican from Santee, co-authored the bill, which would have required retailers to accept up to $5,000 in cash.
Senator Pat Bates, a Republican who represents South Orange and North San Diego counties, helped defeat the bill, but in a statement she said she was willing to reconsider its merits if he came back. She was concerned at the time about how the bill defined a retailer and believed it posed a risk to banks, utilities and other businesses and their employees.
Jerry Hill, the former Democratic state senator, told me that after he wrote and introduced the bill, some people grieved him for his lack of “21st century thinking.” He understood that retailers like to go cashless because it saves time and gives the image of an elite clientele. But he was surprised by racial disparities in banking.
Opposition to the bill has come from banking and energy groups who generally complains on potential costs. The California Bankers Association argued that allowing non-customers to exchange currency or purchase financial instruments, such as travelers checks, would increase the risk of money laundering (which is already widespread in the global banking industry). Southern California Gas Company also argued that going digital was more environmentally friendly, although there is some debate on this point due to the energy required to keep the infrastructure alive.
At the same time, the American Petroleum and Convenience Store Association was in favor of the bill. He argued that many of his customers rely solely on cash to buy basic necessities: “Businesses should not be allowed to refuse cash as a valid form of payment.
Ultimately, Hill blamed the bill’s demise on lobbyists who sparked fear, uncertainty and doubt behind the scenes. He remembered laughing at some of their talking points.
“We could talk about money laundering, but we could also talk about information theft,” he said.
Computer security breaches can expose people’s financial information, and companies like Facebook have used purchase information, both online and in physical stores, to sell targeted advertising. Privacy and surveillance considerations are often downplayed in the cashless debate, but the digital payment system is evolving in the world of biometrics, allowing a customer to literally pay with their face.
This is not the only consideration that is downplayed.
Lorena Gonzalez, who recently left the Assembly to lead the California Federation of Labor, told me she was bothered by cashless stores because it could mean fewer jobs for cashiers. Last month she tweeted his support for a cashless ban after buying breakfast in a wealthier part of town that caters to travelers and workers in nearby tech and medical industries.
The cashless business model might make sense in La Jolla, but not necessarily in its neighborhood, City Heights. She also recalled seeing an ad online proclaiming that the future of grocery shopping was digital.
“People are really screwed if they don’t have access to a map or an app,” she said.
Credit cards, in particular, can serve a fair purpose and, in the right context, help redistribute wealth, counterintuitive as that may seem. Especially in times of high inflation, people borrow for everyday shopping. By the time the debt is paid off – assuming wages keep pace – it is worth less.
But paying with a card can also be extractive, as it increases the overall cost of doing business. It’s not just consumers who are nervously eyeing the cashless trend.
As Mikey Knab, a local restaurateur, explained to me, some of the largest credit card processors are also among the largest banks. They take a cut of every purchase. And that’s probably one of the reasons why financial institutions are increasingly push people to their digital services.
Getting rid of cash reduces the risk of being robbed, but some servers in bars and restaurants prefer to get their tips this way. Huge numbers of hospitality workers are undocumented, with estimates ranging from about 10 to 40 percent depending on the region and the job.
“Money and credit are tied to the larger issue of employment,” Knab said.
There are alternative financial services companies that offer to fill the void for people without a traditional bank account, but using one can come with its own set of issues and limitations.
Ashley Hopkins, a stay-at-home mom in El Cajon, said she went to a warehouse supply store and tried to pay with a $20 bill, but the clerk didn’t have enough change.
“She was pushing me, ‘Do you have a debit card?'” Hopkins said.
She made the purchase anyway. She found out the hard way that there was a coin circulation shortage during the pandemic and paying cash could actually increase their expenses.
Her boyfriend works two security shifts to make ends meet and receives his wages deposited on prepaid debit cards. The family has also started using cash apps for mobile payments. When the holidays started last year, however, they tried to hire a car to visit her father and mother-in-law in the desert. But the rental company would not accept currency that was not routed directly through a bank.
“It put a damper on our Christmas plans,” she said. “We stayed at home. It sucked.