Philadelphia Bans ‘Cashless’ Stores Amid Growing Backlash

In a sign of the growing backlash against “cashless” stores around the country, the City of Philadelphia will require retailers to accept legal tender starting this summer.

Retail outlets that have stopped accepting cash say it is faster and easier for their employees to process digital payments. But critics say the practice discriminates against people without bank accounts or credit cards, or who simply prefer to pay cash.

City Councilman Bill Greenlee, a co-sponsor of the bill, said it would ensure fairness as residents complete everyday transactions.

“It just seemed to me unfair that I could walk into a coffee shop right across from City Hall, and I had a credit card and could get a cup of coffee. And the person behind me, who had United States currency, could not,” he said in a phone interview on Thursday.

The new law, signed by Mayor Jim Kenney last week, takes effect on July 1 and could lead to fines of up to $2,000 on businesses that do not take cash.

But many transactions will be exempt, including those at parking lots and garages; businesses that sell goods through a membership model; rentals that require security deposits; online, telephone or mail-in transactions; and goods sold exclusively to employees.

The bill amends the city’s Fair Practices Ordinance, which is administered by the Philadelphia Commission on Human Relations. Mike Dunn, a spokesman for the city, said on Thursday that the commission would have to set the penalties before the bill takes effect.

The State of New Jersey and the cities of New York, San Francisco, Chicago and Washington are considering similar bills. Dan Bryan, a spokesman for Gov. Phil Murphy of New Jersey — where both chambers of the legislature have passed the bill — declined to comment on Thursday about whether Mr. Murphy would sign the bill.

In Massachusetts, the state has had a little-known law on the books since 1978 that requires businesses to take cash. There have been recent calls from businesses to clarify whether it applies to restaurants.

Retailers and business associations around the country have opposed or raised concerns about the bills, arguing that the government should not dictate how businesses operate.

For example, when the salad chain Sweetgreen announced it was going cashless (except in Massachusetts) in 2016, it said in an online statement that the move would free employees from making change and counting cash, speeding up transactions, and that it decreases the risk of theft.

In Philadelphia, the Chamber of Commerce for Greater Philadelphia and the Pennsylvania Restaurant & Lodging Association said that the law could deter new businesses from opening.

“It is important that Philadelphia remain competitive and a place where businesses want to locate as opposed to putting up roadblocks to future investment and business growth,” Melissa Bova, vice president for government affairs at the restaurant and lodging association, said in a statement.

Amazon had also raised concerns about the bill, Mr. Greenlee said. The online commerce giant has said it will consider opening up to 3,000 cashless stores around the country by 2021. Mr. Greenlee said he believed the law’s membership exemption would allow Amazon to operate cashless stores without a problem.

But Lauren Cox, a spokeswoman for Philadelphia’s Department of Commerce, said that Amazon and its lawyers do not feel that the language in the law applies to their model.

“In particular, they have questioned the ‘membership’ portion of that line because you just need an Amazon account to access the Amazon Go stores, not a Prime membership,” Ms. Cox said in an email.

Ben Holzer, a spokesman for Amazon, declined to comment on Thursday.

A Pew Research Center study released in December found that roughly 29 percent of American adults say they make no purchases using cash in a typical week, an increase from 24 percent in 2015. Those with a household income above $75,000 were much more likely to say they did not typically use cash, the study found. The study found that African-Americans and older people were more likely to use cash.

Critics of cashless stores say they are exclusionary by nature, as low-income people may not have bank accounts because of fees and minimum balance requirements. (A report by the Federal Deposit Insurance Corporation in 2017 estimated that 6.5 percent of American households were “unbanked.”) Critics have also raised concerns about privacy and data security.

Mr. Dunn said that with a 26 percent poverty rate in the city, officials in Philadelphia were focused on finding ways to increase access to banking services for all residents.

“But until we can resolve the hurdles facing the unbanked, we need to remove any obstacles that could prevent them from enjoying all amenities of this city,” he said in a statement.

He added that the mayor had signed the bill “despite our continued concerns about how this legislation might impact innovation in our retail sector.”

“We will continue to monitor this, as we face the ongoing challenge of growing our economy while ensuring that growth is inclusive,” Mr. Dunn said.