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‘Your money's no good here.’ Some Houston businesses shun cash.

Paul Takahashi March 29, 2019 Updated: March 29, 2019 7:18 a.m.

When Angel Williams went to pay $13 for two cones of vanilla ice cream the other day, she was surprised to find out her cash was no good at Cloud 10 Creamery in the Heights.

“It was kind of strange,” the 32-year-old Ohio resident visiting Houston said. “If you don’t have a credit card, then what?”

Cashless businesses, once limited to online retailers and parking facilities, are becoming more commonplace nationwide as a growing number of consumers ditch paper bills for digital currency.

Cloud 10, which also has an ice cream shop in Midtown, only accepts debit and credit cards, as well as mobile payments such as Apple and Samsung Pay. It’s not alone in Houston: Boheme, a Montrose bar and restaurant, only accepts debit and credit cards. Nationally, several chains such as Sweetgreen, Shake Shack and Starbucks are transitioning away from cash sales.

“We’re moving toward a digital and cashless future,” said Venky Shankar, research director at Texas A&M University’s Center for Retailing Studies. “It’s not surprising that some retailers and restaurants would totally do away with cash.”

Proponents say going cashless eliminates the hassle of dealing with paper money and coins, saving employees’ and customers’ time while deterring robberies and theft. Despite having to pay credit card fees, businesses say they benefit from more precise accounting, since there is a digital record for every transaction.

Critics argue cash, as stated on bills, is “legal tender for all debts public and private” and worry that consumers with low credit scores or no bank account may be left out of a cashless economy. That’s of particular concern in Houston, which has one of the highest unbanked populations nationally, with more than 310,000 households, or 11.8 percent, lacking a checking or savings account. Nationally, 8.4 million households, or 6.5 percent, had no bank account in 2017, the most recent period for which data are available, according to the Federal Deposit Insurance Corp.

To be sure, cash is still king for the vast majority of retailers and restaurants nationwide. The handful of businesses that have gone cashless tend to be fast-casual restaurants and trendy food trucks, whose patrons primarily use credit cards and whose business model relies on speedy transactions.

Yet, amid the backlash against cashless restaurants and shops, several cities and states have enacted or are considering mandates that businesses accept cash. Earlier this year, Philadelphia and New Jersey passed legislation requiring businesses to take cash. New York, Chicago, San Francisco and Washington, D.C., are debating similar bills. No such legislation has been introduced in Houston or Texas.

Freedom of choice

Stephanie Martz, senior vice president and general counsel for the National Retail Federation, said retailers are concerned about unbanked consumers being left behind in a cashless future. However, the retail association — whose members include department stores, independent and e-commerce sellers, chain restaurants and grocery stores — doesn’t believe forcing retailers to accept cash is the right answer.

“We feel like merchants should be able to work with their customer base to figure out the best way of accepting payment,” Martz said. “For the vast majority of merchants, it’s accepting cash and other forms of payments. But for merchants who decide going cashless is worth doing, we feel they should be able to experiment.”

Emerging digital payment systems could help unbanked consumers pay for goods and services in a cashless society, Shankar said. Bitcoin and other cryptocurrencies are gaining wider acceptance, and mobile payments are widely popular across Asia, Africa and parts of Europe.

In 2017, more than three-quarters of smartphone users in China made a mobile payment, compared to just a quarter in the U.S., according to marketing research firm eMarketer. China leads the world in mobile payments, posting $12.8 trillion in mobile payments between January and October 2017, far outpacing the U.S., which logged $49.3 billion.

However, consumers should be wary of the growing power of financial institutions, technology giants and telecommunications companies, said Christopher Peterson, the director of financial services for the Consumer Federation of America.

The consumer advocacy group, which supports legislation requiring businesses to accept cash, said that while it tries to keep an open mind about alternative payment options it is increasingly concerned about the growing power of banks, tech firms and mobile phone companies, especially in the wake of high-profile hacking and privacy cases. Some consumers — such as refugees seeking asylum and those wary of authoritarian regimes — are worried about handing over sensitive transaction data, Peterson said.

“Consumers and merchants can be vulnerable to overcharging or deceptive and unfair practices if a payment system is manipulated,” Peterson said. “Cash is currently our public option. It’s government-sponsored tender that is relatively safe, predictable and low cost.”

Cash is costly

Houston restaurateurs and retailers who have gone cashless cite myriad reasons for doing so.

Cash is costly. Banks charge fees to handle deposits and coins. High-volume businesses also pay for armored car service to transport cash to and from the bank.

Cash also is cumbersome to deal with, slowing down checkout lanes and forcing managers and employees to spend hours each week counting money and making cash drops. Business owners say that’s time better spent tending to customers.

Chris Balat, founder of Balcor Hospitality, which owns and operates Cloud 10 Creamery in Houston, said his company’s cashless policy has saved his employees and customers more than an hour a day.

“No one likes waiting in lines or staying late to count cash,” he said. “You can come in, get out and move on with your day.”

Chief among retailers’ reasons to go cashless is safety. Cash attracts crime.

In 2015, Boheme owner Morgan Holleman said he was burglarized during a cash run for his Montrose bar and restaurant. After leaving the Wells Fargo bank on West Gray, Holleman stopped by a nearby cafe to grab a quick coffee, leaving his cash bag hidden inside his car. As soon as he got his order, Holleman heard his car alarm go off and rushed outside to find burglars had broken into his car, slashed his tires and were driving away with just under $2,000 in cash.

Two years later, Holleman turned Boheme into a cashless establishment. Since the switch, Boheme has not been robbed.

“I didn’t want the liability,” Holleman said. “What if one of my employees got hit over the head for a few thousand dollars? The thieves in the neighborhood are aware of the fact that I do not take cash, and they haven’t attempted again.”

Excluding customers

Many mom-and-pop restaurants, bakeries and shops in Houston’s Chinatown area have long been cash-only establishments, catering to first-generation Asian immigrants culturally accustomed to paying with cash.

Amid growing concerns about crime in the neighborhood, however, community leaders more than a decade ago began encouraging retailers to start taking digital payments, both to ward off robberies and to promote the shopping and dining district to outsiders used to paying with credit and debit cards. Today, the Chinese Community Center estimates about 15 percent of businesses in Chinatown’s plaza shopping centers are cash only.

Still, Chi-Mei Lin, chief executive of the Chinese Community Center, said she believes businesses should still accept cash as a form of payment.

“If you do cash only or no cash, either one, you are actually excluding certain customers,” Lin said. “It’s discriminating to do business exclusively with one payment method. You have to take multiple options to be inclusive.”

That’s a lesson Thomas Nguyen found out when he turned two of his five Peli Peli locations — a fast-casual concept near CityCentre and a fine dining restaurant in Katy — into cashless establishments in 2016. The South African-inspired chain put up signs explaining the policy and even comped cash customers who missed the signs.

Nguyen, Peli Peli’s co-founder and chief marketing officer, thought his customers would appreciate the faster service because of its cashless policy, especially since more than 90 percent of patrons were already paying with plastic. However, he found the policy was a sticking point for customers who preferred greenbacks over credit cards.

Some customers walked out of Peli Peli, offended that their cash seemingly was not welcome there. Others left negative reviews online, put off by awkward interactions when staff declined their bills, Nguyen said.

Ultimately, he decided the benefits of going cashless weren’t worth the one or two bad reviews Peli Peli received each month, all stemming from its payment policy. Last year, Peli Peli reverted to accepting cash again.

“We take great pride in making our customers happy, and if you’re not making them happy, you have to make adjustments,” Nguyen said. “I’m still happy we tried it, and my employees still prefer it. Maybe in five years, we’ll look at it again.”

Budgeting with cash

During a recent lunch rush at Peli Peli Kitchen’s Spring Branch location, dozens of patrons went through the cafeteria-style line, ordering South African style chicken wings, tacos and sandwiches. Although Peli Peli accepts cash, not one person paid with paper bills over the course of an hour.

Tina Mack said she thought about paying cash for her lunch. The 37-year-old Houston resident has credit cards, but said she prefers to pay with dollar bills at restaurants since she is trying to set a $15 budget for meals out. Mack’s chicken wings and sweet potato fries cost $16.70, but she only had $15 in her purse and so, she ultimately pulled out her credit card.

“I like cash because I’m trying to save money,” Mack said. “I don’t know if we’ll go cashless someday. It seems a little scary.”

Paul Takahashi
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