Growth of digital payments: Can retailers really refuse to accept cash?

It didn’t stick with the decision for very long, but when the National Car Testing (NCT) Service announced during the summer that it would no longer accept cash as payment for car testing, it ran into an immediate backlash. The testing operator declared that it would no longer accept cash for the “safety and convenience” of its customers, leaving many confused – who knew that cash was so dangerous?

There was a similar outcry when AIB was forced to backtrack last year on its decision to transform 70 of its outlets into cashless branches.

Some responded to the NCT move by arguing that, as cash is legal tender, the NCT is obliged to accept it; but is this really the case? After all, many service providers and retailers around the State now only want digital payments. Electric Picnic recently was a case in point.

So is the cash in our pockets becoming obsolete?

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Going cashless

Increasingly, Irish customers are being asked to pay electronically – be it with debit card or phone – rather than paper, when buying goods and services.

Ryanair for example, no longer accepts cash when making in-flight purchases “in light of the risks associated with cash handling highlighted by the Covid-19 crisis”, while lifestyle store Oliver Bonas told its customers at the end of 2020 that all its stores, including its outlet on Dublin’s Exchequer Street, are now “completely cashless”.

In 2022, about 54 per cent of transactions in Ireland were paid with cash, with 37 per cent by card – this compares with cash at 69 per cent in Italy, 66 per cent in Spain and 62 per cent in Germany

Even the GAA says it no longer accepts cash at turnstiles – although it later emerged that it does in extremis.

And it’s even harder to use cash in a bank of all places, with both Bank of Ireland and Permanent TSB no longer having a physical cash desk in some of their branches. Banks have also made it more expensive to withdraw cash.

But, while people complain about not being able to use cash, the reality is that more and more of us simply don’t use it.

Ireland has embraced the move to digital payments faster than elsewhere. While it may not be as digital-friendly as Finland, for example, where just 19 per cent of payments were made with cash in 2022, Ireland is still one of the more digitalised countries across Europe.

[ Cashless society would give banks way too much power ]

Ireland had one of the highest values of online payments in 2022, for example, according to figures from the European Central Bank (ECB), alongside Belgium and Austria, while its share of mobile payments was the highest across the Netherlands, Finland, Latvia and Ireland.

In 2022, about 54 per cent of transactions in Ireland were paid with cash, with 37 per cent by card – this compares with cash at 69 per cent in Italy, 66 per cent in Spain and 62 per cent in Germany.

The concerns

While it’s hard to argue against the convenience of digital payments – no worrying about whether or not you have enough cash to pay for something (whether it’s in your bank account is another matter, of course); no holding and counting cash for retailers; no wondering where you spent your money – it’s all itemised on your statements – there also some concerns.

Privacy is another big issue, with concerns around digital theft, fraud and sharing of information. Do you want your bank and potential lender to know exactly how you spend your money?

If electronic payment systems fail – as they did briefly at Electric Picnic with a power outage – cash is there as a contingency. And for the digitally marginalised or more vulnerable in society, cash is an essential means of payment. A 2019 European study found that 7 per cent of Irish people surveyed did not possess a payment card.

Moreover, if you travel outside the euro zone, you may be at the mercy of bank charges when you swipe or tap: taking out cash on the other hand, may give you greater control over your spending costs.

Privacy is another big issue, with concerns around digital theft, fraud and sharing of information. Do you want your bank and potential lender to know exactly how you spend your money, down to the last cent?

The legal position

But is an operator such as the NCT within its rights to say no to cash? And what rights do you, as a consumer have, if all you have in your pocket is a €20 note rather than a Visa or Mastercard?

Back in 2010, the European Commission issued a recommendation that there should be “mandatory acceptance” of euro notes and coins in the euro zone. At the time, it argued that refusing to accept cash, such as putting a sign in a window saying you don’t accept cash, would be contrary “to the very concept of legal tender”.

It does, however, allow a provider of goods or services to refuse cash in exceptional circumstances, such as offering a €200 note for the settlement of a debt of less than €5.

So does this mean the NCT would have run into legal difficulties if it had gone ahead with its plans to not accept cash? Unlikely. The Central Bank has, in the past, said that the commission’s view on cash is just a recommendation and “not legally binding”.

This is because, in Ireland, the use of cash is governed by contract law. So, if a business says that payment must be in a form other than cash, such as putting up a sign on its premises or website, “the customer cannot subsequently claim a legal right to pay in cash, even though cash is legal tender”, says a spokeswoman for the Central Bank.

“Therefore, under certain circumstances, retail businesses or service providers can refuse to accept payment in cash,” she says.

The Competition and Consumer Protection Commission (CCPC), offers similar advice to consumers, noting that businesses don’t have to accept cash – as long as they indicate that they don’t.

As part of the creation of a digital euro, which would allow people to store their money in a digital wallet and be then used for both online and offline payments, European authorities have expressed a strong commitment to keeping cash in use

“This can be as simple as a sign in the shop saying ‘card transactions only’,” the CCPC says.

Moreover, as noted in a recent Central Bank report, the regulator has a statutory objective of “the efficient and effective operation of payment and settlement systems” but it does not have an explicit legal mandate with regard to ensuring access to cash.

European moves

The Irish experience is not replicated everywhere else, however. In New York, for example, businesses are prohibited from refusing cash; something ice cream chain Van Leeuwen found out to its cost when it was fined $33,500 for going cashless.

And moves afoot at a European level may also see that being the case in Ireland. As part of the creation of a digital euro, which would allow people to store their money in a digital wallet and be then used for both online and offline payments, European authorities have expressed a strong commitment to keeping cash in use.

Launching its Single Currency Package proposal, which, if adopted by the European Parliament and European Council, would establish the legal framework for a digital euro, in June of this year the Commission also set out a proposal “to safeguard the role of euro cash”.

This would mean that cash “must be accepted as a means of payment everywhere in the EU and accessible for citizens and businesses”.

Under the proposals, countries such as Ireland would have to “monitor the situation in their country so that ‘no cash’ policies will not become too widespread and undermine the legal tender of cash”, according to a Commission spokeswoman.

Countries will also need to take action if refusals of cash become too widespread, to ensure that, in general, it is possible to pay in cash.

“This action would be tailored to the national context, for example taking into account the needs of rural areas or certain essential sectors such as supermarkets, pharmacies, healthcare or post offices where it is deemed important for cash to always be accepted. These could include restrictions or a prohibition on moves to ‘card only’, for example in rural areas or in essential sectors such as pharmacies,” she adds.

Moreover, rather than just complaining about cashless outlets, the public would be able to seek redress via the courts under the proposals “if they consider that cash has been unlawfully refused”.

The digital euro is at the “investigation” stage until October. After that, the ECB will decide whether to move forward with it. But the ECB in Frankfurt is also firm on its view that cash must be here to stay, irrespective of the digital euro project going ahead or not.

“It is crucial that cash remains widely accepted in physical transactions in line with its legal tender status,” the ECB said. Its view is that the digital euro should complement cash rather than replacing it.