Cashless Stores and Cash Users

Oz Shy
Working Paper 2019-11a
May 2019 (revised August 2019)

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The emergence of cashless stores has led several cities and states to ban such stores. This article investigates this issue by characterizing consumers who pay cash for in-person purchases and consumers who do not have credit or debit cards. Using a random utility model, I estimate 1.3 to 30.9 percentage drop in average per-payment consumer surplus if all stores were to become cashless and when utility is measured by the cost of making a payment, security, and convenience. The conclusion provides a discussion of alternatives to cash for in-person purchases that may be needed before all brick-and-mortar stores become cashless.

JEL classification: D9, E42

Key words: cashless stores, banning cashless stores, consumer payment choice, in-person purchases, alternatives to cash, random utility link

The author thanks Fumiko Hayashi for helpful discussions on prepaid cards. 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,

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