01/30/2020 - Is Cash Still King? Reviewing the Rise of Mobile Payments... - (EventID=110420)

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Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/FinancialDems/ Follow us on Twitter: https://twitter.com/FSCDems Thursday, January 30, 2020 (9:30 AM) -- Is Cash Still King? Reviewing the Rise of Mobile Payments ________ This single-panel hearing will have the following witnesses: • Ms. Deyanira Del Rio, Co-Executive Director, New Economy Project • Mr. Usman Ahmed, Head of Global Public Policy, PayPal • Mr. Aaron Klein, Fellow, Economic Studies and Policy Director, Center on Regulation and Markets, Brookings Institute • Ms. Christina Tetreault, Senior Policy Counsel, Consumer Reports • Ms. Kim Ford, Executive Director, U.S. Faster Payments Council ----------------- Overview There are now more ways than ever to make and receive payments. Yet, despite an increase in mobile banking and electronic payment technologies being adopted (i.e., digital wallets and credit and debit card payments), cash is still a popular payment method and financial instrument nationally and internationally. Based on the number of notes in circulation within the United States, estimated to be around $44 billion, the demand for cash has steadily grown for the past 20 years.2 Further, based on the International Monetary Fund’s Currency Composition of Official Foreign Exchange Reserves (“COFER”), the dollar makes up 61% (roughly $6.7 trillion) of all known central bank foreign exchange reserves. Despite the high-demand for cash and the amount of cash in circulation, cash transactions in the U.S. are declining. In 2012, cash was used in nearly 41% of all transactions; six years later that figure fell to 26%. Some of the main benefits of cash for consumers and businesses include: (1) cash lacking supplemental technology for the most part (transactions are validated and settled by the physical exchange of currency) and (2) consumer privacy. This compares to the complexities cash can bring for consumers and businesses, for example: (1) the fees consumers pay when withdrawing cash from automatic teller machines (ATMs), and (2) broadly, the risks of theft, loss, and destruction of cash. Cash is a popular form of payment for small-value transactions ($25 or less), as these transactions account for more than 75% of all cash transactions.8 At the same time, cash is the most used form of payment for in-person payments like, tipping, gifting and donating, car-related expenses, and for food and nutrition. Individuals aged 18-25 and over 65 have the highest shares of cash use, 34% and 33% respectively. Households earning less than $50,000 have been increasing the amount of cash held for the past three years. Subsequently, consumers have not developed an aversion to carrying cash or using it for small value purchases but as new non-cash payment options emerge, consumers are using cash less for higher value transactions and for services primarily offered over the internet (e.g., Uber, Amazon, and Netflix). Federal and State Roles in Cash and Payments Federal law provides that U.S. coins and currency “are legal tender for all debts, public charges, taxes, and dues.” Although cash is accordingly “a valid and legal offer of payment” for pre-existing debts, federal law does not require that private businesses accept cash as payment for goods and services. Federal law providing consumer protections for payment transactions largely focus on electronic forms of payment instead of cash payments. Specifically, the Electronic Fund Transfer Act (“EFTA”) and the Truth in Lending Act (“TILA”) provide two consumer protections. EFTA protects consumers engaged in electronic fund transfers, like debit card payments, by (1) limiting consumer liability for unauthorized transfers and (2) maintaining procedures for resolving payment errors. EFTA protections are extended to prepaid accounts if they have been registered. TILA protects credit card users against the liability for unauthorized uses of the account. Recently, an increasing number of commercial entities such as restaurants, retailers, and gas stations have taken advantage of the absence of the federal requirement to accept cash by requiring that their customers pay using credit or debit cards. Some credit card merchants have gone so far as to offer restaurants $10,000 to stop accepting cash. This trend has led some commentators to worry that such “no cash” policies could disadvantage many low-income consumers who may lack access to bank accounts and credit cards. Also, within the last few years, several states and localities have responded to this concern by introducing and enacting laws that require certain types of businesses to accept calls.... Hearing Page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=406024