From Market Insider
- Businesses around the United States are being forced to ask for exact change or cashless payment methods due to a coin shortage.
- The Federal Reserve pointed to the closure of “retail shops, bank branches, transit authorities and laundromats” as a major reason behind the coin shortage.
- Currently, a task force is being assembled — drawing from government, banking, and retail representatives — to combat the issues.
- The trend toward cashless transactions is likely to most impact the consumers most harmed by the coronavirus pandemic.
Businesses around the United States are worried about quite literally not having two pennies to rub together, thanks to the coronavirus pandemic’s toll on coin circulation.
The virus has stalled out the circulation of coins throughout the economy, according to repeated statements from the Federal Reserve. The Federal Reserve said that store closures and lockdown measures are to blame.
“While there is adequate coin in the economy, the slowed pace of circulation has meant that sufficient quantities of coin are not readily available where needed,” the Federal Reserve said in a statement. “With establishments like retail shops, bank branches, transit authorities and laundromats closed, the typical places where coin enters our society have slowed or even stopped the normal circulation of coin.”
The upshot is that big-name retailers and local shops alike are asking that customers pay with credit or debit cards, cough up exact change, or donate a few extra cents to charity. But groups of consumers most harmed by the coronavirus — the poor and the marginalized — are also most likely to take a hit from many stores’ inability to handle traditional cash transactions.
A growing ‘shortage of coins’
Both financial and health concerns over the use of cash have taken a center stage since early on in the pandemic. The World Health Organization previously sounded off on concerns that COVID-19 could spread via physical currency. Metal coins were said to poise more of a risk than the United States’ signature cotton-linen bills, with Mayo Clinic saying that metal was more susceptible to viral contamination than fabric.
Transactions also pose a natural risk, as they have traditionally required direct contact between customers and cashiers. The US Centers for Disease Control and Prevention recommended that stores “encourage customers to use touchless payment options, when available” and “minimize handling cash, credit cards, reward cards, and mobile devices, where possible.”
But the current coin shortage has more to do with the pandemic’s toll on the overall economy, according to the Federal Reserve. In its June 11 statement, the central banking system said that “the COVID‐19 pandemic has significantly disrupted the supply chain and normal circulation patterns for U.S. coin.”
Last month, the Federal Reserve announced that its banks and coin distribution centers would begin allocating “existing coin inventory to all depository institutions” to combat the shortage of “pennies, nickels, dimes, and quarters” starting June 15. That meant “capping coin orders” and encouraging institutions like banks to “order only the coin they need to meet near-term customer demand and to remove barriers to customer coin deposits.”
But for many retail establishments, these moves from the federal government have fallen short, so far.
Convenience store chain Wawa started asking that shoppers pay in exact change, credit, debit, or its namesake mobile app, 6 ABC reported. The Philadelphia news station also reported that the regional company began accepting customers’ rolled coins in exchange for bills. Customers can also opt to overpay with cash and donate the extra money to the Wawa Foundation, the company’s charitable wing.
“Like many other businesses around the country, Wawa stores have been affected by the shortage of coins nationwide, as reported by the Federal Reserve,” a Wawa spokesperson told 6 ABC.
Meanwhile, Denver news channel Denver7’s interviews with local merchants revealed that the coin shortage is also complicating transactions for “corner stores, restaurants, and gas stations across Denver.” The Tampa Bay Times reported a spate of local businesses going cashless or posting signs asking for exact change.
Over the course of the springtime, the US Mint also decreased its “production of coin” in order to protect its employees, and the Federal Reserve began receiving dwindling “coin deposits” from banks and credit unions.
The United States Department of the Treasury, which controls the US Mint, did not respond to Business Insider’s request for further comment.
‘Those least able to bear its burdens’
With the pandemic effectively putting the squeeze on coin circulation at a federal level, various financial entities are working to solve the problem.
On June 30, the Federal Reserve released a statement saying that it would establish a “US Coin Task Force” to better “reduce the consequence and duration of COVID-19 related disruptions to normal coin circulation.” The task force will include representatives of the US Mint, the Federal Reserve, the American Bankers Association, and the retail industry.
Until a steady stream of coins is unleashed back into the economy, many businesses will be forced to request exact change or cashless options.
The prospect of cashless retail transactions certainly predates the coronavirus pandemic, although it has long been controversial. In 2018, Pew surveyed 1,164 individuals who had made a recent payment, finding that 65% of the respondents who said they primarily used cash were unbanked, 25% made less than $25,000 a year, and 20% were Black, Indigenous, and people of color.
In effect, by dropping cash payments entirely, businesses would likely harm poorer and BIPOC customers.
“Non-acceptance of cash could potentially marginalize those that have limited access to the financial system or mobile technological devices,” researchers from the Congressional Research Service, a public policy think tank run through the Library of Congress, wrote in a 2019 report.
“The pandemic is falling on those least able to bear its burdens,” Federal Reserve Chair Jerome Powell said at a Princeton University event in May. “It is a great increaser of inequality.”