Cash is No Longer King
By George Anderson
It used to be said, “Cash is king.” Those days are quickly disappearing as more consumers pay for goods with their debit, credit or ebt cards.
In the U.K., for example, the number of consumers using various forms of plastic payment has increased to the point where it now exceeds cash purchases. Sixty-nine percent of all card purchases in the U.K. are debit transactions.
Paul Smee, chief executive of Association for Payment Clearing Services (APACS) told The Daily Record: “Truly, Britain has become a plastic society.”
Philip Robbins-Jones, head of Tesco’s IT development, said plastic has become popular to the point where cash payments may disappear at retail.
“Beyond the next year, we will consider developing a cashless store,” he said.
The benefits of cashless stores include faster checkouts, higher staff productivity, shorter queues and better security, according to proponents such as Mr. Robbins-Jones.
“The time spent by retailers handling cash is, frankly, embarrassing,” he said.
Moderator’s Comment: What are the benefits/drawbacks of cashless transactions for retailers? Do you see U.S. retailers opening cashless stores in the
future? –
George Anderson – Moderator
In the retail world at least, when it comes to cash, the king is dead.
Every Internet site is already cashless. Rebate/air miles credit/debit cards give customers great incentive to stop using cash. The 5% rebate for groceries cards are particularly attractive to customers. Dozens of retailers incent customers to sign up for proprietary cards, using discount and rebate offers. The big problem: credit card fees and overhead can reduce pretax profit by 40%, easily. A retailer who makes 5% on sales before taxes can accept a credit card that costs 2% of the transaction, so the net before taxes drops to 3%. Even more alarming: credit card fees (as a percent of sales) are rising. Should retailers, individually or in groups, own banks and card processors?
It appears we are moving towards a cashless society anyway. One way to help move this along is to wave the signature on all credit or debit card purchases under $50. Just swipe and go like at the gas station. I remember a few years ago always going to the ATM machine to get cash. Now $100 will last me a month or more. With all the rebates of 1% to 5% back on just about every credit card purchase, using cash just adds to the cost of goods.
The real problem are the hidden costs to the buyer and the retailer. I like the idea and I use my debit card a lot for the time savings convenience. But this adds up as money lost for both sides. What price or cost do we put on convenience? Remember, value is benefits/price vs. competition. While many consumers want the added convenience, some still like to pay with cash – so you need to have both available. I do like the idea of a retailer bank as a way to put more dollars back into everyone’s pockets.
Cashless is the only way to go. If convenience stores and liquor stores did not take cash you could expect fewer robberies at the registers. I realize that preventing that form of loss will not make up for payout of credit card fees, so perhaps it is time for retailers to investigate having their own cashless payment network. Another possibility would be to update the “loyalty cards” into retailer branded debit/payment cards. The big question is in the make – buy decision. Can this be accomplished for less than what Visa charges?
Cash? What’s that? I think it is inevitable that the majority of transactions will be cashless, but cash still provides anonymity in an increasingly prying world. When someone comes up with a successful prepaid cash card that is truly anonymous, the end of cash is near.
I believe the use of cash will dwindle, but like laws of nature, will have several half-lives and never truly reach zero. As for Bernice’s comment about the poor, in the US, the unbanked are increasingly being enrolled into “paycard” systems, where they receive a reloadable debit card that their wages are added to each week. In many instances, they can take out cash at an ATM for a small transaction fee, or write one check for free acceptable at any banking institution, with small fees for additional checks – utilities, rent, etc. The idea behind this is a reduction in the fees the unbanked participants would pay at a check cashing service for a payroll check, and the opportunity to leave the funds on the card and carry less cash.
As for the other comments on costs to retailers for credit/debit card transactions, there is and will continue to be competition or government intervention when and if attempts to curtail competition or collusion on fees appears to occur. The consumer will continue to have many choices, and cash will be a part of them. Plus, the first catastrophic interruption of the electronic infrastructure running cashless system will bring back the use of physical tender.
“With all the rebates of 1% to 5% back on just about every credit card purchase, using cash just adds to the cost of goods.
– David Livingston, BrainTrust Panelist ”
Credit card sales in my store this month to date are over 70% of total sales. At Christmas, I expect to see over 80%.
The rebates look like a good deal to the consumer. But, as a small retailer, I’m not only supplying your pet care needs, do I have to pay for your free airline tickets too? With credit card sales, the processing fees are substantial … and if I am paying 2% for the processing, and you are getting 2% rebate/rewards… who is paying for your freebies? (Hint: it’s the not the middleman.)
However, I will freely admit to charging store inventory and turning around and using the credit card rewards to pay for my flight and hotel on annual buying trips out of state…
Oh how I hate the word – and the implication – productivity. If the amount of time spent by retailers counting cash is embarrassing, perhaps they should just learn to count better.
Once upon a time, the customer used to be king. Now one more bit of choice bites the dust as retailers assert their right to taunt customers into spending more than they planned. Most cards cannot be used, in the UK at least, for purchases of less than £5. That makes it an awfully expensive container of milk or whatever single purchase you might want to nip in for. Looking at the glass the other way around, if 69% of purchases are made with cards then 31% are not. I recently saw a garage sign (BP, so no small fry here) announcing that cheques would no longer be accepted. But there are still a lot of people in this country without bank accounts and their circumstances have recently been made even more difficult through a government/Post Office policy of eliminating benefit payments that could be cashed as received each week. This is another way of discriminating against the poor and pressuring even those who do have some money. I, for one, am incensed. This is an amoral and wicked thing to do and I do not want to be blackmailed into making life easier for retailers who are too lazy to serve me properly and make me think it is all my own fault that their staff are not sufficiently productive. (And good on you, Jeff, for pointing out the other obvious implication regarding privacy.) As David points out, there are cash advantages through rebates to using credit cards and leveling off cash flow by paying a single bill each month rather than little ones every day but I still prefer choice.
Nations Bank is advertising a future ability to receive cash deposits at ATM’s without the need for a deposit slip or cash envelope. They will produce a receipt that includes a picture of the serial numbers of the bills deposited. Hiding behind cash is almost gone.
Debit cards are good, unless used at a gas pump. The gas stations, in order to approve the transaction prior to pumping, hit your account for a hold amount of $25 to $75 on top of the actual cost of the fuel. This will take you potentially into an overdraft position. You loose not only the fees associated, but any interest as well. Your average daily balance is adversely affected in this scenario.
Retailers can charge a monthly fee, when allowed, for prepaid cards (not in CA) regardless of use frequency.
Cash is no longer king, and more people are hidden in your pockets as we move away from legal tender.
A plastic world to pay would be good if there was less small print that tends to hide the truth about the actual cost of using those devices. Simple and consistent rules on how much the retailers and card providers can charge would be good. Until then, I’ll stay away from loyalty cards and debit cards.