Jul 25, 2007

“Don’t let the banks kill cash”

Here is a striking example of what happens when retailers don’t see enough difference between cash and cards. This article just appeared on The Retail Bulletin.

"There seems to be a constant campaign by both MasterCard and Visa to decry cash in favour of transactions that will reap extra revenue for the banks," writes the editorialist.

"There is little doubt that these are testing times for retailers, especially with the banks latest wheeze, 'contactless' cards, looking like a potential way for them to print money - not cash of course, but fully loaded pre-paid cards. Be in no doubt that if smaller value cash transactions were to all be replaced by these cards then it could easily result in a rise in retailers' bank charges of as much as 10-to-15 times their current levels.

"If you don't believe me then consider this example of how a small shop could be affected:

"Say the store turns over £5,000 per week and 90 per cent of its sales are in cash then if we take an average transaction of say £10 then this would equate to 450 purchases over the course of the week.

"If the retailer's bank was to charge it 12p for each of these transactions (and in many cases this is likely be much higher) when paid for by a contactless card then the monthly bill from the bank to the retailer would be over £210.

"When you compare this with the cost to the shop of accepting all these transactions in cash form, which could be as low as £20 for the month, then the profitability of the shop is severely affected.”

Visa, MasterCard and the financial institutions that issue credit and debit cards spend lots of energy trying to explain why payment cards are better than cash. But the payment function has become so commoditized that it appears basic and simple today, with very little perceived value over cash. It is really vital to start using the new angle centred on Payment Information Value Added Services. This will put clear water between cash and cards, since cash has no ability to store consumer behaviour data and cannot be used to help merchants improve their marketing activities.

For the full article, see Don't let the banks kill cash.

1 comment:

Crediteducator said...

Both cards and cash have its advantages and disadvantages for certain people. Everybody knows that the aim of each bank is to assure consumers that having a credit card will be of great profit. But it's subjective and depends on a person and his aims.