Why Keeping Cash is Like Reading a Print Newspaper
Apr-2011
If you read the white pages from any online retailer’s marketing strategy, you will discover that people tend to do shopping online for convenience. Instead of hassling with crowds at the mall or stumbling through the Home Depot, people would rather look up detailed information about the products they are purchasing from independent third-party websites. This gives them the opportunity to access unbiased information instead of having to listen to a salesperson or relying on misleading in-store advertising.
While a good deal of shopping is occurring online these days, there is a decreased need to carry around cash. Every physical retailer must offer an opportunity for people to use their debit and credit cards or else run the risk of losing business. Just like people don’t want to pick up a bulky, ink-ridden, hard to manage newspaper, they also don’t want to handle cash in most circumstances. Just like customer service, news gathering, and shopping have all gathered online, money will also soon be completely virtual.
Credit and debit cards are not the only ways people will be able to pay for things virtually. Instead of dealing with banks for online money storage, PayPal wants to set up their own checking account system called PayPal Access which will remember financial data across any e-commerce website equipped with the technology. PayPal also wants to issue their own credit cards and swiping terminals for people to use while they are in off line retail environments.
Google also wants to get in on the transaction game, just like they want to get their hands on everything else in the tech world. Near Field Communication technology will allow Google to create a program called Google Wallet which will store all of your credit and debit data into a smartphone so you can easily scan it while checking out at the grocery store, mall, or gas station.
Everyone is starting to realize the importance of accepting mobile payments. The Square company is becoming so popular with mobile vendors, hot-dog stands, and food trucks that they are beginning to offer their iPhone and Android credit card swiping devices at Wal-Mart. What was once thought of as an exclusive payment system for elite tech nerds is now available at the most equalizing retail environment in America.
Even with the fees being imposed for debit card usage by Bank of America, people are not going to stop using cards to make payments. They may switch to smaller banks, credit unions, or other alternative electronic payments in order to make transactions. There is a good chance that we may be lining our bird cages with $20 dollar bills at some point in the future.
I guess you are only thinking of cash as bills and coins. I think of cash as what is in my checking account. For me, cash and online transactions can co-exist peacefully. As a consumer, cash (debit card) payments end up being cheaper if the merchant processing is done correctly. In the USA, if a merchant banks with a “big bank” (defined as $10 billion or more in assets), you can lower processing fees for accept debit cards. Remember that debit cards have nearly zero risk because the funds are taken out of a checking account whether PIN or signature based. A credit card is a loan the bank makes to you and many choose to pay the loan in full or at minimums. One of the points of the Dodd-Frank w/ Durbin amendment was to allow debit cards charges to merchants reflect their level of risk to banks.
You also have payment services like Dwolla that only charge $0.25 per transaction whether funded via balance or ACH.
PayPal is making their own play by making money on PayPal balance to balance payments. It costs them nothing yet they collect fees like they are Visa. The banks want to perpetuate this idea of convenience needing to cost a percentage to merchants, but this is simply not true. There are viable alternatives available that totally cut out Visa, MasterCard, Discover, and AmEx… This means as a nation we have less debt, live within our means, and possibly merchants offering cash discounts (2%?) for utilizing our debit cards, Dwolla, or other bank to bank transfer services.