[Dave Birch] Retailers just won’t let it lay about the cost of cards and there are new articles about this every day. In the U.S., gas stations are a particular focus of discontent (as they have been for some time, in fact). What bothers the owners is that on a petrol sale, the the card companies make more money than they do. For example, on a $30 sale with petrol at $2.89 per gallon (that’s approximately zero per Imperial gallon, for British readers), the retailer will get 39 cents but (as the retailer sees it) the bank gets 69 cents. I saw a quote from another retailer recently that if a customer wants to buy a pack of gum with a card, he’d prefer them to just steal it because he loses less money that way. Not exactly a devoted customer base. It’s not just in the U.S. though. In Dubai, all petrol stations have banned cards and all Emarat, Enoc and Eppco stations accept only cash or own-brand cards. Denzil Lawson, the General Manager of MasterCard Middle East & Levant, said

We continue to consult with all parties concerned towards finding an effective solution… MasterCard is disappointed with the announcement by the fuel companies in Dubai that they will stop accepting payment cards, denying their customers the convenience and safety of using payment cards.

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If contactless transactions are to eat into cash, then the industry is going to have to do better. Not necessarily offering a product that is cheaper than cash (although it is, when cash is priced properly) but offering a product that delivers better value than cash. One rather obvious way of doing this is to point out that people spend more money with cards than with cash, but it’s a sensitive issue, and with good reason: there’s a fine line between trying to say that if you’re going to spend money, you might as well do it with [our] card, rather than with cash, and trying to persuade people to spend more money which, in some circumstance, may not be the best thing for them do. Certain parties (eg, politicians) would happily jump all over card companies for trying to persuade consumers to spend more (especially it involves high interest rates).

But there is another side to the argument. Is it really true that cash, rather than “cards” promotes responsible spending? As one of the commentators notes

Debit cards, used in conjunction with digital balances from my bank (downloaded off the website and uploaded into a spreadsheet) made me far more financially responsible than I am now that I’m “cash only”… a decade ago when I worked in a society that accepts debit cards just about everywhere (Australia) I could tell you exactly how much I was spending on lunches at work. And movie tickets. And impulse purchases. And everything else.
And I was able to modify my behavior to meet changing budgetary needs.

This is a very thought-provoking input to the debate on the cost of cash: should the social cost of cash be extended to include lack of accountability and audit not for governments but for individuals? The commentator goes on to note

Nowadays I live and work in China, probably the closest thing to a cash-only society married to hyper consumption that exists on earth. And my wages (cash — nice red 100 yuan notes in a big stack) sometimes last the month. And sometimes they don’t. And I’ve really no clue why or how or what or when. Give me debit cards any day of the week…

That same article makes another point. Here’s a fun calculation to make: suppose you were, for some reason, convinced that using only cash would be beneficial. On average, how much would you have to draw out each time you went to the ATM? Well, in America that answer appears to be $1,200 so that you would on average have $600 in your wallet at any one time. That’s a big interest-free loan to Uncle Sam if you ask me.

So where can this argument go? Merchants prefer cash, because consumers bear the cost. Since banks can’t charge the proper cost of cash, they have provide services to merchants that make cash more attractive. An example is the new Bank of America in-store cash management system that gives merchants secure hardware for depositing notes and credits them immediately (so they have use of the funds) rather than when the secure hardware eventually gets back to the bank. It looks as if the cards business is going to have to continue trying come up with some genuine innovation to deliver value to the retailer because there is no possibility of competing with (subsidised) cash on a purely cost basis.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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