Hoarding. Only a small amount of cash is actual in circulation (being used for transactions). As Ian Grigg has previously pointed out on this blog, most euros are actually being used as a store of value, with their economic imperative being more about competition than efficiency.
Internationalisation. The euro has become a global currency, in the sense that 500 euro notes are under mattresses in Eastern Europe, the Baltics, Russia, Africa and so on. You can fit much more in a suitcase in euros than in dollars, and they’re acceptable around the world.
Low-value transactions. Cash remains the most effective mechanism for low-value payments, and will remain so until POS infrastructure is built out to orders of magnitude more points (in essence, until it reaches the individual, which will be achieved through the use of mobile phones). Of course, the reason why it remains most cost-effective at retail POS is because retailers do not pay the full cost. That’s why they like it so much…
The BRC’s Cost of Collection survey includes results from 17,000 shops, large and small, multiples and independents, with a sales turnover of £131bn a year, over half of total UK retail sales. It shows cash is the most cost effective way for retailers to accept payments and highlights the huge extra costs card companies impose on retailers for processing card transactions.
The BRC says customers do not realise how much retailers are charged for processing card payments. On average, a retailer is charged two pence for processing a cash transaction while the charge for a credit card is 34 pence and, for a debit card, eight pence. These costs are too high for retailers to absorb and are inevitably passed on to customers in the form of higher prices.
[From – British Retail Consortium – – News ]
When I have to find cash to pay the bus, it’s me that has to drive to the ATM, get money out and then buy something I don’t want in order to get the change I need. No wonder the bus company prefers it.
