Let’s get one thing straight right now: the card networks hate cash.
When I started writing about this industry 10 years ago, my editor hammered this point home for the first six months I was on the job. The more consumers used credit and debit, the more money the card networks made from the interchange fees they (mostly) set.
What a scheme!
With that being said, it should come as no surprise that in 2017 the card networks have become more blatant about their disdain for cash. And at least one card network now wants to reward businesses for ditching cash acceptance.
Visa this week announced a program to award small-and-medium sized businesses that renounce cash in favor of shiny new point-of-sale systems to accept credit and debit payments as well as those of the digital variety.
The Visa Cashless Challenge targets the restaurant industry and is asking owners what going cashless would mean for their business and customers. The company will choose 50 contest participants to receive a reward up to $10,000 each for their efforts. And to completely ditch cash acceptance.
“With 70 percent of the world, or more than 5 billion people, connected via mobile device by 20201, we have an incredible opportunity to educate merchants and consumers alike on the effectiveness of going cashless,” Jack Forestell, head of global merchant solutions for Visa, said in a press release about the contest.
Visa’s all-or-nothing cashless requirement for this contest speaks volumes about what’s at stake with digital payments.
But should cash be the ultimate victim here?
As with anything, there are pro and cons will this all-or-nothing approach to the cashless conversation.
If you’ve read past commentary from me about this subject, you know that I believe a cashless society is dangerous. And while I’m an advocate for digital payments, particularly mobile, it should not come at the cost of paper money’s existence.
PayPal positioned itself as the new form of money. It’s hard to argue that moniker when you look at the company’s growing market share over the years, and the fact that PayPal owns (sorry Zelle) the mobile P2P market with Venmo.
But the problem with PayPal’s new money messaging is that old money is still relevant, and a lifeline, to millions of consumers in the U.S. and worldwide.
I just wrote about this issue last month when I gave readers a bird’s-eye view of how cash shapes the lives of the people who work and live in one neighborhood I call home in Chicago.
In Visa’s defense, it does lay out the net benefits to merchants that reduce their dependency on that old money. Of course, you need to look past how the company benefits from more digital transactions.
The company recently concluded a yet-to-be-published study about the cashless trend that found “if businesses in 100 cities transitioned from cash to digital, their cities stand to experience net benefits of $312 billion per year.”
New York City business alone “could generate an additional $6.8 billion in revenue and save more than 186 million hours in labor by making greater use of digital payments. This amounts to more than $5 billion annual costs savings for businesses in New York.”
But while merchants would benefit from the change, some consumers suffer.
Those merchants that choose to accept Visa’s ultimatum alienate themselves from the unbanked and financially underserved consumers in the U.S.
“That population includes a large swath of youth who have no cards, and people who are avoiding debt [and] overspending by avoiding cards,” Ben Jackson, director of the prepaid service at Mercator Advisory Group, said in a tweet in a response to something I shared on Twitter.
And to take the argument against this ultimatum a step further: are today’s brick-and-mortar retailers, especially SMBs, in a position to deny any form of payment when they’re battling the likes of Amazon and Walmart to stay in business? That doesn’t sound like sound strategy.
Michael DeSimone, the CEO of cloud-based iPad POS provider ShopKeep, contends Visa’s play benefits retailers and consumers, especially for those people who run and visit restaurants.
“This cashless incentive is in response to how buying decisions are shifting away from conventional, in many cases, analog practices and closer to consumer tendency,” he told Mobile Payments Today in an email. “And for those who are afraid of alienating their cash preferred customers, consider your location first. What makes independent businesses truly independent is that they continue to do what’s best for their customers and community.”
That last part of what DeSimone said plays well into what I mentioned earlier about where I live in Chicago. And Jackson’s point about the financially underserved population. Again, there are two sides to this cashless conversation.
Cash and emerging payments can sit side-by-side for both consumers and merchants. But I would be naïve to think a cashless society is not inevitable. I just believe it’s a lot further off than some people think.
While India is barreling towards a cashless economy, Sweden put the brakes on the transition because a portion of the population worried that a move to a cashless society could have dire consequences on citizens’ right to privacy and make them more vulnerable to cybercrime.
I like the way those Swedes think.