The true cost of cash
One of the hot topics for the financial industry, the tech industry, retailers and consumers has been the development of payments via a mobile phone. Most of the talk is about how adoption will be impacted by the various technologies and which one will win out, or the fact that U.S. consumers are very concerned about the security of their financial information and how mobile transactions are processed.
One aspect of the conversation that has not gotten as much attention is the growing perception that cash may not be the best payment option, even though it is the most universally accepted.
Everyone is familiar with the saying “you need to spend money to make money,” but probably don’t know that it costs the U. S. Treasury more to produce pennies and nickels than the face value of the coins. The penny costs 2.4 cents to produce, and the nickel costs 11.2 cents! Canada recently decided to stop producing pennies for this reason. But that’s not the only cost associated with cash. There are costs to storing, moving and protecting it. Some estimates show that governments could save as much as 1% of the annual GDP by going cashless. Certain countries, such as Italy, are already mandating large payments can’t be made with cash due to the fact that they lose €10 billion each year handling physical currency.
Cash has been around so long there’s a psychological barrier to imagining a world without it. However, most people have no problem using credit cards to make purchases in store or online, or using services like PayPal to pay virtually. So what will it take to show the true cost of cash? For consumers, the talk about moving to mobile often centers around convenience and time saving, but there needs to be more education around the true cost of cash, which is generally hidden from consumer view. Perhaps one benefit of mobile wallets, the increased opportunity to receive special offers based on loyalty programs or location-based promotions, can increase the value of virtual vs. physical cash.
As one member of the financial community recently told me “While it might cost more to produce currency notes, it costs much less for merchants to accept cash as compared to debit cards or credit cards or any other form of ePayments.” With that said, would the merchant community get behind this idea?
At the end of the day I think we’ll see cash for quite some time and live with the fact that it’s a costly (no pun intended) requirement. But the bigger question might be how quickly will consumers determine the adoption of mobile money based on the benefit to the individual?
Related blog posts
“Roads? Where we’re going we won’t need Roads” - Open APIs and Financial Services
The word ecosystem is often used when discussing payments. Whether it’s to describe how a payment is made or to discuss a partnership or even understanding your place in the value chain. Though part of the issue with how we present the ecosystem is that we tend to emphasize only small portions of the overall picture, that is to say if we are discussing payments to a merchant or retailer, the picture shifts to just show eComm, mComm and POS while partially ignoring the Financial Institution, and to a lesser extent the FinTech’s domains. But those days may be coming to an end as we have begun the transition to a new payments ecosystem.
PSD2 Regulation Will Bring Down the Walls Not Build Them
The Payments Services Directive 2 (PSD2) is shaking up the industry, and for good reason. There is sometimes a tendency for the payments ecosystem to expect doom and gloom when it comes to new regulation; seeing it as restrictive, unnecessary interference, or costly. The reality is that PSD2, along with other regulatory changes across Europe and the world, offers a massive opportunity for all participants in the payments ecosystem to carve out new revenue streams.
Connected Devices are Opening Up New Forms of Payments and Partnerships
Of all the trends that are currently shaping – or re-shaping – the nature of payments, none is more significant than the rise of the Internet of Things (IoT). We often talk about the payments ‘ecosystem’ and the complexity that exists between the many participants that are part of this ecosystem, but this complexity will expand exponentially as millions – no, billions – of devices become internet capable.
Driving Toward Innovation in Digital Banking User Experience
The need for delivering on a user experience strategy necessitates the use of common and sometimes confusing lingo like CX, UX, information architecture, UX design and UI design. It introduces ways to gain deeper understanding of customers through methods like personas, journey mapping and Kano analysis. It commands phrases like customer-centric, experience-driven, and ideation/visioning. In the past 4 months, I have interviewed more than half a dozen agencies to engage one that could go beyond the buzzwords and the methods described above. I want to be convinced that great and meaningful changes can happen to UI’s. After all, talk is cheap.
ACI Worldwide Survey Validates Growth in Mobile and Omni-Channel Retail
During this year's National Retail Federation (NRF) Retail's BIG Show, ACI Worldwide conducted a survey of more than 100 retailers in attendance. The results of the survey highlight how retailers see an increased reliance on both mobile and omni-channel retail solutions to meet consumers’ evolving buying habits.
FinTech Payments are Open for Business
Another year has begun, and how appropriate to kick it off with my 2017 expectations for FinTechs. There are always exciting technological innovations afoot in the FinTech space, but this year it’s all about Open; open technologies, open partnerships, and open customer choice. The New Payments Ecosystem has its foundations in open practices, and this in turn is changing how payments players work together to meet customer needs. So what does this mean for FinTechs?
Coffee, Waffles and Payments - Notes from a Waffle House
Yes, a Waffle House—that destination of deliciousness; that institution of intestinal fortitude; that hangover cure; that culinary staple of…well…waffles. And speaking of deliciousness, it’s about time for a Ranting, our first Rantings of 2017 in fact. This week/month/session, we’re Ranting from a Waffle House in downtown Atlanta. And as my intrepid cohort and I indulge in our respective covered and smothered dishes and I wipe syrup from my keyboard (apologies to my great IT folks), let’s embark on some payment meanderings.
The Small Business Trends Banks Can’t Ignore: Part 2: Navigating through the “Fog”
In our first blog post we discussed the trends that are shaping the small business banking evolution well underway. This post will focus on what we all can be doing to address those trends and how to better position ourselves to continue to evolve as the pace of change continues its acceleration and threatens to leave many banks in its dust.
The Small Business Trends Banks Cant Ignore Part 1
In the past 10 years, the world has fundamentally changed all around us—from the introduction of the iPhone which celebrates its 10th birthday this year to autonomous vehicles on our roads…and much more—the last decade has seen change not rivaled since perhaps the early onset of the industrial revolution. With that as our backdrop, it stands only to reason that banking would not remain untouched from the outside world’s trends for long, and with the explosion of Fintech, it’s no surprise that what we see all around us is rapid change.
IoT, Blockchain, Predictive Analytics and Voice First: 2017 Payments Predictions
Well, my predictions last year of blockchain, millennials and SaaS will dominate payments was partly true. I missed millennials, I overstated the impact millennials, particularly millennial business owners, would have on the payments. The desires and needs of millennials (e.g. faster processing, mobile first, contextual offers) are built into the roadmaps of providers. Blockchain and SaaS dominated many headlines and will continue to do so. My predictions to stay relevant this year – IoT, Blockchain (with a twist), Predictive Analytics and Voice First.