Customers Cashing In
The British Retail Consortium (BRC) has reported that cash is now used for 60 percent of all transactions, up from 54 percent last year. Measured by value, cash is used for 34 percent of retail spending compared with 32 percent a year ago.
Results of its Cost of Collection survey came 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. The survey 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.
Credit card interchange fees, imposed by MasterCard and Visa, have been under investigation by the Office of Fair Trading (OFT) since 2000. MasterCard's cross-border fees have already been deemed as illegal by the European Commission. In making moves to replace cash, the BRC believes card issuers and banks should acknowledge the very low costs they actually incur and reduce charges for processing these card payments.
Director General Stephen Robertson said, "The BRC has consistently said these unjustifiable charges cost customers because they are so high retailers are forced to pass them on. Banks should not be exploiting new payment systems as a way of taking extra money from shoppers."
Mr. Robertson added, "Reports of the death of cash are premature. Cash is not only alive, it's thriving. Hard up customers are increasingly reluctant to spend money they haven't actually got in their hands."
Nor does he believe that customers understand just how much card payments cost to process. 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.
Other implications of using cash, however, include concerns about theft if there is a lot of it about, the need to have sufficient cash to make change and whether or not (and how much) banks charge for counting it when deposits are made.
Discussion questions: Do you see cash making a comeback in the U.S.? What impact would it have on retailers? Would this be a positive or negative development?