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Friday, July 21, 2017

Visa's war on cash encounters backlash

Visa Inc. launched a new initiative to unseat cash from its perch atop the payments apparatus. And that has some folks crying foul. Despite the proliferation of card-based electronic alternatives, cash remains the number one choice for consumer payments in the United States, particularly for items priced at $50 or less.

Data published by the Federal Reserve Bank of San Francisco revealed cash was used for nearly one-third (32 percent) of retail transactions in 2015; credit cards represented 21 percent and debit card transactions were 27 percent of the total. Cards fared better in terms of total value of retail payments: 16 percent of dollars spent were transacted with credit cards and 18 percent with debit cards. Cash accounted for 9 percent of the total value of retail payments in 2015, according to the The State of Cash: Preliminary Findings from the 2015 Diary of Consumer Payment Choice.

Rewards for going cashless

On July 12, 2017, Visa heralded an initiative to get businesses off cash, particularly fast food truck vendors. It is promising awards totaling $500,000 to eligible small food establishments that commit to going 100 percent cashless.

In support of going cashless, Visa cited a study it just completed that found if businesses in just 100 cities shunned cash in favor of cards (such as those loaded on mobile wallets) the net benefits to those cities would total $312 billion a year. In New York City alone, businesses could generate $6.8 billion in additional revenues and save over 186 million hours of labor by switching to digital payments, according to Visa.

Visa said it will be showcasing the new initiative as sponsor formula race car events in and around New York, where concession sales will be cashless. "With 70 percent of the world, or more than 5 billion people connected via mobile devices by 2020, we have an incredible opportunity to educate merchants and consumers alike on the effectiveness of going cashless," said Jack Forestell, Head of Global Merchant Solutions at Visa. "To Visa cashless culture means convenience, security and ease of use. That translates to freedom for consumers and merchants alike."

Cashless rationale assailed

But not everyone is convinced. The ATM Industry Association immediately blasted the initiative, and Visa's promise of monetary rewards for businesses that can successfully wean customers off cash. Among other arguments, the association called into question the economics of card payments if Visa needs to offer monetary rewards to incent change.

By effectively paying food service vendors "to reduce their customers' payment choices, Visa Inc. has elevated its commercial interests above the public interest in America," stated Mike Lee, ATMIA's Chief Executive Officer. "Cash is still the most universal, popular and convenient form of payment in the world today and to deny the right to use it is an insult to millions of Americans who use cash, as well as a deal-breaker for those who only use cash. This is digital discrimination and bad industry practice."

Concerns about digital discrimination, particularly as it pertains to payments, are not limited to ATMIA. Several media outlets – from national to local newspapers – have published articles raising concerns going cashless will seriously disadvantage Americans without bank accounts. The Federal Deposit Insurance Corp. reported that 7 percent of U.S. households (9 million in all) are unbanked.

In June, Washington City Paper, a weekly publication in Washington, D.C., where more than 11 percent of households are unbanked, ran this front page headline: Casual Restaurants are Going Cashless – And Cutting Off their Unbanked Customers. end of article

Editor's Note:

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