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A Thing

Follow the cash

By Paul Rasori

These are good times to be selling electronic payment solutions. Consumers are using plastic more than ever, including credit, debit, and an ever wider variety of stored value and prepaid cards.

Electronic payments are infiltrating more and more areas that were formerly cash only. POS systems from industry leaders have been strong sellers.

Some of you may be thinking it all sounds too good. Some may not be experiencing gangbuster sales. Others may believe that all good things come to an end, and this party has been going on too long.

At VeriFone, we don't think so. With a solid sales strategy and an increasingly diverse merchant base, we think it is possible for you to continue to enjoy the good times. In some ways, the party has just begun.

Opportunity knocks

It's estimated that about 55% of all consumer retail transactions in the United States are now accomplished via electronic payments. Put another way, that means we've converted just over half the market of all potential transactions; we still have a long way to go.

Many markets remain untapped. If you look at the percentage of transactions that are already electronic, much of that volume is clustered at places that have been using electronic payment systems for many years, such as supermarkets.

In a presentation earlier this year, Visa U.S.A. President and Chief Executive Officer John Philip Coghlan offered the following breakdown on some small-ticket purchase areas that are ripe for conversion:

  • Taxis and limos, a $3 billion market, of which Visa estimates it has only a 26% market share
  • Parking lots, a $9 billion market, with 16% market share
  • Laundries, a $4 billion market, with 1% market share
  • Car washes, a $7 billion market, with 13% market share
  • Movie theaters, a $14 billion market, with 13% market share.

So there's a lot of potential new business out there. In the past, many cash-only businesses have resisted electronic payment for a variety of reasons: Transactions slowed down queues; merchants didn't want to lease or buy equipment; and merchants didn't want to pay interchange fees.

For the most part, merchants were able to resist because consumers were not forceful in demanding the electronic payment option. That's no longer the case.

Consumers want to use plastic for small, everyday purchases. They don't want to carry cash. Quick serve restaurants - long a holdout when it comes to card payments - have adopted electronic purchase on a wholesale basis.

And they're laughing all the way to the bank because they can move card-paying customers through the lines more quickly and at the same time cut down on the costs and risks of handling cash. Debit card use has taken off way beyond what industry pundits thought likely just four or five years ago. It now equals cash payments for in-store purchases.

Options abound

Merchants have virtually unlimited options when it comes to buying into electronic payments. If they don't want to put cash down on a system, there are plenty of low-cash or no-cash terminal deals available.

Interchange fees ... well, what can we say? Somebody has to pay for this somewhere along the line. But for merchants, interchange is the cost of doing business: If they don't provide their customers with a card-payment option, a competitor will, and they'll lose business revenue that will vastly overshadow the interchange costs.

The issue is no longer one of making the case for electronic payment. It's practically impossible to make a case for paper-based payments in the current era. No, the issue is coming up with the right business case argument for each particular merchant.

It's a matter of searching out a cash-only business and figuring out how much revenue that merchant is losing because he's not in tune with the needs and demands of his customers. If that merchant doesn't buy into the concept, it's up to you to hunt around until you find one that understands the larger picture. After you convert that one visionary, the rest will eventually fall into place.

In many situations, wireless is the new factor that makes the business case. Wireless solutions allow merchants to bring electronic payment to the point of service, whether that's at the curb for takeout food, on an outside table for a sidewalk sale, at a weekend flea market, in the hands of a limo driver or at the customer's door.

Or perhaps it's an issue of servicing the "unbanked," a neighborhood of less affluent consumers, few of whom possess credit or debit cards. Then the sale might be made by offering a multiapplication bundle including prepaid cards, telephone top up and money transfer - a vital function for many immigrant populations.

For the smart salesman, it's always an issue of following the money. Only now, it's all about figuring how to convert cash businesses into electronic payment businesses. Eventually, we'll get to the point where we essentially do become a cashless society for 95% of the economy.

Maybe at that point, it will seem like the end is in sight. Nah, even if we get to that point, look at the huge market we'll have created for replacement sales.

Paul Rasori is Vice President of Product Marketing with VeriFone. He can be reached at or 770-754-3686.

Article published in issue number 060701

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