August 30, 2007
Cashless Society Cometh
By Tom Ryan
According to Yankelovich survey released by Visa USA, an overwhelming majority of both Baby Boomers (79 percent) and Echo Boomers (74 percent) believe that U.S. society will one day operate without cash and checks and will conduct all payment transactions electronically.
In a statement, Visa said innovations in technologies and products are easing the transition to a cashless society. Among the factors, according to Visa, underlying the shift away from cash and checks:
- Debit Cards: More than three-quarters of U.S. adults have a debit card,
according to The Nilson Report, a payment systems analyst publication, and
the Federal Reserve Bank reports that debit cards are the fastest-growing
payments type at retailers nationwide; - Government Migration: More than 30
states, including California and Texas, are switching from cash to Visa reloadable
prepaid cards to disburse child care, unemployment, and other social benefits; - Contactless
and Mobile Payments: Contactless transaction methods – ones that don’t require
consumers to swipe the card or hand it to a cashier – have rolled out across
a full range of products, including credit, debit and prepaid, as well as
mobile phones and other handheld devices.
Prior to the introduction of the Visa Check Card in 1995, less than two percent of Americans used a debit card. In 2006, Visa debit products generated more than $600 billion in consumer spending.
To tout the benefits of plastic, Visa is airing four commercials illustrating how using cash and checks “disrupt the harmony of life” versus the convenience and efficiency of credit/debit cards.
“Consumers’ payment preferences have evolved,” said Kevin Burke, head of marketing for Visa USA. “As consumers look for payment options that enhance their everyday life, we’ll continue to use a variety of channels and techniques to reinforce the benefits of Visa payment options that empower cardholders.”
Discussion Questions: Are retailers prepared for the arrival of a cashless society? What actions should they be taking around registers, store credit cards, marketing, loss prevention/fraud, or card processing fees?
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I would love to believe our society will become cashless – like many people, I avoid cash transactions like the plague. I cannot tell you the last time I used cash for groceries or gas. I rarely carry more that a few one dollar bills in my wallet – that’s only for the snack and drink machines at work. The reality is that some cash transactions will still occur. Transaction fees will need to go away or go down for the small business to take up the cause.
Yankelovich regularly yanks our chains with publishable, pop-psychology, billable “research.” (Thanks, Faith Popcorn, for this legacy.) But this headline-grab might be different. I used to write nearly a hundred personal checks per month, and now I write two. Everything else is electronic banking and debit cards, and I love it. But somehow I’m genetically predisposed to question Homer Simpson research like this (D ‘ohh!). Yes we knew it; thanks for quantifying it; please return with something useful.
At one point I thought that the movement to electronic banking would distinguish between legal American citizens (with SS nums allowing them to open bank accounts) and illegal aliens. Then, I helped develop a system that provides MasterCard and Visa debit cards to anyone, especially those who work off the books for cash in the harvesting fields of my state, Caleefornee-uh (thanks, Governor Ahhnold). Our system worked, showing once again that you cannot stop the sophistication of financial transactions. You can only hope to contain it (can I get an “Amen” from all the sports cliché devotees out there?).
So, are retailers ready? If trusting plastic over Franklins (which their clerks hold up to the light to determine validity) is ready, then they are. It began a number of years ago when clerks were no longer trained to count back change to customers, and now the dumbing-down is nearly complete. Witness the TV commercial where a cash customer interrupts an entire retail rhythm and is made to look foolish.
Talk of a cashless society is similar to the paperless enterprise. It makes a lot of sense but only up to a point. Certainly the bulk of the transactions can move to the new and improved technology, but some may not. Think about cab drivers, ice cream and hot dog vendors, the beverage cart at your favorite golf course or the local farmer’s market. Think also about the entire shadow economy that includes garage sales, panhandlers, immigrant workers and a whole raft of illicit transactions.
I propose that the future is already here. We may see a slight increase in the percent of total transactions going away from cash and checks, but for the most part, anyone who wants to and has the means to make the conversion has probably already done so. I don’t think anyone would miss the penny and probably not the nickel. But that’s another subject.
Credit card use is heavily stimulated by premiums: miles, points, and rebates. Cash is awfully handy, and leads to discounts in certain circumstances. A few businesses won’t accept cash (certain public phones and mass transit systems and some car rental counters) because of security concerns. The biggest problem with cash: payment can’t be delayed like a credit card. The biggest problem with checks: identity theft is very easy, since your name, address, phone, and account number are all usually visible.
As a retail worker, one of those Visa commercials drives me a bit bonkers. Cash doesn’t slow the transaction down for me, unless a person insists on digging through their purse or pockets for exact change. It is the check-writing that brings things to a grinding halt. Or, people who use debit cards but insist on standing there and recording it right away in their checkbooks. (I typically don’t see anybody under 35 doing that.)
I don’t think we’ll have a cashless society in my lifetime for three reasons: 1. some people and small businesses use cash to avoid paying taxes; 2. some consumers use cash so as not to have their transactions recorded; 3. interchange fees.
The Visa commercials are great. But I agree with Al that we’ll never see that kind of utopian retail environment in my lifetime.
Avoid taxes? Now, who would do such a thing! Nonetheless, people like cash and it’s a way to control expenditures. It’s a way to avoid spending what you don’t have. Furthermore, I think the widely publicized credit crunch has people thinking twice before they pull out those high interest credit cards. Debit cards still produce too much paper and are difficult for consumers to control and track.
Having said that, I know I avoid paying cash at every opportunity. I recently had to request another American Express card because the mag stripe wore out on the old one.
A cashless society, is that our fate?
Are my transaction preferences now late?
I like my paper money, I do not deny.
I hear it speak, most often saying “Goodbye.”
But it brings a discipline with it, paper dough,
Plastic cards cloud reality, don’t you know?
Should that day come when we deal only in plastic,
I hope my brain becomes much more elastic.
So we speculate on what retailers should do.
They always come up with something out of the blue.
I don’t think cash will ever totally go away but electronic payments have gotten so easy that many have migrated to that type of payment. The credit card companies shouldn’t be celebrating yet. Young people today will finally get a handle on what credit cards and unlimited spending has done to their lives and will resort to other types of payment mechanisms.
With the increase in debit cards, rechargable cards, etc., fraud and the need for high security is on the rise. Retailers can protect their systems with fraud proof access and protect their information along with their customers.
What’s a check? Just kidding, but I do agree that checks will disappear before cash. When truly anonymous debit cards are developed–stored value cards would work just fine; pick up a random card at a store or from a vending machine and pay with a $20 bill or higher–I can see smaller denominations disappearing. Micropayments via mobile phone and other technologies can replace small bill and coin transactions. Our society should be able to issue just a $20 and a $100 bill, and those would be used only for purchasing debit cards or for large all cash transactions (exact change only for your drug deal or ransom please). That will preserve the ability to have anonymous transactions and minimize the handling of cash.
X and Y generations, yes…if not yesterday.
Boomers, they’re not pushing for this. The article did say “one day.” Hmmmmmmmm
I can see checks going away. Debit cards are much easier and admittedly faster.
Cash is a completely separate thing. One size fits all, and anonymous at that. Cash remains easier for small transactions; desirable for many reasons. (Sometimes it isn’t Big Brother I worry about; it’s my spouse.) Cash avoids some of those high level discussions about discretionary spending within the family.
H.H. Munro once said, “A little inaccuracy saves a ton of explanations” and cash is the financial equivalent.
Finally, for me at least, the whole enormous machinery of credit, and its fees, interest payments, arrogant and arbitrary contract changes, etc. means that at one point, I would use cash just to put some sand in their gears. Maybe that’s the old hippie in me.
I don’t know that we’ll ever get entirely away from cash, but there are certainly products out there that are making credit more anonymous – like kiosks that let you use cash to load a prepaid Visa card.
I have less trouble getting over the privacy part of it, and more trouble swallowing the implication that an all-plastic society effectively means privatizing our currency system. If we go down that path, Visa, MasterCard, etc. are going to have to give something up or back in transaction fees for both retailer and consumer. Or, there will need to be some way of increasing the competition on that end of payments.
I agree that more consumers are using an electronic form of payment for most of their purchases. Those who actually write checks at the register are definitely “frowned upon,” especially by the customers in line after them.
Another electronic form of payment that is quite convenient is Pay-By-Touch, used by some of the grocery stores. It is not only quick but you don’t need to reach in your wallet to produce a card. Since finger prints are unique, I believe it is a very safe form of payment – safer than debit and credit cards where transaction detail has been stolen. I would like to see other retailers begin to use this technology.
Cashless is coming, but not until the “millennials” or “mobile youth” are executing the lion’s share of transactions.
A radical departure from current payment methods calls for 1) a compelling reason for merchants to accept those methods – say, a dramatic drop in interchange fees without the need for significant capital investment, and 2) compelling reasons for consumers to want to use that payment method for their purchases. Compelling reasons for consumers would include widespread acceptance among retailers, and promotions that have real value.
In my opinion, the only solution provider coming close to hitting the mark is Mocapay (MObile CAsh PAYments). They enable cellphone text message-based payment at the point of sale without a negative impact to checklane efficiency. Their flat rate fee of $0.19 per transaction should be attractive to almost any retailer. And if they can move past their cottage concentration of participating merchants in Boulder, CO into national exposure and adoption by Tier 1 retailers, watch out.
Times change and things are cyclical. Hasn’t everybody heard of the aunt/uncle or grandparent that had all of their cash stuffed under their mattress or in the closet? This happened because of the distrust of banking after the stock market crash.
People only trust things until they get burned. If the credit card companies or banks issuing them do something to lose the trust of the people, things will evolve again.
There will never be a cashless society. How else will you pay the neighbor’s kid for mowing the lawn or shoveling the drive way? How will you pay for the carpenter that is helping you out by doing a side job. Not every transaction can use the auto-debit method of payment.
I interpret this as a loaded question meant to stimulate me into thinking of ways I could use more Visa cashless products. This leads to a real question – Can Visa sell anything else in this (70%) saturated, aging country? All cashless means there’s a 30% growth potential. I, a technical geek who believes in electronics for everything, answered “never”. Money is private. It likes to be hidden. The current Debit/Credit card system is not protective enough. Future systems involving smart card type technology will be hard to sell to everyone. If for any reason someone has non-plastic money, I’ll take it.
Will this happen? I believe it will emerge as a popular option but never be 100% standard.
We looked at the challenges of mobile payments in Japan a few months ago and I think it points to a few of challenges here. (1) Generational differences and propensity to embrace this; (2) security (scary!); (3) POS integration and having mass adoption of the IT equipment necessary to enable this; (4) social class differences (not all will understand it or have access to it); (5) privacy (do any of us want ALL of our information that transparent to the financial behemoths?); and (6) control of budgets (which not all of us are great at!)
I would personally embrace it wholeheartedly. But migrate this as the norm across the board as a society? Not sure.
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I would love to believe our society will become cashless – like many people, I avoid cash transactions like the plague. I cannot tell you the last time I used cash for groceries or gas. I rarely carry more that a few one dollar bills in my wallet – that’s only for the snack and drink machines at work. The reality is that some cash transactions will still occur. Transaction fees will need to go away or go down for the small business to take up the cause.
Yankelovich regularly yanks our chains with publishable, pop-psychology, billable “research.” (Thanks, Faith Popcorn, for this legacy.) But this headline-grab might be different. I used to write nearly a hundred personal checks per month, and now I write two. Everything else is electronic banking and debit cards, and I love it. But somehow I’m genetically predisposed to question Homer Simpson research like this (D ‘ohh!). Yes we knew it; thanks for quantifying it; please return with something useful.
At one point I thought that the movement to electronic banking would distinguish between legal American citizens (with SS nums allowing them to open bank accounts) and illegal aliens. Then, I helped develop a system that provides MasterCard and Visa debit cards to anyone, especially those who work off the books for cash in the harvesting fields of my state, Caleefornee-uh (thanks, Governor Ahhnold). Our system worked, showing once again that you cannot stop the sophistication of financial transactions. You can only hope to contain it (can I get an “Amen” from all the sports cliché devotees out there?).
So, are retailers ready? If trusting plastic over Franklins (which their clerks hold up to the light to determine validity) is ready, then they are. It began a number of years ago when clerks were no longer trained to count back change to customers, and now the dumbing-down is nearly complete. Witness the TV commercial where a cash customer interrupts an entire retail rhythm and is made to look foolish.
Talk of a cashless society is similar to the paperless enterprise. It makes a lot of sense but only up to a point. Certainly the bulk of the transactions can move to the new and improved technology, but some may not. Think about cab drivers, ice cream and hot dog vendors, the beverage cart at your favorite golf course or the local farmer’s market. Think also about the entire shadow economy that includes garage sales, panhandlers, immigrant workers and a whole raft of illicit transactions.
I propose that the future is already here. We may see a slight increase in the percent of total transactions going away from cash and checks, but for the most part, anyone who wants to and has the means to make the conversion has probably already done so. I don’t think anyone would miss the penny and probably not the nickel. But that’s another subject.
Credit card use is heavily stimulated by premiums: miles, points, and rebates. Cash is awfully handy, and leads to discounts in certain circumstances. A few businesses won’t accept cash (certain public phones and mass transit systems and some car rental counters) because of security concerns. The biggest problem with cash: payment can’t be delayed like a credit card. The biggest problem with checks: identity theft is very easy, since your name, address, phone, and account number are all usually visible.
As a retail worker, one of those Visa commercials drives me a bit bonkers. Cash doesn’t slow the transaction down for me, unless a person insists on digging through their purse or pockets for exact change. It is the check-writing that brings things to a grinding halt. Or, people who use debit cards but insist on standing there and recording it right away in their checkbooks. (I typically don’t see anybody under 35 doing that.)
I don’t think we’ll have a cashless society in my lifetime for three reasons: 1. some people and small businesses use cash to avoid paying taxes; 2. some consumers use cash so as not to have their transactions recorded; 3. interchange fees.
The Visa commercials are great. But I agree with Al that we’ll never see that kind of utopian retail environment in my lifetime.
Avoid taxes? Now, who would do such a thing! Nonetheless, people like cash and it’s a way to control expenditures. It’s a way to avoid spending what you don’t have. Furthermore, I think the widely publicized credit crunch has people thinking twice before they pull out those high interest credit cards. Debit cards still produce too much paper and are difficult for consumers to control and track.
Having said that, I know I avoid paying cash at every opportunity. I recently had to request another American Express card because the mag stripe wore out on the old one.
A cashless society, is that our fate?
Are my transaction preferences now late?
I like my paper money, I do not deny.
I hear it speak, most often saying “Goodbye.”
But it brings a discipline with it, paper dough,
Plastic cards cloud reality, don’t you know?
Should that day come when we deal only in plastic,
I hope my brain becomes much more elastic.
So we speculate on what retailers should do.
They always come up with something out of the blue.
I don’t think cash will ever totally go away but electronic payments have gotten so easy that many have migrated to that type of payment. The credit card companies shouldn’t be celebrating yet. Young people today will finally get a handle on what credit cards and unlimited spending has done to their lives and will resort to other types of payment mechanisms.
With the increase in debit cards, rechargable cards, etc., fraud and the need for high security is on the rise. Retailers can protect their systems with fraud proof access and protect their information along with their customers.
What’s a check? Just kidding, but I do agree that checks will disappear before cash. When truly anonymous debit cards are developed–stored value cards would work just fine; pick up a random card at a store or from a vending machine and pay with a $20 bill or higher–I can see smaller denominations disappearing. Micropayments via mobile phone and other technologies can replace small bill and coin transactions. Our society should be able to issue just a $20 and a $100 bill, and those would be used only for purchasing debit cards or for large all cash transactions (exact change only for your drug deal or ransom please). That will preserve the ability to have anonymous transactions and minimize the handling of cash.
X and Y generations, yes…if not yesterday.
Boomers, they’re not pushing for this. The article did say “one day.” Hmmmmmmmm
I can see checks going away. Debit cards are much easier and admittedly faster.
Cash is a completely separate thing. One size fits all, and anonymous at that. Cash remains easier for small transactions; desirable for many reasons. (Sometimes it isn’t Big Brother I worry about; it’s my spouse.) Cash avoids some of those high level discussions about discretionary spending within the family.
H.H. Munro once said, “A little inaccuracy saves a ton of explanations” and cash is the financial equivalent.
Finally, for me at least, the whole enormous machinery of credit, and its fees, interest payments, arrogant and arbitrary contract changes, etc. means that at one point, I would use cash just to put some sand in their gears. Maybe that’s the old hippie in me.
I don’t know that we’ll ever get entirely away from cash, but there are certainly products out there that are making credit more anonymous – like kiosks that let you use cash to load a prepaid Visa card.
I have less trouble getting over the privacy part of it, and more trouble swallowing the implication that an all-plastic society effectively means privatizing our currency system. If we go down that path, Visa, MasterCard, etc. are going to have to give something up or back in transaction fees for both retailer and consumer. Or, there will need to be some way of increasing the competition on that end of payments.
I agree that more consumers are using an electronic form of payment for most of their purchases. Those who actually write checks at the register are definitely “frowned upon,” especially by the customers in line after them.
Another electronic form of payment that is quite convenient is Pay-By-Touch, used by some of the grocery stores. It is not only quick but you don’t need to reach in your wallet to produce a card. Since finger prints are unique, I believe it is a very safe form of payment – safer than debit and credit cards where transaction detail has been stolen. I would like to see other retailers begin to use this technology.
Cashless is coming, but not until the “millennials” or “mobile youth” are executing the lion’s share of transactions.
A radical departure from current payment methods calls for 1) a compelling reason for merchants to accept those methods – say, a dramatic drop in interchange fees without the need for significant capital investment, and 2) compelling reasons for consumers to want to use that payment method for their purchases. Compelling reasons for consumers would include widespread acceptance among retailers, and promotions that have real value.
In my opinion, the only solution provider coming close to hitting the mark is Mocapay (MObile CAsh PAYments). They enable cellphone text message-based payment at the point of sale without a negative impact to checklane efficiency. Their flat rate fee of $0.19 per transaction should be attractive to almost any retailer. And if they can move past their cottage concentration of participating merchants in Boulder, CO into national exposure and adoption by Tier 1 retailers, watch out.
Times change and things are cyclical. Hasn’t everybody heard of the aunt/uncle or grandparent that had all of their cash stuffed under their mattress or in the closet? This happened because of the distrust of banking after the stock market crash.
People only trust things until they get burned. If the credit card companies or banks issuing them do something to lose the trust of the people, things will evolve again.
There will never be a cashless society. How else will you pay the neighbor’s kid for mowing the lawn or shoveling the drive way? How will you pay for the carpenter that is helping you out by doing a side job. Not every transaction can use the auto-debit method of payment.
I interpret this as a loaded question meant to stimulate me into thinking of ways I could use more Visa cashless products. This leads to a real question – Can Visa sell anything else in this (70%) saturated, aging country? All cashless means there’s a 30% growth potential. I, a technical geek who believes in electronics for everything, answered “never”. Money is private. It likes to be hidden. The current Debit/Credit card system is not protective enough. Future systems involving smart card type technology will be hard to sell to everyone. If for any reason someone has non-plastic money, I’ll take it.
Will this happen? I believe it will emerge as a popular option but never be 100% standard.
We looked at the challenges of mobile payments in Japan a few months ago and I think it points to a few of challenges here. (1) Generational differences and propensity to embrace this; (2) security (scary!); (3) POS integration and having mass adoption of the IT equipment necessary to enable this; (4) social class differences (not all will understand it or have access to it); (5) privacy (do any of us want ALL of our information that transparent to the financial behemoths?); and (6) control of budgets (which not all of us are great at!)
I would personally embrace it wholeheartedly. But migrate this as the norm across the board as a society? Not sure.