by: Daryl Cornell –
Just this week the Wall Street Journal reported on Visa’s bold new “war on cash” program. In exchange for up to $10,000 in upgraded POS hardware, merchants would agree to ban the use of cash to pay for goods and services. Visa’s CEO, Al Kelly, didn’t mince words when he boasted, “We’re focused on putting cash out of business.” Well of course he is. Despite persistent rumors of its demise, cash remains a formidable competitor to Visa and remains the preferred method of payment in the U.S. for a host of reasons, all well known to consumers.
With all due respect to Mr. Kelly, he and his folks must take a dim view of the intelligence of Visa’s merchant customers. Recent U.S. statistics show that cash accounts for about a third of all purchases – much higher for purchases under $60. At a 2% transaction fee to Visa, a $2M business would incur an additional $13,000 in annual Visa fees in order to deny customers the option of using cash. Costs could easily mount should customers actually object to being told how they must pay. In exchange for a cash-free establishment and some irate customers, merchants would receive “free” POS hardware from Visa. Hmmm.
Studies consistently show that, with few exceptions, customers prefer a variety of payment options. Clearly there is a place for debit, credit, mobile and cash – each with its own benefits and drawbacks. Pretending that “one size fits all” when it comes to payments is merely self-dealing on the part of Visa. And yet, you have to admire the audacity of Visa to take this farce of an offer to market. It will be interesting to see whether any merchants are gullible enough to bite.
But what if we were to take Mr. Kelly’s coercive approach to payments and turn it on its head. What if merchants were offered a free ATM in exchange for killing debit and credit. Customers could either use cash on hand or would have access to an on-site ATM. Plastic could still be accepted as long as customers were willing to pay the card fee – but that’s another story for another day. Here, rather than a $13,000 increase in annual Visa fees on the third of all payments currently made with cash, a $2M business would potentially see a $26,000 reduction in annual fees to Visa and the other card schemes. Oh, and that upgraded POS hardware might not even be needed. Finally, merchants would benefit by being able to efficiently recycle their cash from the till through the ATM. Now there is a promising business case which could actually be sold to merchants – a “war on plastic” if you will.
Hold your applause for Visa and its free hardware offer for now. Initially hailed as innovative, it appears that Visa’s “war on cash” is in reality a war on merchant profitability and customer payment choice.