The businesses with the most incentive to produce a cashless economy are accelerating the process, and they’re not being coy about it.
Visa has launched a new initiative that will pay small businesses $10,000 each for upgrading their payment technology and marketing expenses … if the businesses agree to stop accepting cash from their customers.
The company is committing potentially $500,000 to The Visa Cashless Challenge, with up to 50 businesses selected from an application process.
The businesses who take part in the program would only accept payment via debit or credit card or via cellphones, like Apple Pay. In exchange Visa will pay for the technology upgrades necessary, and cover marketing expenses associated with publicizing the change.
Obviously, the move to cashless transactions means that there’s now a man-in-the-middle of every purchase at these businesses, with companies like Visa getting their cut for connecting buyer and seller.
Visa is the largest credit/debit card processor in the country, with 59% of transactions in 2016. Mastercard is next at 25% of transactions.
Is it a War on Cash?
The headline of the article in The Wall Street Journal calls it a “war on cash,” and while that may sound a bit overblown, Visa is saying that it’s true in no uncertain terms.
Visa has long considered cash one of its biggest competitors and has been taking steps to chip away at it. Getting rid of cash is a priority for Visa Chief Executive Al Kelly, who took over late last year, especially as cash and check transactions continue to grow globally.
“We’re focused on putting cash out of business,” Mr. Kelly said at Visa’s investor day last month, adding that converting check and cash to digital and electronic payments is the company’s “number-one growth lever.”
That’s a pretty brazen statement.
It’s not surprising, though, and from a business point of view, it makes total sense.
Cash is still the most used payment form among Americans, according to the Federal Reserve Bank of San Francisco in their “The State of Cash” report.
In 2015, cash remained the most frequently used retail payment instrument, used in nearly one-third (32 percent) of all transactions, including bill payments. Consumers used debit cards for 27 percent of their transactions, followed by credit cards for 21 percent of transactions. Electronic payments (e.g. ACH transfers and online bill pay) and checks comprised a small share of transaction volume, though the value of these payments tended to be higher than cash, debit, or credit payments.
As you can see, when compared to 2012, cash and check usage has dropped as a percentage of all transactions, with credit, debit and electronic growing in its place.
Does Going Cashless Make Sense for a Business?
Like in all decisions, there’s pros and cons for a business potentially going cashless.
Aside from any marketing initiative or financial assistance, going cashless can certainly appeal to a younger demographic used to paying by card or with their phone. Visa also points out that cashless businesses are less likely to be targeted by thieves looking to steal cashboxes, and owners can save time not needing to count their cash and visit the bank.
But like they’ve found in Sweden, you can’t assume that everyone who wants to be your customer has the technology able to buy from you. A business that doesn’t accept cash is essentially telling those customers they can’t shop there.
Certainly, the expenses associated with going cashless — the transaction fees that Visa is pushing to grow — are a con for businesses looking to keep their costs low. I’ve actually written about why my business doesn’t accept credit card payments — and it all has to do with the cost of fees.
It’ll be interesting to see what types of businesses participate in the “challenge.” My quick assumption is that many of the businesses may be newer businesses that wouldn’t have necessarily taken cash in the first place, but we’ll see.
As long as they straighten out the whole chip reader annoyance.
Photo by Aidan Bartos on Unsplash
