Essential Retail —Cashless Society Disadvantages

by Raymond Pucci 0

With a nod to a “Be careful what you wish for” scenario, commentary in Essential Retail by Brendan Doyle of CMS Payments Intelligence, paints a contrarian, yet reasoned viewpoint of the seemingly inevitable march toward a cashless society. Led by a growing cadre of governments, card industry players, and merchants, cash transactions are being discouraged for reasons of cost, convenience, and control. But not so fast….as can be seen by his comments:

I have long supported a pluralistic payments landscape and maintain that competition between payment types is positive. This is not a view shared by all. There are international efforts by governments and the card industry to eradicate cash. For example, in France and Italy a €1,000 limit per cash transaction has been introduced, stores in Denmark now have the right to not accept cash, while in the UK a card payment provider organised a “cashless day” on a street in Manchester, as reported by the Manchester Evening News.

In spite of this opposition, merchants have until now broadly supported cash. It may be manual and laborious to handle but is ultimately cheaper to accept than cards. This means that merchants in many sectors, such as hotels and airlines, often surcharge for card transactions and while many UK merchants currently don’t accept cards, all accept cash.

We maintain that a cashless society should be avoided because it will provide the card industry with a monopoly over payments that will inevitably lead to higher card fees, whilst denying their customers the most convenient method of payment and feeding the culture of surveillance. However, we need help from merchants, government and the cash industry to ensure that cash costs are kept to a minimum and, therefore, that they remain an attractive option for merchants.

The Law of Unintended Consequences is alive and well, and the march to a cashless society could impact merchants and their customers with higher fees and increased surcharges. Card companies, merchants, and bank regulators are driving the transition away from cash to trackable transactions. But if some consumers prefer cash as the last refuge of anonymity, that’s their choice.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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