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Cards save everyone money ... apart from consumers!
June 24, 2013 by Ron Delnevo — Chairman, Cash and Card World
The vested interests that push for more card use — Visa and MasterCard — can afford to field a vast array of advocates.
Almost every conference I attend is heavily endowed with speakers who appear to be independent but are actually beholden in some way to the major card schemes.
One storyline these carefully groomed advocates continually return to is: "Cash is expensive. Cards are cheap. Therefore the economy will benefit from more card use."
Now it is of course true that parts of the economy will benefit from more card use. Primarily the corporate profits of the card schemes and their participating financial institutions!
But what about consumers? Joe Public — you and me?
My research indicates that there is little evidence that any cost-savings associated with card use ever reaches the pockets of the public.
Take the vending industry, with millions of machines in markets such as Japan, the U.S. and the U.K.
Vending machine operators are forever whining about the cost of cash handling. They want customers to use cards — or mobile — so that costs can be reduced.
This has to some extent come to pass. Cards and mobile can now be used to make purchases at many vending machines.
But have you noticed prices coming down?
No. Vending prices keep going up as package sizes are reduced.
Why might that be, given all the money vending machine operators are supposedly saving through not having to process cash?
Look no further than the fees charged for card use.
Here in the U.K., a contactless card transaction will cost the vending machine operator the equivalent of about 7 cents. A standard card transaction is even more expensive — more than 20 cents!
Considering that the average item in a snack vending machine costs about $1, these card use fees clearly swipe a hefty wedge of the profit margin. It is easy to understand why there are no cost savings to pass on to the long-suffering public!
You might think that mobile transactions would deliver a better deal for consumers ? Forget it!
If you are crazy enough to use a text message to buy a snack from a vending machine, you will find you have on average paid a surcharge of more than 20 cents plus the cost of the text.
All of this probably explains why, when consumers are offered a choice of cash or card use at vending machines in the UK, around 70 percent still opt to use cash.
The public clearly know a good bargain when they see it!
About Ron Delnevo
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