2016 marks the first year in which the value of global credit card transactions exceeded that of hard-cash transactions. This shift in payment tendencies is led by an improvement in transaction technologies. Portable POS (point-of-sale) devices and mobile payment applications such as Venmo and Paypal have reduced the need for cash, especially among younger consumers.
A Tufts University Fletcher School study found that the average cash holdings for Americans under 35 was less than half that of those over 55. While this figure may be attributed to the greater average wealth of older Americans, it does lend credibility to the idea that a younger generation is more likely to adopt cashless transactions.
Many small businesses are now moving towards a cashless transaction model thanks to the accessibility of POS devices. A small business owner can pick up a “Square” device for around $100. The use of these devices reduces the amount of time spent on a given transaction and also limits the potential losses from theft and robbery. Businesses, small and large, stand to gain from this style of transaction that eliminates the complexities of a cash-based enterprise.
Consumers can also find savings in the growing popularity of credit card transactions. The Tufts University study found that Americans lose $500 million per year to cash theft and almost $8 billion in ATM and check-cashing fees at non-home bank ATMs. As these costs of carrying cash rise, the average consumer can benefit from holding small amounts of cash and relying on payment cards for most larger transactions. Finally, the Tufts University study concluded that merchants rarely provide cash discounts or other cash benefits and that these should not be considered an advantage of using cash.
This data implies that consumers may be choosing the fees associated with credit card transactions over ATM costs and the risks of carrying cash.
Read more from WSJ here.