Thursday » February 28 » 2008
 
Why cash is no longer king
Businesses are slowly 'training' customers to pull out their plastic and keep their bills in their wallets, writes Misty Harris.
 
Misty Harris
Canwest News Service
 

Monday, February 25, 2008
 

 
Inside a popular Canadian electronics store, a woman trying to pay for a DVD is being refused at the register. Her money is no good there.

The snubbed customer is not a counterfeiter or a shoplifter barred from shopping in the store, she's simply a woman who wants to pay for a purchase with dollars and cents.

Increasingly, cold hard cash is the victim of a digital economy that favours symbols of money -- plastic cards, electronic key fobs, and online payments -- over the real deal. Nowhere is this more evident than in the diminishing presence of automated teller machines, which in 2007 saw their biggest drop in the U.S. (nine per cent) since their debut in the 1970s.

In Canada, the latest data point to a future similar to that of our American neighbours, as cash withdrawals steadily decline and shoppers prefer to pay with plastic.

According to Moneris, Canada's largest processor of debit, credit and gift card transactions, one of the strongest aggressors "directly attacking cash" is technology that allows consumers to use plastic for small purchases. Examples include No Signature Required credit card programs, as well as "tap and go" key fobs.

"In the past, you may have heard a heavy sigh from the person behind you in line if you pulled out your credit card for a transaction under $20," says Brian Green, senior vice-president of marketing at Moneris.

"This removes the taboo of using a credit card in a small-ticket environment."

The past few years have seen the cash-only lineup be supplanted by the no-cash lineup. Mr. Green says it's all part of merchants' plan to "train" Canadians to lessen their cash use.

"A fast form of payment is beneficial to the quick-service operator because they can greatly increase their through-put and therefore their amount of revenue," explains Mr. Green.

"And as plastic becomes more convenient, we're going to become more accustomed to using it and will draw on cash less often, which means fewer withdrawals at the ATM."

After falling victim to debit-card fraud last summer, Derek Moscato swore off plastic and wrote in the Vancouver Province: "Better for that wad of hundreds to live in your pocket than the billfold of some high-tech gangster."

Despite his resolve, however, his planned lifestyle change couldn't be sustained.

"(Plastic) is just an easier, cleaner way to pay for things.

"You're not fumbling around with bills and change and so forth," explains Mr. Moscato, a communications professional from B.C.

"But I've learned there's a price to pay for that convenience."

According to Canadian Interac data, the number of shared cash-dispensing transactions (money withdrawn from machines not associated with the user's bank) has plummeted, dropping from 375 million in 2001 to 285 million in 2006, the most recent year for which statistics are available.

Tina Romano, public relations manager for Interac, says the decline is "likely the result of cardholders using their own banks' ABMs to avoid paying fees, as well as the fact that more Canadians are moving to electronic payments."

Indeed, debit usage nationwide continues its dramatic rise. In 1998, 1.4 million Interac transactions were processed; in 2001, it was 2.2 million; and in 2006, 3.3 million Interac payments were made in Canada, making us among the highest users of debit in the world.
http://www.canada.com/components/print.aspx?id=757f7aef-55de-40eb-8d7b-5e001abba0e1&k=43581