Rumours of my death have been greatly exaggerated
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3 September 2012Gareth Lodge
Having worked in the non-cash side of the business for so long, it’s often assumed I’m anti-cash. That’s far from the case. What I’m “for” is about the most appropriate payment method for that payment occasion for that person, and that in turn has a multitude of factors that decide what is most appropriate. That’s why sometimes I’m somewhat negative about things that are promoted as innovative as many are in reality trying to replace existing methods but with no improvement. It’s also why cheques pose a tricky challenge – they are centuries old and costly, but for many, there isn’t anything better. In this vein, this article caught my eye. Walmart.com have introduced a new payment mechanism which is proving popular. It’s called cash. No, really. There is now an option to go and pay in store with 48 hours of placing the order using cash. It’s in the remit of this post to discuss the online shopping piece, but I thought the study of who was using the service was very interesting. There is often a blanket assumption that more affluent customers use credit cards, affluent use debits and the poorest resort to cash. And with the levels of un- or under- banked in the US still very high (some estimates suggest it has almost doubled to 50m in the last 5 years), those are not unreasonable assumptions. But that’s conflating options with actions. The figures in the article clearly show that the more affluent consumers are as likely to use the cash service is the lower end of the scale. There is also a belief held by some that retailers want to lose cash as an option. Again, I’m not sure that it’s strictly true. It may be true if you’re an Apple store, probably, but not if it’s a local corner store. But that’s more to do with transaction size, rather than anything else. What is interesting to me in this instance is the jam-jarring preference takes sufficient precedence to warrant an extra trip to the store, over-riding the cost of going to the store. And that customers end up buying more stuff still when the visit the store. So whilst customers prefer, they say, the control of their spending, in reality it could be argued that they’ve displayed less control over their money! And that’s the challenge for payments innovation. It’s not just one barrier to overcome, it’s several. It has to be a win-win-win (that is, ensure there is value or benefit for the payment operator, the merchant and the customer) for example. But the toughest is the customer. Old habits are hard to break, but when they’re not rational, then they’re even tougher to overcome. So to the blog title. The title is an abbreviated version of the quote associated with Mark Twain (although that is in fact an incorrect attribution). I can just see cash, if it could speak, saying the same thing. Indeed, cash is likely to be here, in the form that it is today, certainly for the rest of my working life time, if not my actual life time. Cash is king, long live the king.