Cash -As Important As Ever!

Posted on: 24/05/2014

Even I, a great lover of cash, was somewhat surprised to learn last week from the European Central Bank that over 90% of all retail payments in the EC under 20 Euros are still made using cash.

So all of the hundreds of millions of dollars Visa & MasterCard have spent on hyping payment by card has lead to less than a 10% share of this crucial segment of the payments market.  For "spent", should we substitute "poured down the drain"?  I will let their shareholders decide.

There are of course some markets where less cash is being used today than a few years ago.  However,almost invariably, this is because easy access to cash has declined.  Bank branches have closed and/or ATMs have been removed, pushing the public to resort to cards.

It is very interesting.  No community is pleased to see their last bank branch close - but where an off-branch ATM is installed after the branch goes, residents suddenly feel a whole lot better!  They are happy that they can get convenient access to cash and, as ATMs become increasingly sophisticated customer touch points, the locals also know that many of the services previously provided by the branch will be readily accessible at the neighbourhood ATM.

Wherever I travel, local retailers tell me they are seeing more cash in their tills now than a few years ago.  Many of those retailers have filled the customer-service gap created by bank branch closures by accomodating an ATM on their own premises.  None of them ever regrets doing so.  Their shop, with its popular cash-dispensing ATM, becomes the healthily pumping heart of the community.  More cash being available tranlates into higher sales.  Everybody is happy!

Local ATMs are also a "Green" payment solution.  No one needs to travel outside their neighbourhood to get cash, so the carbon footprint is reduced automatically.  This environmental gain can be increased further where recycling ATMs are employed, with cash deposited subsequently dispensed to those requiring cash.

In the UK, another logical step in improving the efficiency of ATMs has been widespread Merchant Replenishment.  In this model, the retailers fill the ATMs on their premises, using cash they have taken in at their tills.  Of course, this cannot always be a workable solution to a community's cash needs but, where the retailer has enough cash and a proper level of security can be put in place, it can be the perfect model, economically, environmentally and from the point of view of customer service levels.

I was speaking last week to an independent retailer who runs a shop in a major housing estate in the UK.  He replenishes his own ATM and has seen the number of cash withdrawals increase from 5000 per month to 8000 per month in recent years.  Are you surprised to learn that his business is booming?!

It is likely that Merchant Replenishment will eventually be used in all 28 EC Member States.  It can never be the sole solution but it has a role to play in suitable circumstances.

Across Europe, communities and local businesses prosper when residents are given convenient access to cash.  As bank branches close, ATMs are of course increasingly the main conduit for that cash.  This trend is likely to continue and strengthen.

Am I surprised that over 90% of retail payments under 20 Euros are made using cash?  NOT ANY MORE!

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