Cash, bank notes and coins, are the oldest payment system and coins were first used some 2,500 years ago. Cash is used for the majority of payments in almost all countries. In Europe in 2008 78% of all payments were by cash according to the UK's Retail Bank Research consultancy. The use of cash is declining slowly, in the UK and the USA, over the last decade payment cards have overtaken cash as the most important payment system for over the counter payments by value, though not by number of transactions. The UK Payment Council has forecast that cash will be redundant by 2050, but that doesn't mean it will not be used.
Indeed over the last 2-3 years cash usage in some of the developed economies has increased as consumers have reduced their usage of credit cards. Cash usage is likely to continue at current levels for many years.
Payments Over the Counter
For most retailers accepting cash payments over the counter will be essential, because if they did not accept cash they would loose business. But already there are a few places where the retailer no longer accepts cash of over-the-counter, e.g. for duty free goods on planes, where the hassle of accepting cash is unacceptable and there is little lost business.
Replacing payments by cash will not necessarily cut retailers' costs. The British Retail Consortium's 2008 'Cost of Collection' survey showed that the total cost per payment, including all bank charges and processes and fraud, for the different collection systems for cash was 2p, far less than for the other payment systems with debit cards 8p, credit cards 35p, charge cards 52p and cheques 53p. But cash is costly, it costs the USA $300bn/year to manage and support cash
Minimising the Cost and Administration of Accepting Cash
The key driver in accepting and handling cash is to minimise costs and administration throughout the supply chain. The main costs in accepting cash at POS have to be minimised are:
- collection and/or delivery of cash to/from retailer premises - a major cost which can be minimised by:
- maximising re-use and recycling of cash within the store
- Accurately predicting the cash volumes per store to be able to develop optimum collection schedules
- accepting when Cash In Transit company delivery rather than insisting on narrow window when cash is picked up
- insurance costs when in transit and in store - here the key is to minimise the amount of cash that has to be insured
- cash counting and processing costs including both in store and by the bank or courier
- provision of secure on-site safes
- audit and verification of retailer's register totals and transactions.
Bank charge for paying in notes and coins over the bank branch counter and at their cash centres, typically a few ¢/$100 for notes and around ¢35-50 / $100 for mixed coin. They also charge for cash provision, the charge depends on what combination of notes and coins are required.
New cash handling services credits the cash to the bank account even before the cash is picked up for deposit. The services use the in-store safes with an integrated note counter which count the cash, and then the details of the amount deposited is submitted to the cash courier's central system, and which the informs the bank who credit the retailer's bank account. With these services the retailer gets the cash credited to their account three days sooner than with traditional processing. Suppliers claim these new safes and systems pay for themselves in 6-18 months.
Cash Payments Over the Internet
The many consumers, even in developed countries, who do not have a debit or credit payment card still want to buy goods and services on the Internet. Specialised services have been developed for consumers to pay by cash on the Internet. On enabled web sites the customer fills up their shopping basket as normal and then on the payment page the customer clicks 'Pay Cash' service logo. A barcode is then generated confirming the transaction which the customer prints out and then takes the barcode number to the nearest 'Pay Cash' outlet/agent where they pay for their goods in cash. The 'Pay Cash' system then pays the merchant and the goods are dispatched.