If you’re wondering what the disadvantages of non-cash payments are, you’re not alone. There are many advantages to using these methods, but you should still be aware of some of the downsides as well.
First, the costs of switching to card payments can be significant. For instance, an ATM withdrawal can cost a fee, as well as commissions. On top of that, there are additional security measures that must be taken. If a merchant’s computer is compromised, or if a robbery occurs, the loss of money could become a financial burden.
Second, there are privacy concerns. Consumers may choose to use cash because they are uneasy about sharing their details online. Another reason people use cash is because they lack access to their accounts or because they do not trust the merchant.
Cash costs retailers $0.53 per $100 of sales compared to $1.12 for signature debit and $0.81 for PIN debit
Despite the popularity of debit and credit cards, cash remains the preferred form of payment for many consumers. Cash offers a number of benefits. Not only does it offer an anonymity advantage, but it also does not carry interest rates or charges. It is also safe from hackers.
For small- and medium-sized businesses, cash handling costs can be tens of billions of dollars. To put that into perspective, a small business that makes $200 million in sales annually pays roughly $200,000 in cash handling fees.
The Bank of Canada examined 500 companies in 2008. Their study found that cash was the cheaper option for retailers. This may be because cash is not subject to the interest rate and fees that credit cards have.
However, cash is not always the best choice for consumers. A new study by Tender Greens reveals that, in general, cash transactions take four to five seconds longer than card transactions.
In addition, paper money is not as secure as credit or debit cards. Scammers can create fake ATM cards to withdraw cash, and if your PIN is compromised, you can be exposed to a greater risk of theft.
Privacy concerns
The growing appetite for non-cash payments is bringing up some privacy concerns. Specifically, consumers want to know how their data is protected and how long it’s kept. In addition, they may worry that they’ll be subject to discrimination and commercial data-sharing.
Those concerned about privacy may prefer to use digital money through less commercially driven wallets and accounts. Some users may also see advantages to data collection, while others may opt for providers with explicit privacy protections. However, a risk-based approach can help address these concerns.
While some digital payment systems can offer enhanced levels of security, they can also leave a digital trail of purchases and spending habits. This can lead to a number of concerns, including identity theft and fraud. Financial institutions must ensure that their anti-money laundering frameworks are robust enough to monitor transactions for suspicious activity.
In the United States, for example, the Bank Secrecy Act (BSA) still stands. Even in these countries, however, there are still some common practices that put people’s privacy at risk.
Advances in cashless transactions make copying and fraud difficult
One of the biggest benefits of going cashless is the cost savings a merchant can realize. For instance, a study in Canada compared the costs of taking credit card and cash payments. It found that the latter was less expensive to accept than the former.
Another benefit of using non-cash payment methods is speed. In addition to the obvious convenience, using a card instead of a cashier’s check allows a store to process more customers per hour. This may be an important consideration to retailers looking to keep their customers happy and satisfied.
In addition to reducing costs, going cashless also reduces the chance of theft. For example, the Mercedes-Benz stadium in Atlanta switched from cash to cards, cutting transaction times in half. The same goes for salad chains Tender Greens and Sweetgreen. These establishments reported cashless locations processed up to 15% more transactions per hour.
Despite the hype surrounding digital payments, many consumers are still averse to making such a purchase. The reasons are varied. They range from a lack of access to accounts to a lack of trust in current technologies. A well-rounded solution should involve the involvement of all stakeholders.