Visa announced this month it's considering giving a select group of restaurants $10,000 and upgraded checkout terminals. The catch? The businesses must go completely cash free.
Cash is the No. 1 competitor of the major credit card company, so the proposal comes as no surprise to Bhaskar Chakravorti, senior associate dean of international business and finance at The Fletcher School at Tufts University.
"Visa's biggest competitor, it’s not MasterCard or American express, it's cash," Chakravorti said. "And roughly about anywhere between 25 to 30 percent of all transactions in America take place in cash. Worldwide, about 85 percent of all transactions take place in cash," he said. "If you think about where all the headroom is for Visa's growth, it’s kind of penetrating into all that cash territory."
While this information may still sound surprising to some, America is actually behind on the trend toward going cashless, said Chakravorti, who is also the founding executive director of Fletcher’s Institute for Business in the Global Context.
"The idea of Visa offering incentives to restaurants is sort of a cute idea, in and of itself it might be novel, but more generally the trend toward 'cashlessness' I think here in the United States we're only playing catch up," he said.
Nevertheless, from the perspective of businesses, there can be a number of different reasons to transition to a completely electronic payment system.
"You don't have to handle all this paper money, you don't have to worry about storing it, you don't have to worry about it getting stolen, you don't have to worry about transporting it from your cash register to the bank, you don't set up an arrangement with an armored car company," Chakravorti said.
"Across all businesses in the United States, the cost of transit of cash, which is basically moving cash from cash register to bank, is about $5 billion, the cost because of theft is about $40 billion, because of bank robberies is about $400 million, the cost of ATM operations is about $6 billion," he said.
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