How You Gonna Pay?

By Robert L. Cain

Since the beginning of the pandemic, 76 percent of businesses have done it and 82 percent are changing a process, while 51 percent are transitioning clients to it.  Some 70 percent, say they’re “willing to invest in the technology required to advance their payment system,” reports mastercard.com. It is something that both businesses and consumers will have to deal with.

That, of course is digital payment: its growth unstoppable. “It’s been clear for some time now that the cashless society would eventually become reality, with new technologies and adoption trends accelerating at a steady pace,” opined a July 28,2020 blog by mobilepaymentstoday.com. They further claim that “cash is no longer king” and cite the example of Sweden, which has announced its goal of attaining a cashless society by 2023 with countries such as Argentina, and The Philippines not far behind.

“Consumers,” reports TDC Research, “have reduced their physical currency to half of what it was before the pandemic” turning to cashless transactions.  Worldpay reports the 30 percent of in-store cash purchases today are expected to drop to 19 percent by 2023.  And today, 48 percent of in-store purchases are by card and expected to increase to 52 percent by 2023.

Banks and credit card companies love it and governments salivate. Senator Tom Cotton (R-Ark.) quoted in a July 1, 2020 article in Forbes said, “The U.S. needs a digital dollar…The U.S. dollar has to keep earning that place in the global payments system.”

Every business and rental owner can look forward to dealing with this “modernization” as cash disappears.  Plans have been in place by companies such as Mastercard and Visa to completely eliminate cash for some time.  Central banks already have in place  digital payments or are testing it to discover its feasibility, reports Mastercard.  They call it “modernization” and a “level[ing] of the playing field for everyone.” Why it is either is a good question.

What is digital currency and what effects will its increasing use have on small businesses and rental owners?

Generally, digital currency is any medium of exchange that doesn’t involve the direct exchange of cash.  The Better Than Cash Alliance (Betterthancash.org) defines them generally as “an umbrella term applied to a range of different instruments. . . .”  Even checks can be considered digital since “they require the payee to have an account and are also traceable.”

All of the cashless methods require that no untraceable money, dollar bills, coins, etc. be exchanged.  The key is traceable, and we’ll get to that in a minute.

The professed advantages of digital payments are efficiency and speed, accountability and tracking, reducing corruption and theft.

How is it more efficient and faster?  First, money goes directly into the payee’s bank account, no deposit slips, no trips to the bank, no question that the money’s available.  Of course, it reduces theft in retail because there’s no cash to steal and any digital transfer is easy to track.

Eliminating cash also benefits the tax authorities because every transaction is recorded and easy to follow.  No more under-the-table payments to handymen, contractors, and illegals. 

Going cashless requires special equipment and bank accounts for the payee, but not necessarily for the payer.  We’ll get to that in a minute, too.  The particular issue involves small businesses and sole proprietors who receive cash payments.  They may not accept credit and debit cards now. That means buying special equipment so they can accept credit and debit cards. It can be as easy as an attachment to a smart phone that enables card scanning. Then, of course, they have to pay the discount on every transaction, 2.5 to 3 percent interest plus a per transaction charge.

It can present a difficult situation for handymen, and small rental owners and managers. When an applicant pays a deposit, it can be by check, but for many properties serving lower income tenants who are part of the 25 percent of people who are “unbanked” or “underbanked” that can mean they could not pay cash for their security deposits and rent.

Then there are transactions between individuals such as garage and Craigslist sales.  Most individuals don’t have a way to accept any payments except in cash (or checks).

People worry about having their every move tracked by government and businesses.  Since every purchase made with a card or contactless Apple Pay transaction is tracked.

Look for the burner-card solution. Just like burner phones, these are cash cards that are refillable and make payments anonymous.  Options from gift cards to prepaid Visa and Mastercard refillable cards are available.  That anonymity quest will become more prevalent at least until government finds a way to crack down on them, too.

Stores such as Target and Walmart offer them.  Some cards are refillable, some not, so if refilling is intended, read the terms and conditions carefully.  Others are refillable but require the person with the card to provide their Social Security Number.  So much for anonymity. One of the more interesting ones is the Starbucks card. Starbucks’ card is one that doesn’t require anything but plunking down the cash at a Starbucks and having the clerk and refill the money on the card.

People use them today for online purchases because of the limited amount of cash available put on the card, so any hacker who tried to use it would be sorely disappointed.  There are also the unbanked folks who use them when a credit card is required such as renting a car or buying a plane ticket.

The goal is to completely eliminate cash.  It won’t be this year or next year, but little by little we slide down the slippery slope to a cashless society. Banks and credit card companies say the elimination of cash makes it easier and cheaper for them and provides them with an entirely new way to keep track of purchases and thus add a new profit center by selling personalized ads, as Google does with searches on its website. 

Written for Zip Reports where they do employment and rental screening.

Contact Robert L. Cain at bob@cainpublications.com

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