Is cash still king? Not for long
One of the oldest adages in business is, “Cash is king.” But is it? These days, emerging alternative technologies are pushing cash to the curb. Admittedly, many people still do use cash. However, debit cards now appear to be the most popular form of payment, closely followed by cash and credit cards. The rest is a mix of checks, money orders, prepaid cards, electronic payments, and online bill paying.
Retailers and others have plenty of reasons to eliminate cash. Doing so obviously reduces the temptation of employees to steal and helps reduce the chances of a robbery. It also means no one has to count change, make sure a cash drawer balances, or haul cash to the bank at the end of the day.
Though credit cards help solve these problems, they come with a cost, one that retailers tend to pass on to customers. Retailers typically end up raising the prices charged to everyone—including those who pay with cash—to cover the fees that the credit card companies charge.
As an alternative to government-issued cash, Bitcoin made its first appearance in 2009. Today there are hundreds of other cryptocurrencies, often referred to as “altcoins.” These are mainly used for large transactions, and in the U.S., the IRS has ruled Bitcoins and several of its counterparts are not actually currencies, but rather an “investment” vehicle that fluctuates in price. You may read a lot about Bitcoins, but as a gun-store owner, you really don’t have to pay much attention to it (at least for now).
A few years ago, the Federal Reserve predicted there would be $616.9 billion in cashless transactions in 2016. That’s up from around $60 billion in 2010. Not too surprisingly, governments have been increasingly pushing for a cashless society, as cash transactions that support underground economies and criminal money-laundering efforts are difficult to track, unlike e-payments, which leave an easily traced trail in their wake.
In Germany, strong moves toward limiting cash transactions are underway. Nearby Sweden has advanced far along the cashless path, as many banks no longer accept or dispense cash of any sort; bill and coin transactions now represent only 2 percent of Swedish commercial activities.
While the elimination of cash is not yet a government policy in Canada, the country is voluntarily moving toward credit and debit card payments at a remarkable rate. Right now, a whopping 77 percent of responders to a recent survey said they preferred to eliminate cash altogether. In the Netherlands, cash is definitely not getting the royal treatment; in many places, it has simply ceased to be recognized as legal tender. More and more Dutch stores, from the upscale health-food Marqt stores to local bakeries and bagel shops, take credit or debit cards exclusively. Some retailers even describe going cash-free as “cleaner” or “safer.”
Though American consumers are not as far down the cashless road as their European counterparts, there is no doubt that cash alternatives will continue to command more attention, especially with younger buyers.
Mobile commerce, or M-commerce, is the buying and selling of goods and services through wireless, handheld devices such as cell phones and personal digital assistants (PDAs). It represented 34 percent of all eCommerce transactions globally in 2015. PayPal, the online payment system, continues to add more merchants, and now counts 14 million merchants to complement the platform’s 170 million users. Users can utilize PayPal’s mobile phone app online and in stores.
Electronic money, or e-money, is the money balance recorded electronically on a stored-value card. E-money is a floating claim on a bank or other financial institution that is not linked to any particular account. Examples of electronic money are bank deposits, an electronic funds transfer, direct deposit, payment processors, and, of course, digital currencies.
Although the digital era has been in full swing for some time, many shooting, hunting, and firearms businesses have yet to invest in the latest technology. Near-field communications (NFC) is one such technology retailers might consider as part of their marketing campaigns. Many mobile payment systems have been introduced in the past few years, including Google Wallet and Apple Pay. With these and other similar applications, consumers with mobile devices have a “digital wallet” accepted by shooting sports merchants with active NFC terminals. The list of digital wallets accepted by merchants is growing. According to many reports, Wells Fargo Bank will soon launch an NFC-based mobile payment service.
To use these mobile wallets, such as the one Wells Fargo plans, consumers enter their credit card information in their phone. Then, when shopping with merchants who use NFC technology, the consumer holds the phone over a payment terminal and taps a button on the phone or enters a PIN.
Another benefit of the new NFC technology is integration with social media. Imagine, with a quick scan customers can automatically alert followers of their location—your shop or firing range—along with an invitation to join them. A firearms business can achieve similar results by setting an NFC tag by the shop’s entrance, and a friend or “like” request for your operation’s web page will be sent to customers with an NFC-enabled phone as they enter the premises.
Along with the convenience offered by cashless transactions is an increased awareness of security concerns. A good example is provided by the new chip-encoded smart cards, which an estimated 90 percent of consumers will soon have.
By now, every gun shop owner and manager should be aware of the so-called liability shift that occurred when the new EMV (Europay, Mastercard, and Visa) technology was introduced (See SHOT Business, October/November 2015). No longer will credit card companies be liable for fraudulent use of credit and debit cards scanned or keyed into the old, non-chip credit card payment transaction technology. Instead, businesses that continue to utilize the older non-chip technology will find themselves, not the credit card companies, liable for fraud.
Finding a suitable approach for transitioning from conventional credit cards to the new EMV smart card technology has been difficult. Fortunately, there is good news for merchants in that true integrated solutions have recently been introduced. This new tool is a cutting-edge implementation of technology that takes current POS system data and migrates the communication with a chip-processing device. This streamlined process meets regulations, consumer demand, and the bottom-line concerns of merchants.
Adopting any of these new and emerging payment systems largely depends on what the customers of your firearms business prefer and are willing to deal with. Right now, it’s probably safe to say your older customers would prefer to use the payment devices with which they are most comfortable—credit cards, checks, and cash. But your younger customers think and act differently. Many rarely have cash on hand, preferring to use payment devices accessed through their smartphone. In order to attract and keep such customers—something essential to the long-term health of your business—you will have to eventually accommodate their payment preferences. And that means you will have to take that big step into a world without cash.
—Mark E. Battersby
—Illustrations by Pixel Pushers