Costs of cash versus costs of electronic payment instruments

In a new paper, Gerhard Rösl and Franz Seitz, argue that the stabilizing function of cash—especially during crises—must be preserved. However, this requires confronting not only the visible but also the hidden costs of cash and digital payments alike.

Cash remains the most cost-effective payment method for small transactions (up to €20) in German retail, while Girocard debit cards are most efficient for larger amounts. Visa/Mastercard debit and credit cards incur significantly higher transaction fees (1.5–3.15% per transaction). Company size strongly influences payment method costs: small retailers favor cash due to low fees, while large retailers leverage economies of scale to adopt digital payments efficiently.

A new Bundesbank paper delves into the true cost of payments and shows that while cash is cost-effective per transaction, debit cards are economical relative to transaction amounts and credit cards are the most expensive. Consumers value cash highly, requiring significant compensation to go cashless. Maintaining cash infrastructure is crucial for consumer choice and economic stability.

Two policy shifts - mandated cash acceptance and regional bank branch levies - if adopted, could steer the cash ecosystem towards more sustainability.

Domestic ATM cash withdrawals are subject to interchange fees, which are designed to compensate ATM deployers for operational costs. These fees have remained largely unchanged for years, in spite of rising operational costs. This divergence poses a threat to the sustainability of ATM networks.

Elsewhere on the Web provides updates and links to articles related to cash, money and payments curated on the web.

As the number of ATMs has significantly decreased in recent years, SIX and Diebold Nixdorf are entering into a cooperation to secure the long-term cash supply through ATM pooling. However, the Swiss Post also aims to be the sole ATM operator.

U.S. consumers paid credit card issuers $130 billion in interest and fees in 2022. In March, the Biden Administration curbed excessive credit card late fees.

Digital payments become a nightmare after losing your mobile phone, as I learned from two robberies in London last year.

Digital payments become a nightmare after losing your mobile phone, as I learned from two robberies in London last year. 

HSBC’s mobile and online services were out on Friday, November 24, causing dismay among customers relying on digital banking channels to conduct everyday transactions.

Outages in the RedSys platform brought down digital payments in much of Spain on November 18 and 23, raising questions about the vulnerability and resilience of the digital payments infrastructure.