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Cash and Card Usage by the Public and Merchants

Categories : Cash is efficient, Costs of cash versus costs of electronic payment instruments
August 7, 2017
Tags : Cash, Europe, Retailers
Cash is cheaper than cards for merchants and it also contributes to society thanks to the tax commercial banks are subject to for using it: seignorage.

Cash is the cheapest payment method in terms of costs incurred for merchants, a cleavage largely caused by interchange fees merchants are subject to when using credit and debit card payment terminals. Also, cash turns out to be the most efficient payment method the larger the company. For example “for merchants with a turnover of more than €200 million per annum in the retail sector other than cars in the UK […], the time for a transaction was of only 24.13 seconds versus 35.17 for debit cards and 38.89 for credit cards” (Winchcombe, p.4). And finally, cash actually brings a direct financial benefit to society thanks to the seignorage paid to the central bank for using it, contrary to cards which only result in income for banks and scheme operators.

John Winchcombe analyses and compares the cost of cash versus cards especially for CashEssentials in his research paper “Cash and Card Usage by the Public and Merchants”. The report was written following the European Commission’s decision to cap card interchange fees in the Eurozone. The data in the report is based on the European Commission’s Directorate General for Competition’s 2015 investigative work carried out to cap card interchange fees.


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