The paper was authored by Santiago Carbo-Valverde and Francisco Rodriguez-Fernandez. Santiago Carbo-Valverde is a Professor of Economics and Finance at the Bangor Business School in the United Kingdom and of CUNEF Business School in Madrid. Francisco Rodriguez-Fernandez is a Professor of Economics at the University of Granada in Spain. He is a senior economist at Funcas and the Funcas Observatory of Financial Digitalization, the main research centre on financial digitalization studies in Spain.
The study identifies and measures the main cost items of cash and debit cards for consumers and retailers. 19 different cost components were identified.
The report concludes that globally, the unit cost of debit cards is 2.8 times larger than the cost of cash. For an average retail transaction of $59, this would imply:
There are significant variations across geographic areas but cash is cheaper than debit cards in all.
In the case of cash, ATM fees are by far the main cost item for consumers and represents 92% of costs. For retailers, cash-in-transit represents the two thirds of cost the transaction time represents 23%.
In the case of debit cards, annual fees represent 70% of consumers’ costs while transaction time represents 23%. For merchants, the merchant discount fee represents 82% of costs.
Most of the cost is borne by retailers. In the case of cash, they assume 56.14% of the cost and 54.7% in the case of debit cards.
Measured in relation to GDP, cash represents 0.114% versus 0.252% in the case of debit cards.
The report also concludes that banks generate a profit margin when they distribute cash. The average costs of cash distribution including cash-in-transit and ATM operating costs are lower than ATM revenue.
In February, the Deutsche Bundesbank also concluded that cash is quick and cheap. The study found that cash payments costs 24 cents on average compared with 34 cents for a debit card transaction.
Download the report below: