Tuesday, September 12, 2017

Current fee structure favor cash payments

Consumers prefer cash .... of course. They can withdraw cash from ATM without any charge.

Vendors also prefer cash, because they do not have to incur any fee for banking in the cash. They do not realize that there is a high cost of their employee's time taken to collect cash from customers and give change and count the cash at the end of the day and when banking in the cash. The bank does not charge a fee.

The helper may be an unpaid family member, so the cost of the time spent is not counted.

This is why cash continues to be popular, even though it takes time that can be quite costly, when it is properly costed.

Vendors do not like credit card payments. They have to install a device and a connection to the bank or credit card operator. In many cases, they need several devices and connections.

The bank also charge a heavy fee, say 3%, for credit card payment.

If cash continues to be free and card payments are charged and cost has to be incurred for installing devices and connections, simple common sense says that cash will continue to be the preferred mode.

This can only change if the fee structure is changed to make it cheaper and more convenient to use cashless payments.

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