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Jeremie Leroyer, Airtag
Jeremie Leroyer, Airtag
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Cash Not Accepted Here

Smart phones are chipping away at the physical dollar's dominance.

As a culture, we've been conditioned to think that paying with cash is always better, whether it's for taxis, gas stations, or shopping on the street. Trips to a local bank branch or an ATM are still normal for largely this reason- because cash is still the universal method of payment accepted at all locations.

The reality, however, is that smart phones are gradually chipping away at the physical dollar's dominance. Mobile wallets have expanded consumers' options, and in the process have begun to heighten our expectations about what we gain with our transaction. As a result, we are nearing a time when cash may no longer be the preferred method of exchange. Banks, then, should seize the unique opportunity to get in on the ground floor of the mobile commerce revolution in order to reach an entirely new generation of customers.

The Case for Mobile Payments

When critics denounce mobile payments, they are often denouncing it as a standalone feature. The standard argument is that mobile payments are a solution looking for a problem, and it’s easy to see where this opinion comes from: After all, today’s mobile commerce ecosystem is highly fragmented, and there is no established traditional user experience.

However, there are several key features to mobile payments that indicate a clear advantage over cash payments. Most important for financial institutions is the increased protection against fraud that mobile wallets afford. The biggest failure for payment cards has been their lack of sophisticated security- something that mobile payment technologies are working aggressively to combat. Mobile payments also afford banks a way to integrate brand-specific, loyalty-based incentives into transactions- a capability that few banks currently take advantage of, but that have the potential to be instrumental in attracting and keeping long-term customers. By standardizing the way they reward customers, financial institutions can help to reinforce the relationship between a customer and their brand, well beyond an individual teller or branch.

Many e-commerce providers have already scoped these advantages out. Moves such as PayPal’s recent acquisition of Braintree demonstrate that the demand for mobile wallets is real, as more and more established names jump into the payments race alongside financial institutions. If banks develop their own mobile wallet, they can go on the offensive against the likes of PayPal and Google Wallet and carve out their own slice of the market, reaching out to a new generation of tech-savvy potential customers while also becoming the mobile commerce providers for the loyal customers they already have. After all, banks have a weapon that independent mobile wallet vendors do not- a customer relationship that’s already in place.

Cash is Expensive

Mobile loyalty options may be the item that momentarily lures customers away from cash, but the inefficiency of utilizing cash will be what keeps them there. According to a study by Tufts University, the average American household loses $1,739 per year due to cash. This includes the fees required to cash checks, to withdraw cash from a non-ATM network, or to access wages loaded by an employer onto a payroll card. In the days of brick-and-mortar transactions, many of these fees were acceptable or even inevitable, but as time goes on, cash becomes costly in more and more situations.

[See Also: PayPal Is The Most Trusted Brand For Mobile Wallets]

Looking at projections for the mobile wallet industry, it’s clear to see that the transition away from cash inefficiency and towards mobile commerce is underway. A recent study by eMarketer found that mobile payments are expected to top $1 billion in the United States this year, and will clear $58 billion by the end of 2017. It’s hard to see a future where cash will ever go away completely- it’s too important, even as merely a symbol, for that to happen. However, as the drawbacks of cash begin to make less sense and become an inconvenience to customers, people will start to move to an option that makes more sense. That option is increasingly looking like it might be mobile wallets, and banks- as the de facto source of cash and commerce for many years- are in the unique position to shape the future of mobile wallets.

Jeremie Leroyer is CEO of mobile shopping solutions providerAirtag

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finansielle raadgivere
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finansielle raadgivere,
User Rank: Apprentice
7/10/2014 | 6:20:50 AM
re: Cash Not Accepted Here
The current disruption in the market will continue to unfold, and technologies will continue to offer retail brands many new opportunities.But in the long run, if history has taught us anything, the case for closed platforms is closed, and open mobile payment platforms are the future.
Becca L
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Becca L,
User Rank: Author
12/16/2013 | 5:42:16 AM
re: Cash Not Accepted Here
Great idea, maybe even a mobile punch card.. pay with this mobile payment app 10 times and get a free bagel. I'd consider...
Kelly22
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Kelly22,
User Rank: Author
12/9/2013 | 3:19:33 PM
re: Cash Not Accepted Here
Maybe they could try offering some kind of rewards program for trying the mobile payment program - like 50% off a bagel/coffee when you first download. I feel like having some kind of incentive makes people more likely to try out the mobile option.
Becca L
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Becca L,
User Rank: Author
12/9/2013 | 2:53:09 PM
re: Cash Not Accepted Here
That's really interesting that they tried - and failed - to get customers on a mobile payment program. I'm sure they weren't the first to try, I wonder if there have been any successes, and what approaches they took beyond postcards and verbal warnings.
Byurcan
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Byurcan,
User Rank: Author
12/9/2013 | 2:05:51 PM
re: Cash Not Accepted Here
Yes, they get trained on using that stink eye to guilt you into more purchases.
Becca L
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Becca L,
User Rank: Author
12/9/2013 | 1:57:15 PM
re: Cash Not Accepted Here
Exactly, Dunkin, no problem, but the guys behind the counter at local shops really know how to give the stink eye when you go to purchase a Snickers with a card. 2 Snickers? Double the stink eye... okay, I'll also take some fancy fruit juice... and a month's supply of paper towels. Better?
Nathan Golia
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Nathan Golia,
User Rank: Author
12/6/2013 | 9:50:53 PM
re: Cash Not Accepted Here
My local bagel shop tried valiantly to get everyone to use a mobile payment program (I forget which one it was called) because of fees related to credit card swipes Gă÷ they would hand out postcards with every order and when I went in the guy would always tell me to download the app and try it out because eventually he was going to get rid of credit cards. Well, I didn't go for a while (I go through phases where sometimes I want a bagel every day, and sometimes I don't feel like walking that far), and one day I went back and it was gone and people were swiping their cards for $5 bagel and coffee again. It's a very hard habit to break. I try to use cash there as much as I can but usually, by the time I get bagels and drinks for the whole family, the interchange fee is the least of my worries.
Nathan Golia
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Nathan Golia,
User Rank: Author
12/6/2013 | 9:48:00 PM
re: Cash Not Accepted Here
Well, it would take a revolution in the cashless payment processing realm to erase those kinds of costs completely. There's lots of people taking a cut along the line...
Nathan Golia
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Nathan Golia,
User Rank: Author
12/6/2013 | 9:46:55 PM
re: Cash Not Accepted Here
Sheesh. And how much money are these people making per year after taxes and any other deductions (like, say, if they're lucky enough to have any benefits at their job?) If they make $25,000 per year before taxes ($12/hr) it's likely the equivalent of a whole month's after-tax pay just to get at their money.
Kelly22
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Kelly22,
User Rank: Author
12/4/2013 | 7:53:29 PM
re: Cash Not Accepted Here
I just signed up for Mint and already don't know how I lived without it. Definitely worth looking into if you want to keep your spending in check
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