2 PAYMENT METHOD PROFILES: CASH
Merchant Cost Considerations Cost of Cash Analysis There are few updated and credible cost of cash analyses in the public domain. The European Commission calculated the cost of cash acceptance for merchants at 0.2% when imposing a cost of cash “Merchant Indifference Test” methodology as part of setting EU interchange fee caps in 2015 while other sources set the cost of cash as high as 15.3%. 118 A key issue with accurately calculating the cost of cash acceptance for merchants is that it contains several subjectivities, particularly with respect to the allocation of front office and back office on-site labor cash handling time (see Table 2.2). There is clearly no academic consensus but one of the best studies available seems to be by the Kansas City Fed, which published cost of cash analysis for six countries in 2021, based on the criteria included in Table 2.2. The KC Fed’s key datapoints can be found in Table 2.3 below:
Type
Cash Costs for Merchants 119 Processing Cash Transactions Stocking Registers with Cash Cleaning Excess Cash Changing Receipt Paper Receipt Paper and Ink Counting and Sorting Cash Preparing Cash for Deposit Transporting and Depositing Cash POS Terminals Software to Record and Analyze Payments Buying or Leasing Cash Storage (Safes) Cash Shortage, Theft, and Counterfeit Theft Insurance Premiums Cash Deposits Banknote and Coin Ordering
Front Office
Back Office
Infrastructure
Fraud, Losses, and Mitigation
Fees
Table 2.2
Cost of Cash by Country 120 Country Year
Cost of Cash (per txn, local currency)
ATV (local currency)
Cash Spending (local currency) 121
Cost of Cash (%)
2006 2013 2014 2018 2002 2009 2007 2013 2002 2009 1999 2018
0.24 0.29 0.29 0.31 0.17 0.2 1.28 1.32 2.58 6.5 0.12 0.19
19
1.26% 1.04% 1.61% 1.48% 1.89% 1.54% 0.59% 0.85% 1.56% 2.58% 0.86% 0.83%
Australia
28
136,186 153,230 96,759
18 21
Canada
9
Netherlands
13
72,928
218 156 165 252
Norway
142,800
Sweden
239,700
14 23
United States
1,574,570
Table 2.3
50
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