Is Cash on the Brink of a Slow Death?



Cash may be an endangered species. Think about it: Around $60 billion in cashless consumer transactions occurred in 2010. In 2016, the Federal Reserve has estimated that figure will rise to $616.9 billion. 

Certainly, the move toward a cashless society is already well under way around the world. In Sweden, an estimated 59 percent of consumer transactions are cashless. And in Canada, 77 percent of those responding to a recent survey by the Canadian Broadcasting Corp. said they would prefer to eliminate cash altogether.

Stateside, 3 out of 4 Americans say they use less cash today than 10 years ago, according to MasterCard. In fact, 43 percent of Americans said debit cards were their preferred payment method, while 35 percent preferred credit cards and just 9 percent preferred cash, according to a 2014 survey of 1,000 consumers by TSYS, a payment processing company. 

“We’re definitely moving toward a cashless society,” says Perry Kramer, vice president and practice leader at Boston Retail Partners, which advises retailers on payment solutions and upgrades. “Do we think we’re going to achieve that in the next 10 years? No. But we will have a much more significantly cashless society.”

Smartphones will likely play an important role in that development. “Our findings make it clear that mobile wallets will lead the next wave of mobile engagement,” says Brett Caine, president and CEO of digital wallet provider Urban Airship. (The company likens mobile/digital wallets to a physical billfold, letting you store credit cards, coupons, tickets, and business cards on your phone.)

The Benefits of a Cashless Strategy

A cash-free existence is appealing not only to shoppers. It also has clear benefits for retailers—among them, new avenues to connect with (and learn about) consumers. Mobile payments, in particular, allow brands to collect reams of personal data from their clients, and ultimately insert their brand messaging into the consumer mobile experience, including on social media networks.

Today, as cutting-edge retailers work to eliminate their dependence on cash, jewelry businesses that hope to stay current need to take note of the latest cash-free point-of-sale (POS) innovations—chief among them EMV (Europay, MasterCard, and Visa) technology in credit cards, which helps protect users and lenders from security breaches and credit card fraud, and Apple Pay, Apple’s mobile wallet app that’s accepted at hundreds of chain retailers, from Bloomingdale’s to Best Buy. 

In an increasingly digital marketplace, the time is right for jewelry brands and retailers to familiarize themselves with cashless payment systems currently gaining ground. 

Next-Gen Credit Cards 

First and foremost, retailers must be aware of how credit cards are evolving. “Smart” cards—also known as chip cards—are embedded with computer chips that are more secure against hackers than the traditional magnetic stripes. 

In order to accept EMV cards, retailers need EMV readers—and the United States is lagging big-time on this compared with Europe, where chip cards are the norm. Experts, however, say we’re slowly getting there. It’s estimated that almost 90 percent of U.S. consumers will have chip-encoded cards by the end of 2017. 

The transition to EMV, first announced in the United States in 2011, has been a daunting chore for many jewelry retailers. A smattering of phone calls from JCK to corporate and independent jewelry stores—including London Jewelers in Manhasset, N.Y., and Tiffany & Co.’s New York City flagship, neither of which use an EMV credit card reader—revealed that jewelers are in no hurry to embrace chip cards. “We’re planning to switch at some point, but it took so much to do the last switch-over, we’re just tired out,” said a representative from an independent jewelry store who spoke on condition of anonymity. 

By now, though, every jewelry retailer should be aware of the so-called liability shift that comes with failure to adopt EMV technology: In essence, businesses and card processors using old technology after the Oct. 1, 2015, switch date will find themselves, not the credit card companies, liable for fraudulent charges.

“I’ve worked with some retailers where it was costing them a million dollars a month in fines and chargebacks not to be EMV-compliant,” Kramer says. “There’s a big financial incentive for many retailers to be on it. Secondly, there’s going to be a tipping point in the next six months or so, where the consumer is going to assume you accept it and, if the retailer doesn’t have it, they’re going to feel less secure.”

Considering that 30 percent of U.S. retailers and 40 percent of all retail transactions use the EMV technology, Kramer thinks the nation is “rapidly getting to that point.” 

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The Pros and Cons of Mobile Payments

The rise of mobile payment options has further reduced the need for consumers to carry cash. Leading credit card companies Visa and MasterCard have both introduced technology that lets users pay with a swipe of their phones. MasterCard’s Maestro card (and accompanying phone app) allows shoppers to pay by waving either the card or their device in front of a reader, while Visa’s payWave uses an embedded computer chip to send payment information to a secure reader at the point of sale. Users wave their card or device within 1–2 inches of the reader to make payments.

Meanwhile, Apple Pay and other mobile wallets—such as Android Pay, Google’s mobile wallet app, and Samsung Pay, made for Samsung phones—can store, for example, credit, debit, and loyalty cards and connect a credit card to an account that enables users to pay via near field communication (NFC) technology at terminals found at hundreds of stores. Mobile payments are still relatively new. And most independent brands that accept Apple Pay do so through third-party POS systems, including Square and Shopify, which integrate the Apple Pay functionality into their interfaces.

There are, however, caveats. The fact that Apple’s iPhone 6 is the only smartphone that even works with Apple Pay has slowed down the advance of mobile wallet payments. In the United States, iPhones account for about 44 percent of the estimated 207 million smartphones in use. Of these iPhones, approximately 29 percent are from the iPhone 6 family. That means only about 13 percent of all U.S. smartphones are even capable of using Apple Pay. 

Another issue that’s holding back Apple Pay and other mobile wallets: vendor adoption, at both POS and online. 

Forbes reports that a survey of nearly 100 retailers by PCM Research and ACI Worldwide found that, while half said they were interested in mobile POS and mobile wallets, only a fifth had implemented an omnichannel payments program. Among the challenges retailers reported: incompatible systems, data integration, and the inability to track customers. 

The jewelers with whom JCK spoke say they don’t feel compelled to accept any mobile wallet solutions, not even Apple Pay. Adam Gorman, co-owner of jewelry store I. Gorman in Washington, D.C., said he’s never considered accepting Apple Pay because no one’s ever asked to use it. 

Worries over the security of contactless payments are another roadblock. The security of EMV cards is predicated on the combination of encryption keys and a consumer-generated PIN code. But with contactless payments (usually made on a smartphone), a PIN is not requested, stripping them of a security layer. 

“Contactless payments are probably the future,” says Itai Sela, CEO of B2, a consultancy that specializes in computer-chipped credit cards and contactless and NFC payments. “But they are not secure, and if their security is compromised—which is easy to do—consumers will lose trust in [the payment system] and therefore not use it anymore.”

All that aside, Kramer says the biggest obstacle to a cashless society is “the 37-some percent of America that’s unbanked—people who don’t use a bank. That’s a very large part of our society. They don’t have a credit card—but they will get a prepaid card that they reload all the time. Until we can get to the point where we can take these payment cards at retail, the cashless [equation] will be hard to reach.” 

Future Pay

Despite the challenges to achieving a cash-free society, retailers need to consider their cashless options if they hope to stay relevant to millennials. According to CreditCards.com, 13 percent of that demographic reported using digital currencies in 2014, while 26 percent expect to use them by 2020. High-income consumers are also more open to using digital currencies than those in lower income brackets. Nineteen percent of high-income consumers used digital currencies in 2014, and 32 percent expect to by 2020. 

“I think we are going toward a cashless society,” says Sela. But, like Kramer, he says the wheels of this train are moving slowly. Which means there’s still time to get up to speed before the new cashless world is upon us. (Additional reporting by Emili Vesilind)

 

Becoming Cashless

Demographics play an important role for every jewelry retailer attempting to enter (or expand within) the cashless world. After deciding what customers—existing and prospective—want in the way of cashless payment options and what they will accept, be sure to consider these factors:

 Is your store EMV-compliant and able to accept the new chip cards? Liability for potentially fraudulent sales is at stake. For more info on EMV compliance, consult the EMV Migration Forum (emv-connection.com) and the Smart Card Alliance (smartcardalliance.org/activities-emv-migration-forum).

 If your store can accept the new EMV cards, are they compatible with your business’s existing POS system? Integration remains a work in progress, so shopping for a new, fully integrated system is important. 

 Does your store’s current credit card provider offer programs such as MasterCard’s PayPass (mastercard.com/sea/consumer/paypass.html) or Visa’s payWave (usa.visa.com/run-your-business/small-business-tools/payment-technology/visa-paywave.html) for contactless sales? 

 Although their acceptance is still limited, Apple Pay (www.apple.com/apple-pay) and mobile wallets such as Android Pay (android.com/pay) offer yet more cashless options. Check out this primer on mobile wallets: wellsfargo.com/mobile-payments/mobile-wallet-basics.

Don’t forget PayPal (paypal.com), the still-growing online payments system that now comprises 14 million merchants and 170 million users. PayPal can be used online, in apps, and in a brick-and-mortar store. —MEB

(Top: Tim Gainey/Alamy; inset: Steve Bronstein/Getty Images; $5 bill: Nik_Merkulov/Thinkstock)