Antiques and Collectibles Merchants Struggle to Adapt to Cashless Payments
Some time ago, I left $300 worth of merchandise on an antique mall’s checkout counter and walked out the door. Unfortunately, they didn’t take digital payments or cards, and I didn’t have $300 in cash.
Last year, I revisited the mall and, remembering my previous experience, was flush with cash. At checkout, I saw a sign that read, “No cash accepted—debit or credit cards only.” I laughed at the irony and whipped out my plastic.
Soon, debit and credit cards won’t be accepted, either. Instead, the world is moving toward payment by mobile apps—digital wallets. IndependentBanker.org explains: “…a digital payment results when a transaction is fully electronic, initiated by a mobile device or computer, and where the funding mechanism does not have to be presented in a physical setting…[it] may be a physical credit or debit card, but that card is stored in a digital environment.”
Cash Is Crashing
Arguments rage as to whether we are becoming a cashless society. I hope not. But digital payment methods are hard to ignore and are clearly trending.
Worldwide, governments are pushing for cashless payments. The United Nation’s Better Than Cash Alliance was organized with one goal in mind: the universal application of digital payments. The Alliance boasts eighty member countries. Beroe, Inc. reports that globally, the 2020 mobile wallet adoption rate was 50-55%. It is expected to rise to 75% by 2025. Cash is losing its appeal.
NPR Radio IQ tells us that 95% of transactions in Sweden are already digital or mobile. Some Swedish churches pass a digital payment system along with the collection plate. A few homeless people sell newspapers on street corners and take digital payments.
Who Has Skin In The Digital Payments Game
As with all paradigm shifts, there are winners and losers. Those affected by the rapid transition to digital payments include governments, banks, financial institutions, consumers, and merchants. The shift is cross-cultural and all-encompassing. Everyone is affected—even those who don’t use digital wallets. Of course, some groups will benefit more than others. In exploring the ramifications, I’ll take a tip from Deepthroat (of Watergate fame) and “follow the money.” Those that have skin in the cashless payments game are:
The blog of the World Bank presents a list of five reasons why digital payments are good for governments. I’ll summarize their points because the Bank can get a little long-winded and self-righteous. So pardon me if I seem a bit skeptical of their benevolent claims. Their points are:
- Broadening the tax base. In essence, plugging holes. It’s estimated that the U.S. underground economy—amounts paid “under the table” in cash—is over $2 trillion annually. Digital transactions can be tracked and tax liabilities assessed. You can run, but you can’t hide.
- Enhancing transparency. Data collected from digital transactions can be collected and analyzed. This will drive privacy advocates crazy. If they had privacy concerns before, wait until the government can track every nickel spent.
- Reducing the compliance burden. That’s bureaucrat-speak for making it easier for you to pay your taxes.
- Improving administrative efficiency. (Pardon me while I laugh. When has adding another layer to government made it more efficient?)
- Advancing growth and other policy objectives. Clear as mud. No matter how often I read their explanation, I can’t figure out what they are trying to say.
Let me add that governments also spend a lot of money creating, producing, and distributing cash. Digital payments will cut down on the need for most of these expenses.
Banks are on the cusp of a substantial digital payments windfall. IndependentBanker.org estimates that by 2023 the value of the digital payments market will be about $1.3 trillion. As a result, not only will bank revenue increase dramatically, expenses will fall. This is because digital transactions don’t require tellers or ATMs to dispense cash.
Also, Federal regulations require banks to keep a certain amount of cash on hand. However, cash requirements may be severely reduced when most transactions are digital.
Digital payment processors stand to gain the most from going cashless. They charge a fee for every transaction. When someone pays in cash, they don’t make a dime.
The great thing about cash is that it is free to use. The government doesn’t charge a transaction fee whenever I pull five bucks out of my wallet and buy a latte.
Consumers: Pros and Cons Of Digital Payments
For consumers, digital payments are a bad news-good news scenario.
First, the bad news. What concerns me is that the existing digital payment system is built on sand. These transactions rely on a series of connections between banks, card companies, phone providers, and payment apps. If one part of the system breaks down, the entire system breaks down. Currently, I don’t think we have the nationwide infrastructure to handle universal digital payments.
I’m also concerned about cybercrime and the privacy of my personal information. So, for now, I will keep carrying cash and cards. I’m not going to jump into the deep end of the pool until I’m sure there’s water in it. It’s too soon for me to go all-in on digital payments.
Now for the good news.
Banks and digital payment providers have been harping—for nearly two years—that cash may carry viruses, and electronic payments are safe. China’s central bank even disinfected banknotes in areas affected by the coronavirus. There is no evidence to support this claim. It’s a scare tactic. But, fears over disease transmission have increased awareness. Retailers and restaurants favor digital payments over cash to reduce exposure for employees. The fact that digital payments are touchless has increased their appeal.
Also, great strides are being made to increase the security of digital payments. Tokenization—the process of replacing sensitive data with a unique string of numbers—is standard practice. Pin codes, PCI compliance, address verification, and SSL protocols are commonplace. Biometric scanning—using facial recognition or a fingerprint—is rapidly evolving. DNA verification (spitting into a cup?) has been discussed.
How Digital Payments Affect Antiques and Collectibles Merchants
Antiques and collectibles merchants love cash. It goes right into the register—no waiting for bank processing, no transaction fees, no chargebacks. Discounts are sometimes offered for paying in cash.
For decades, cash has been the lifeblood of the A&C business. Pickers carried wads of cash to shows, fairs, and yard sales. Dealers paid pickers for their finds in cash. I once met a picker who claimed to not have a business bank account. He paid for merchandise in cash and sold it for cash. Profits went into a safe in his home, and unsold inventory went into his barn. There was no paper trail, no books kept. He claimed enough profit to justify his lifestyle to the IRS. A risky and irresponsible way to do business, for sure.
But requiring cash transactions is inconvenient for customers. Merchants lose sales by not offering multiple payment options. Increasingly, consumers don’t carry cash. The Pew Research Center says that only about 31% of Americans make purchases with cash in a typical week. Most don’t carry cash when they go out, and about half of those that do carry less than $20. The remaining 69% of transactions is split between digital, credit, debit, and checks.
Customers don’t care how merchants take their money. They expect them to process whatever form of payment they offer. Increasingly, cash is not the payment method of choice for consumers. Even a babysitter can say “Venmo me” and have immediate access to their money.
Robert Conery, C.O.O. of Avidia Bank in Hudson, MA., says:
“RTP [real time payment] will become the expectation, and customers will no longer need to select a payment method, nor will they care how the payment was processed. [Instead], they will simply make a payment.”
How quickly is this likely to happen? “I would never predict the death of cash over the next decade or two. I think cash is going to be with us for a long time to come,” PayPal CEO Dan Schulman recently told the New York Times.
Of all the trends I have discussed in this column, digital payment is the most profound. Digital payments lay the foundation for switching from fiat currency to blockchain currency. Eventually, we will all have to adopt the technology, like it or not. That’s the way it is. That’s the new normal.
Wayne Jordan is WorthPoint’s Senior Editor. He is the author of four books: The Business of Antiques published by Penguin Random House, Antique Mall Profits for Dealers and Dabblers, Consignment Gold Rush: the Ultimate Startup Guide and Relocate for Less published by Learning Curve Books. He is a regular contributor to a variety of antiques trade publications. He blogs at sellmoreantiques.net.
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