Visa Takes War on Cash to Restaurants
July 12 2017 - 8:18AM
Dow Jones News
By AnnaMaria Andriotis
Visa Inc. has a new offer for small merchants: take thousands of
dollars from the card giant to upgrade their payment technology. In
return, the businesses must stop accepting cash.
The company is announcing the initiative this week as part of a
broader effort to steer Americans away from using old-fashioned
paper money. Visa says it is planning to give $10,000 apiece to up
to 50 restaurants and food vendors to pay for their technology and
marketing costs, as long as the businesses pledge to start what
Visa executive Jack Forestell calls a "journey to cashless."
"We're really viewing this as the opening salvo," said Mr.
Forestell, Visa's global head of merchant solutions, of the
potential total $500,000 commitment.
Consumers at those stores would be able to pay for goods or
services only with debit or credit cards or with their cellphones.
In exchange, Visa is offering to pay for upgrades to merchants'
technology at the checkout line so that they can accept contactless
payments, such as Apple Pay. The $10,000 incentive can also help
cover some of the merchants' marketing expenses.
Visa will pick the participating merchants from an application
process that starts in August. Online-only shops are excluded.
Visa has long considered cash one of its biggest competitors and
has been taking steps to chip away at it. Getting rid of cash is a
priority for Visa Chief Executive Al Kelly, who took over late last
year, especially as cash and check transactions continue to grow
globally.
"We're focused on putting cash out of business," Mr. Kelly said
at Visa's investor day last month, adding that converting check and
cash to digital and electronic payments is the company's
"number-one growth lever."
Visa processes credit and debit card payments on behalf of banks
and merchants. The company makes money when consumers use their
Visa-branded cards. An increase in transactions and payments volume
over its network typically results in rising revenues.
The company accounted for 59% of purchase volume on U.S. general
purpose credit and debit cards last year, compared with rival
Mastercard's 25% market share, according to the Nilson Report, a
trade publication.
Still, cash remains a formidable competitor. Check and cash
transactions totaled $17 trillion world-wide in 2016, up about 2%
from a year prior, according to Visa.
Cards have made a dent in cash in the U.S., but cash remains the
most widely used payment form among Americans, accounting for 32%
of all consumer transactions in 2015, compared with 27% for debit
cards and 21% for credit cards, according to a November report by
the Federal Reserve Bank of San Francisco.
Visa is trying to turn those numbers more in its favor. In the
U.S., it is going after spending categories, such as parking and
rent, that have been entrenched in cash and check payments for
decades. Abroad, it is partnering with governments to move more
payments onto its network, including an agreement that it recently
signed with the Polish government to move the country to a cashless
system.
Some merchants have already stopped taking cash. New York
City-based 2nd City, a Filipino taqueria, hasn't accepted cash
since it opened its doors in 2016. Michael Ryan, the co-owner and
co-founder, said he never ordered cash drawers or a safe. By not
having to count cash, visit a bank or order change, Mr. Ryan
estimates, the manager on duty saves about 23 hours a week.
The restaurant, which mostly caters to millennials, has had
"very little" push back from customers, Mr. Ryan said. He added
that the downside is the fees that his business pays to the card
issuers.
Indeed, many merchants prefer cash because they don't have to
share the revenue with card companies. Credit-card interchange
fees, which networks like Visa set and that merchants pay to the
banks that issue their cards, are on average around 2% of the
transaction amount, according to the National Retail Federation,
the largest trade group that represents merchants in the U.S.
"The idea that merchants don't want to accept cash is a myth,"
said Mallory Duncan, senior vice president and general counsel at
the National Retail Federation.
Visa says merchants making the move stand to benefit from higher
sales and lower theft risk. Some, though, are skeptical that Visa
can take the cashless push much further.
"Getting rid of things like rent checks is difficult," said
Chris Donat, a managing director who covers credit-card companies
at Sandler O'Neill + Partners.
(END) Dow Jones Newswires
July 12, 2017 08:03 ET (12:03 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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