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Got Cash? (Craig Douglass On Consumers)

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“Excuse me. Do you have change for a $20?” You probably didn’t even check your wallet and immediately thought, “Nope.” That’s because you, like so many other Arkansans, are carrying less cash and relying on debit or credit cards — or other forms of mobile payment applications— to make a purchase.

While we are not yet a cashless society, we definitely are moving toward a less-cash society. In fact, a Boston financial consulting group recently reported the use of cash will decline a full 17 percent by 2015 (measured from a 2010 benchmark). And the Federal Reserve reports there were 123 billion noncash payments in 2012, only 18 billion of which were by check.

The consumer with less cash in a wallet, purse or pocket is relying more on the simple debit card. The card is considered cash, or should be, as it is tied directly to the consumer’s transaction bank account balance, or is a prepaid debit card with a specific amount of cash “loaded” in the card account and drawn down as purchases are made. Pretty simple. And most of you have one. But what about some transactions traditionally requiring cash? Are these entities suffering by not adding to their payment options? The answer, of course, is yes. Here are two examples.

The Arkansas Scholarship Lottery has reported declines in sales during the last year. While there may be a number of circumstances affecting instant and online ticket sales, one factor surely is that lottery players are limited to cash only for their purchases. The Arkansas lottery would like to do away with the cash-only limitation by allowing purchases with debit cards. And rightly so. The purchases would still be made in person at licensed area retailers, and the prohibition on credit card purchases would stay in place. With the allowance of debit card purchases, lottery players would be afforded the same consumer convenience as with other cash-related purchases, which would be their choice.

We’re not sure sales would increase, but they certainly would not be retarded due to a cash-only requirement. To buttress the lottery’s argument, a March survey conducted for the lottery among 500 Arkansans reported 55 percent of lottery players responded that there have been times they have not purchased a lottery ticket because they did not have cash on hand. The implementation of debit card purchases is imminent.

Consider, too, the Salvation Army’s holiday season kettle program. Last year, according to The New York Times, the charitable organization’s red-kettle contributions from loose change totaled $138 million. A nice sum. However, the ringing of the bells outside shopping malls and grocery stores garnered 10 percent less in cash than the year before. Maj. Ron Busroe of the Salvation Army said a big factor was people have fewer coins and bills in their pockets and the 125-year-old fundraising tactic would have to adapt. Perhaps next year the nonprofit could use PayPal or Square and add a digital kettle for a savvy bell ringer to promote to passersby. Just select an amount, swipe your card and move on. The Salvation Army has seen some initial success with an online kettle, which last year brought in $2.4 million.

Mobile pay platforms using smartphones are moving ahead as well. But slowly. The reason, experts say, is because there is no compelling need to turn to mobile applications because credit cards and debit cards are working well and their use is continuing to increase, thus replacing cash. (A Yankee Group survey found that out of the 150 million or so smartphones in use in the United States at the end of 2013, only 16 percent used a mobile wallet to make a point-of-sale transaction.)

It’s all very techy and trendy, to be sure. But some individuals in the service business, whose very livelihood depends on tipping, are seeing real benefits. A recent visit to a local popular Italian restaurant saw our dinner capped off with the wait staff swiping our debit card on an iPad and offering the pad to us simply to use the touch screen to tap in a tip at 20 percent, 25 percent or more, and sign with our finger. We obliged. New York cab drivers have also seen tips rise from an average of 10 percent to 22 percent because they have moved from cash to credit or debit.

Just as with Las Vegas chips, when cash is removed, we seem to become a bit more generous.

Craig Douglass is an advertising agency owner and marketing and research consultant. He is president of Little Rock-based Craig Douglass Communications Inc. Email him at Craig@CraigDouglass.com.

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