Much has been made of the costs attached to different payment mechanisms and the need to minimize these but putting that aside, what makes a ‘good’ transaction from the merchant perspective? Is it speed, certainty, lack of confrontation? From the consumer side I would add lack of potential embarrassment. This can take various forms. A transaction can be denied because of insufficient funds or indeed on rare occasions as part of a security check. I once had a card transaction denied for this reason when on a business trip in Turkey and had to phone my bank to confirm I was in fact travelling. Though the matter was resolved it was a bit embarrassing for me and indeed the hotel staff dealing with the transaction.
From a personal perspective, things have improved greatly since the introduction of chip and PIN, though as a multiple card holder I’ll admit there have been a number of occasions when I’ve entered the wrong PIN, as in last week at Waitrose! At least I no longer have to reproduce my admittedly illegible signature. I once had to make five attempts at a Chinese restaurant in London. Suffice to say the person I was with wasn’t particularly impressed. When it comes to biometrics the need to avoid personal embarrassment must be high on the agenda and I suspect will count against these technologies at least in many countries. Whatever individual physical characteristic is used there needs to be something approaching 100 percent accuracy. For example if you are one of those whose occupation or nationality means you cannot give a measurable fingerprint how embarrassing would it be if the technology doesn’t work. This isn’t questioning your ability to do something (signature), rather it’s questioning who you are.
But I digress. Let’s assume there’s no issue with authorisation, how long does the transaction take? Well, that depends on the Internet connection. At peak times we’ve all had to stand around waiting and although this is quite normal, I’ll admit to having had the odd moment of anxiety as to whether I’m overdrawn.
How does this compare with a cash payment? From a merchant perspective you don’t need to seek authorisation and the cash is validated at the point of sale. Apart from that, the process is similar to what is normally termed an ‘e-payment’ and a colleague recently pointed out that cash-based payments are faster, less problematic and more secure than those using other tokens. There is no need to check whether there are funds available or indeed confirm the identity of the customer. Indeed the customer doesn’t have to wait for transaction data to be submitted. When it comes to cash being credited to the retailer, funds received at the point of sale can be credited in real time via Provisional Credit.
So let’s recap – for the consumer faster transactions, less potential for embarrassment, for the merchant less concern with fraud, more transactions processed and the potential for real time funds. Is it any wonder that cash remains a popular payment mechanism?