The use of cash is decreasing in the US and with the arrival of new electronic payments method, it is going to be further impacted.
Card payment on smartphones:
While Square is mostly in the media spotlight, Verifone and other competitors (to find) are quickly filling this new place. Their business models is slightly different (merchant account or not) but the basis is the same. It will soon be much easy to accept card payment anywhere with any whom. A great news for small business and split restaurant bills 😉
RFID tag, dedicated cards, mobile apps: several solutions are currently being pushed to transform your mobile into a payment device. The goal is the same: allow you to make transactions and sometimes receive them anywhere for a lower cost that a regular card.
What are the pros of these new methods?
While ease of use is important, I think the underlying key reason for switching to an all electronic model is analytics.
– Cash transactions do not have meta information. While big corporations can compensate on this crossing information from bar codes and client cards (when it occurs) to matches product information to client information, smaller companies with most transactions in cash do not even have access to such information. It creates a gap in some key analytics for companies: – frequency, average amount and other information that would help them categorize their customers. Transforming these cash transactions into electronic transactions will allow these smaller companies to benefit from new tools to improve their performance. This is why I believe analytics will be an important part of Square project. (see the receipt at 1.55, twitter id, gps tag, number of payments,…).
– This lack of meta information also impacts the consumer. A cash will need to be manually input in a personal finance software to be properly categorized and recognized. A cumbersome step that will prevent most people from doing it. Whereas an electronic transaction can be automatically categorized (with a relatively high percentage of success) to the proper class of spending. In addition, an electronic transaction with enough meta information will allow consumers to do price/location/products comparisons, for example quickly identifying prices differences in time and in location.
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