Wednesday, April 25, 2007

DNB working paper shows that substitution of cash lead to 200 million cost benefit for society already with several hundreds more coming up

See this working paper of the central bank on cash usage and its subsitution at the point of sale for debit cards. It outlines that between 1987 and 2004 the use of cash at the point of sale in value terms diminished from 75% to 46 %. Thus saving us all in the Netherlands an amount of 200 million euro. And the good news is that there is still room for improvement. The researchers (Jonk and Kettenis) consider a number of scenario's to conclude that it is possible that in 2015, the value of cash-payments at the point of sale constitutes only 20%. This would be the case if a further promotion and use of pos-terminals occurs.

The latter thing: further use of POS-debit at low-end merchants, is most likely to happen. Banks and retailers have joined hands and used a public RFP in order to ensure that 'smart and simple' POS-market propositions will be developed for low-end merchants and retailers that until now do not have pos-terminals. This has resulted in ten offers/packages for POS-terminals/packages where merchants have plug-and-lay functionality and aggregated fees (all-in-one fee for telecommunications, authorisation and terminal use). See the website smart packages here (in Dutch: slimmepakketten).

The authors estimate the financial benefits for society of this further trend at several hundreds millions of Euro.