Cashless payment is the new, cool thing to do these days. Pay, tap, or swipe your phone or plastic card and you’re out the door with your purchases. Cash, on the other hand, can be more inconvenient, not to mention costly. It can be difficult to discover the true cost of cash management. Between having to collect the money, count it, transfer change, in addition to the cost of cash-in-transit service, using cash payments can be costly. In fact, some estimate that using cash for metro and bus transit costs operators between 7-10% of their revenue. But is going cashless really saving your business money? The short answer: it depends. There are pros and cons to paying cashless, and it’s important to weigh each factor when considering your bottom line.
Hidden transaction fees add up quickly with cashless payments. There are different fees between credit and debit cards. For credit cards, the largest transaction cost is the Interchange Fee—a fee comprised of both a flat rate and a variable rate per transaction. Each industry and sector has its own interchange fee rate. The flat rate is generally around 4 cents per transaction. The variable rate depends on many factors such as the credit card association brand, the security level of the transaction, and the card type the purchaser uses.
Additionally, there are other fees such as the Network Association and Brand Usage (NABU) or Acquirer’s Processing Fee (named differently depending on which credit card brand is being used). This is another flat fee in addition to the Interchange Fee. NABU or Acquirer’s Processing Fee can cost around 2 cents per transaction. Plus, some credit transactions involve an Assessment Fee which can add another 4 cents to the transaction. Between these flat rates, you are already looking at about 10 cents per transaction in flat fees.
What about debit cards? While debit transactions were once less expensive than credit transactions, those times have passed. The Durbin Amendment introduced a single-tiered transaction cost structure. No matter the transaction value, the Interchange fee is 0.05% + 21 cents. If your bus ticket costs are $1.50, you’re looking at 19% of that revenue going to debit card fees!
So, is it really more expensive to manage cash than go cashless? Again, it depends. It’s important to take into consideration all the facts and numbers, and then decide what is best for your particular situation. Cashless payments may be more convenient for your customers and, therefore, might be worth the costs to keep customer satisfaction high.
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