The Rundown

• Debit cards and credit cards overtake cash at the retailpoint of sale.
• Cash is steadily used only for smaller valuetransactions.
• Implications for credit unions discussed.

In what may have significant implications for ATM deployment andother aspects of credit union operations, a study from JavelinStrategy and Research has found that debit and credit cards haveovertaken cash for the bulk of sales volume at the retail point ofsale.

The study relied upon survey results from a representativesample of 3,210 consumers, U.S. Census figures and data drawn fromthe major card brands and U.S. government agencies.

The study found that consumers still use cash to pay for thingsat the retail point of sale, but that purchases with cash, whilenumerous, were of generally lower value. Higher value transactionstended to go to debit and credit cards, with debit cards accountingfor 31% of retail sales volume, credit cards 29% and cash only 27%.Further, the study forecast that cash would only represent 23% ofsales volume by 2017.

“Cash may be the most commonly used payment option for POSretail transactions, but frequent usage does not necessarilytranslate to a higher sales volume,” theresearch firm wrote in its forecast.

The study also found that payments on mobile devices representedthe fastest growing payment segment in terms of sales volume andforecast that mobile payment sales volume will hit $1.4 billion by2017.

“Mobile phone POS growth is hindered by a lack of both consumeradoption and merchant acceptance, but industrywide investments willhelp propel the growth of mobile POS payments,” Javelin wrote. Itforecast that this emerging payment option will grow from $362.6million in 2011 to $1.4 billion in 2017. “Though the forecastgrowth for mobile POS payments will increase share only from 0.01%in 2011 to 0.03% in 2017, mobile POS payments are undeniably on anupward trajectory and represent a future game changer for thepayments market,” the firm added.

Additionally, prepaid cards were forecast to overtake gift cardsin terms of sales volume by 2014 and will reach $139.4 billion by2017 as sales volume on gift cards is forecast to fall to $108.7billion by 2017.

Javelin's research also indicated that the share of paymentvolume taken up by paper checks will also keep dropping, from$267.6 billion in 2011 to $166 billion by 2017.

“Although paper checks are in no way obsolete and remain acommon payment method for bills, the POS use of paper checks ispredicted to continue falling from $267.6 billion in 2011 to $166.0billion by 2017. The decline of traditional paper payment options–specifically, cash and paper checks–will be absorbed by card-basedoptions, with the bulk of dollar volume transferring to creditcards,” Javelin wrote.

If the study is accurate, it will be the first to signal asignificant shift in consumer behavior. But cash has defenders whopointed out that it still has plenty of uses.

“Cash is one of the most successful human technologies of alltime,” said Mike Lee, CEO of the ATM Industry Association, aninternational trade group serving the ATM industry. “And today itrepresents 84% of all global transactions. Unfortunately, some ofthe global card schemes, in particular Visa, have aggressivelydeclared war on cash in order to increase the sale of their plasticcards,” Lee said. “We believe in the peaceful co-existence ofcash, cards and other payments, such as online and mobiletransactions. We are calling for an end to this war in payments.Let's get human about this issue.”

Andrew Schrage, co-owner of Money Crashers Personal Finance, anonline publication that covers many aspects of finance andfinancial services, thought it unlikely that cash would be able tocompletely avoid the erosion of its influence by cards. He notedthat the percentage of things that people have to use cash topurchase diminishes steadily, but he also thought the trendrepresented more of a trickle of change than a torrent.

He referenced an article called Cash is King thatMoney Crashers had published that laid out several reasonsthat both businesses and individuals still find cash useful. Cashis still the medium of exchange between individuals, Schrage noted,and had begun to grow a bit in appeal as an easier medium fortransactions like the private purchase of cars and otherassets.

In addition, he pointed out that cards were not a directcompetitor with cash. “Not everyone can qualify for a credit cardor obtain a debit card,” he said.

Further, the cards carry a higher expense and fee burden thancash does, so it's not like cash has no advantages over cards,especially for lower income consumers, he added.

Eli Lehrer, president of R Street, a think tank headquartered inWashington that often addresses credit union and ATM issues, agreedthat the overall trend was against cash and added that trend couldbe good for credit unions.

He observed that, even with CO-OP Network's thousands offee-free ATMs, many credit unions still suffered a disadvantage interms of convenience when compared to larger banks in ATMavailability. A decline in the importance of ATMs to the averageconsumer can only help level that competitive field.

“Even with CO-OP Network ATMs, you are still left with mostlycredit union locations along with 7/Elevens and Costco,” Lehrerobserved. “If you happen to be in place without a lot of creditunions and where 7/Eleven does not have large footprint, you can bewithout a fee-free ATM.”

He also pointed out that most credit unions are not directlyimpacted by the Durbin Amendment regulations, which give them acompetitive advantage in debit cards over very large banks.