War on Cash bogs down, despite best efforts of government, banks, and credit card companies.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Spain’s third biggest lender, CaixaBank, has just launched a pilot project in Madrid aimed at limiting cash services in their branches to less than three hours a day, from 8:15 am to 11 am. After that point, all cash operations, including the settlement of bills and cash withdrawals and deposits, must be conducted through an ATM.
Caixabank is not the first Spanish bank to try out such a scheme, but it is the biggest. Spain’s fourth largest lender, part state-owned Bankia, has removed all cash services from select branches (including my local branch), forcing customers to withdraw or deposit cash at the ATM or travel further afield to another branch that still offers cash services.
It’s part of a broad trend. Bank branches are increasingly becoming so-called “customer advisory points,” where the primary role of branch staff is to sell customers a myriad financial products, many of them no doubt risky.
Those same customers are forced to perform many of the more rudimentary bank operations (cash withdrawals and deposits, transfers, payment of bills…) themselves, either at the ATM or online. It’s a great way of getting your customers to do your work for you while also cutting back on staffing costs.
Spain’s banking industry has already witnessed a savage cull of branch and office staff since the financial crisis began as many banks collapsed while those left standing closed many of their branches. In 2016 the total number of workers in the sector was 189,280 — 81,605 fewer than in 2009. What’s more, it’s a trend that shows little sign of ending, especially with most other banks almost certain to follow CaixaBank and Bankia’s lead in paring back their cash services.
But this is not just about saving money; it’s about trying to force a dramatic change in customer habits. The more difficult banks make it for their customers to use cash, the more likely those customers are to turn to alternatives, such as P2P payments and wallets, contactless cards, mobile money platforms or CaixaBank’s very own contactless payment bracelet. At least that’s the thinking.
In the last couple of years, Spanish banks have pulled out all the stops to promote cashless payments, but to little avail. As in Germany and Italy, cash is still very much king at the point of sale (POS) in Spain, accounting for 71% of all retail transactions in 2016 — compared to 74% in 2011. In other European countries such as the UK, the Netherlands, Poland and Sweden the decline in cash usage has been far more dramatic.
Hence the need to make it harder and more time-consuming for bank customers in Spain to access physical money. But it’s not all stick; there’s also the occasional carrot on offer for those willing to make the shift to cashless payments.
In October the sleepy town of Suances in the northern region of Cantabria was home to a rather curious open-air experiment in cashless economics called “Cantabria, Digital Payment.” The scheme was led by the region’s somewhat Orwellian-sounding Modernization Forum and was co-sponsored by MasterCard (which gets a cut every time someone makes a payment via its system, rather than wish cash) and Banco Santander.
The initiative began with a ‘Digital Payments Marathon’ in which local residents were strongly encouraged (but not quite forced) to pay all their daily purchases electronically or digitally in establishments that voluntarily took part in the initiative, and then register their transactions through an ‘app’ that had been purposefully designed for the activity. At the end of the four weeks, the most active cashless citizens and establishments received a small prize for their efforts, including lower credit card charges for businesses.
Then there were the cashless ambassadors — 10 local volunteers who were given a contactless payment bracelet precharged with €150 to live out a whole week without using physical cash.
The pilot scheme was aimed primarily at enhancing the “financial skills and digital training of local citizens,” said Eva Díaz Tezano, the vice president of Cantabria’s regional government and head of the Modernization Forum. “We hope to be able to demonstrate to all Cantabrian stakeholders, to society at large, that transitioning towards cashless payments, whose applications do not cease to grow, is to the benefit of all,” she said.
Javier Aranduy, account manager of Spain for MasterCard, could not agree more.
“(Going cashless) has benefits for both retailers and consumers who can receive and make payments in a faster, simpler and safer way.” It also has huge benefits for MasterCard, for whom cash is still the biggest competitor. But not for much longer, according to Aranduy. “The process of paying exclusively with electronic methods, to the detriment of coins and notes, continues to advance inexorably,” he said.
Spanish consumers seem a lot less convinced. Indeed, so “inexorable” is the shift toward electronic methods in Spain that the use of cash has barely slipped a beat in the last six years, despite the prevalence of cashless technologies. Hence the need for such extravagant open-air experiments involving blatant financial inducements for participants, or for banks to make it increasingly difficult for their customers to access their own physical cash.
As MasterCard, Santander and Spanish authorities well know, Spanish consumers remain wedded to physical money. In a recent study, Analistas Financieros Internacionales, a major financial consultancy group, found that seven out of ten Spanish citizens continue to make most of their payments in cash, three out of 10 retail establishments do not accept card payments and one out of six stores with an electronic POS set a minimum amount for card payment.
In other words, the Spanish authorities and banks will have to offer a heck of a lot more carrots and wave a lot more sticks to persuade Spanish people to abandon physical lucre in favor of cashless payments. By Don Quijones.
But how did things get this bad? Read… Spain’s Pension System Hits Crisis Point (and Everyone Ignores it)
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Thanks for this informative article Don Q.
Funny you mentioned the Netherlands.
The largest ( upscale ) supermarket chain Albert Heyn,
( Royal Ahold ) does NOT accept credit card payments in their stores.
Go figure.
Just IMAGINE if they would have the same rules for their
American supermarkets…..!
Their parking lots would be empty……
The Dutch don’t like credit cards; they strongly prefer bank cards (cashless transaction directly from bank account). Neither cash or credit cards were used much, or at least weren’t when I lived there.
Albert Heyn supermarkets will accept debit cards (pin-pas) issued by Dutch banks. Not quite the same thing, sure, but there you go. Makes life difficult for foreigners, who also have difficulties parking their car or using public transport.
In one French supermarket I recently used, you could either pay by (French) debit card, or the cashier would take you to a separate small machine into which you fed cash – notes or coins – to the right amount (or it would give change). I seemed to be the only one using it that morning. On the other hand, the 24-hour petrol pumps will now accept credit cards as well as French debit cards.
In Portugal all motorways now use only the number plate recognition method to charge users. However, the method to charge foreign cars for motorway use is so complicated that officials advise conscientious and worried would-be foreign users just not to bother.
I am sorry but this is poor analysis. It does not portend a war on cash – just staff optimization. Since very few people actually use cash, any bank who keeps paying tellers is wasting a lot of money.
It is not as if they are not giving cash via ATMs. And yes deploying Human Resources to sell you might be a better return in capital employed to pay the humans.
No, I don’t work in a bank.
At least in San Francisco, I avoid human tellers. Maybe the Spaniards don’t like ATMs.
In either case the caixabank story is the leading point of poor analysis.
Sorry Wolf, Don but this is CNN-esque
You need to live in Spain to understand the people and how it all works no offense but I am British living in Spain so I know it’s a world away from anything you know in the USA
That is right. Cash is reliable and effective when it comes to confidence, and in Spanish society that means individual status and meaning. Personally I find electronic payment useful at times… but I don’t think anyone doesn’t know the feeling of doing a lot of shopping etc., presenting a card and wondering “what if it does not work”. I always get that feeling (we are not talking here of because of an empty account) , and dislike it. The other feeling I dislike is not experiencing the transfer of cash – you just don’t register until you look at a screen later, and even then.
There is also the question of privacy. With cash it is a private conversation you are having, and that is part of the traditional fabric of society, a necessary part in my opinion.
The “cashless society” is among the first things to break down in the event of natural or man-made disasters. Just ask the people of Puerto Rico how those electronic payments are working out for them.
https://www.bloomberg.com/news/articles/2017-09-25/king-cash-may-reign-for-weeks-in-storm-ravaged-puerto-rico
Using ATMs create their own risks including identity theft (tiny cameras planted by thieves over the keypads) and robbery, especially in major cities including San Francisco. Use a credit card instead of a debit card. Your protections under Federal law are better and it may be a hassle getting a bank to honor a debit card promise of no financial loss to the consumer. Once a checking account is emptied by a criminal, it may take several days for the bank to put back your money into the account and in the meantime, you may have bounced several checks. You don’t need the hassle.
DO PUT A FREEZE ON YOUR CREDIT REPORTS. The costs are nominal and the hassles involved in untangling a case of identity theft can be very significant. Freezes don’t eliminate all risks of identity theft but they certainly reduce them.
Yes, I used to work for a bank.
If that were the case, why would this bank reduce the hours that the customers can access the ATM?
I’ll give you a hint. This kind of an activity makes cash-based transactions more of a hassle. Think of it as a nudge with discouraging certain behaviors.
When I visit India, I avoid ATM machines and debit cards and walk around with cash. If I need cash, I go to the teller in the bank, not to the ATM machine. There’s an option online on my ICICI Bank account to deactivate my debit card where one of the reasons is “card swallowed by ATM”. Sounds ridiculous, but happens all the time. Those ATMs are hacked all the time and still run on Windows XP.
https://www.thequint.com/tech-and-auto/tech-news/debit-card-fraud-in-india-via-digital-payment-by-infecting-malware-into-atm-caused-big-worry-for-all
Where I live in rural Massachusetts most of the family food shopping is done by the grandmothers and they overwhelmingly pay at the till with a check (or a Food Stamp card). This idea that everyone is oh so digital is a big-city coastal affectation. It says more about your class than how the majority of Americans live.
I live in a small Spanish village
The local bank has shut just a bank ATM left
The problem is most of the old local people mint use cards and the shops only take cash
So the people have to find a way to travel 10 Klm to the nearest bank the retailers to deposit and the people to withdraw there money
So there must be a way to. MOVE this money around without this happening any ideas
The “little people” just aren’t “smart enough” to want every activity monitored by their friendly government.
Gosh …… wonder why that is ?
I agree with Don Q. its a war on cash becuase its saves on HR. But, small shops maybe want cash so its “under the table” like, I think, Marco suggests. But, Who wants to wait in line to withdraw cash, no one, but if 80% of outlets want cash you have to go to a bank (big wait) or find an ATM. In Shanghai, where I live, I use WeChat to pay (they just launched in the UK and Europe) Not sure how some small vendors get around the the registered payment when they tax man can see, but, somehow, they dont mind. so maybe its a war on tax.
It’s not just about HR cost cutting. It is also about recourse, the legal right to compensation should a problem arise. There may be no legal recourse when you deposit cash into an ATM, or for a check as well should they lose it. This is what the banks like the most.
I had an interesting experience using an ATM, when I got a receipt but no money. It was during normal business hours so I had an interesting exchange with the bank manager. The bank manager told me they had no responsibility for the ATM because it was leased to a third part. I told her in front of her entire staff that was the most ridiculous thing I had every heard, having worked for a few major banks. I eventually got the money but I had to make a few phone calls to get it.
It is the same game where I live. The banks keep shutting down their branches, most of the few that do remain do not handle cash and the few that still have cashier services are open between 10 am to 1 pm. The banks do remove ATMs, too, for example in my home town there is no longer any ATM nor any branch with cashier services left. The banks/card companies etc try to force people to use cards, your handys etc instead of cash. Very nice for old folks that aren’t experienced in using online banking etc. And having seen how some kids behave, it seems that kids do not get the feeling for money and its worth, “you get money from a hole in the wall …” Sometimes it is a pain to explain to the kids that if you want something, you have first to save the money so that you can buy it …
And they are going to succeed in removing cash, people are too inclined to comfort and don’t think any farther than the length of their noses …
A funny anectdote, Apple pay was recent introduced over here and the previous day to the big premiere a collegue of mine almost came in his trousers ( excuse the language ) when he was frothing that tomorrow he will use Apple pay …..
The big drawback with cash is that it is anonymous and the middle hands ( card companies, banks etc ) have difficulties to skim off their cut, in addition people usually are more frugal when they notice that their thin packet of notes do shrink compared to when they are using their cards. It is fun to notice that banks have begun to use elctronic billing of their cards in such a way that it is entered into your internet bank as the least amount to pay each month, people have to change the amount themselves to the full amount and a lot of people either don’t notice this or are happy to pay the amount listed ( and paying a hefty interest on the remaining saldo as the bank/card company wishes them to do ).
I live in the southern US and have observed that the larger banks are abandoning the less densely populated areas. Most of the larger banks congregate in the larger metro areas and have largely left the smaller towns and cities. There are still many small and regional players left to service these areas. I think all those under served areas in Spain won’t be under served for long.
The cashless society is Big Brother’s wet dream. Once they have full visibility into every single transaction, source of revenue, and individual wealth, the looting and asset stripping of the proles – via taxation, “asset forfeiture” for a growing array of offenses, or the naked larceny of bank bail-ins – will enable systems of surveillance, control, and expropriation far beyond what George Orwell ever imagined. Yet the sheeple can’t comply fast enough.
I have survived in the grey economy for years. I take on construction gigs that require 2-6 men and last 2-4 weeks. I pay cash. If people like me are flushed out, millions will be added to the welfare system. If you haven’t been a part of the underground economy, you probably can’t know how big it is. Most of the workers I employ are unable to navigate above board… drug, alcohol, prison background, awol personalities and so forth. taxes and regulatory obstacles make it impossible for these people to go legit. Cashless society better get ready for a flood of problems.
Credit card companies enjoy the best of both worlds as both predator and parasite, and the sheeple have little choice but to cooperate, not too unhappily, bleating expectantly, as they are herded to the shearing houses and the abattoirs. Control their money and you control them, and like most countries Spain has been cultivated into a rich feeding ground for the FIC, like one of those BBC documentaries narrated by David Attenborough.
Businesses not only save on wages by using machines and making the customer do their own “service” operating the machine, they also avoid having to cover the employment taxes.
Getting rid of the federal income tax on wages would be the best place to start. Delete line 7 from the IRS 1040 form.
At the same time you can discontinue the unemployment compensation that those taxes pay for. Then you’ll really have them at your mercy and will have more to stash in the Cayman’s besides.
So it seems Spain crash is coming closer and closer… will they end in default? Find out in 2018!
Physical lucre is the grease that keeps the economy of a nation interactive, it facilitates any potential & it’s profit margins.
What is it with the morons running the EU ?
Every step they take is one step closed to the decimation of the 28 member nations that make up the European Union.
Can’t anyone see that the EU Leaders are insane ?
These people are old & demented – their mind set is of past generations – too many things have changed in the world – the world is still coming to terms with the new technology – nothing today can be like yesterday – yesterday is gone forever – but these old & senile people hang on for dear life – & as a result they are running the EU into the ground.
There needs to be a compulsory retirement age at 60 year.
And at 50 years of age – compulsory cognitive testing for anyone holding a position of power or influence.
Dear God save us from the good old days when we lit candles to lit up the dark night & rode to work on a donkey
I am house hunting.
One real estate agent offered me a 2 bedroom unit in Seaford Victoria for $350.000.
He wanted $35.000 deposit immediately & offered me up to 12 months settlement date.
The unit was his & he was desperate for cash.
It was a win, win situation for me only that I am looking for a house.
The Germans still prefer cash.
Full stop.
On the topic of “optimizing HR” and “not wasting money on tellers’ salaries”, I’m sure the tellers don’t feel their paychecks are a waste.
Those checks are some small families’ livelihood, for food and shelter as I’ve seen it with my own eyes in my town!
CIBC in Toronto has eliminated teller counters including furniture, cabling for power and terminals and they call it “savings”! Sure, on tellers’ salaries! I know four faces that I will not see anymore, with whom I will not have human interaction, who are now unemployed.
Who will provide a paycheck for them now?
I wonder how much the bank lost on surplus capital equipment and leasehold improvement value, plus cost of alteration. Construction trades don’t come cheap, or so I’d like to think. At least legal labour shouldn’t be!
At this point I agree with Prez Trump that “mismanaging human resources is bad business!” He wasn’t just talking of a few tellers but the millions of mismanaged labour force .
When Lehman went under, 20,000 workers went unemployed. That CEO should have hung for that.
If Americans lose Trump, there will never be another character like him willing to pick up the challenge!