As consumers, we make risk and reward decisions constantly during the day. They’re not conscious but we decide whether a merchant looks reliable, can they be trusted with a card, a myriad of choices. The most obvious one we make is how much cash to carry.
Cash of course can’t be traced or replaced. A fraudulent card transaction in the vast majority of cases is not borne by the owner of the card but by the issuer of the card (or in some cases, particularly with some online transactions) by the merchant.
(Online fraud is certainly growing but of course tap-and-go transactions can’t be made online.)
More and more, people are choosing to carry less cash. That’s due to security concerns but also convenience. Cash has to be withdrawn, from a bank, an ATM or via an Eftpos cash withdrawal.
ATM usage is a good proxy for the desire to carry cash. According to APCA, Australian ATM usage is declining faster than most developed countries while tap-and-go payments are understood to be growing around 30 per cent per annum. ATM transactions have peaked. In 2013, the monthly volumes of ATM withdrawals fell about 5 per cent to $67.7 million, according to APCA.
Meanwhile, there was a 7 per cent growth in credit card transactions and a 14 per cent growth in debit card transactions over 2013.
Tap-and-go replaces cash. The average transaction size is lower even than a debit transaction.
As a cadet journalist with the old Melbourne Sun News Pictorial, I did my fair share of police rounds stints and the underlying causes of petty crime were always the same: the perps were opportunistic and after cash or items that could easily be turned into cash.
As Visa notes “the attraction of a low value purchase card using contactless is not consistent with the drivers of fraud perpetrators looking for high value saleable items”.
You can’t make a tap-and-go cash withdrawal. Cybercrime of course is a different and far more serious matter. Organised crime aims to systematically obtain large sums of money, corrupting whole tranches of transactions.
APCA chief Chris Hamilton has said when signatures finally are removed as an authorising protocol for credit cards, making PINs mandatory for larger transactions, there may be a blip in old school theft - as there was in the United Kingdom - as the crims look to replace the business case for skimming.
(BlueNotes carried a recent comprehensive explanation of the shift away from signatures by Lance Blockley who lead the project.)
Chip cards can’t – yet – be skimmed, only the old fashioned magnetic stripe.
Victoria Police Commissioner Ken Lay argued the banks were not concerned enough about tap-and-go driven petty crime because they saw it as a cost of doing business. Yet the logic here is unclear: costs are one of the major focuses of all banks in the current low growth environment. While banks do write off bad debts as a matter of normal business that hardly means they are not trying to reduce them.
Any reduction in the cost of doing business is something card issuers have a very clear incentive to pursue.
There is a broader social amenity in this debate as well: cash has costs.
Some retailers and consumers tend to assume non-cash payments have a fee and cash doesn’t. This is simply wrong.
MasterCard has done extensive research on the costs of cash in recent times and while the card scheme may have a vested interest, the thrust of the research has been widely replicated and indeed is obvious when considered.
Merchants only receive credit for cash when it is actually banked. There are transport and security risks with carrying cash. Cash restricts sales - consumers with cards are more likely to make an extra purchase. And cash is readily pilfered.
For society as a whole, cash has a cost because it facilitates the black economy. Tax avoidance is much easier with cash. Organised crime is not typically a big merchant base for American Express or Visa.
It may be that the Victorian Police has some extra data which demonstrates trends seen elsewhere in Australia and the world are not applying in Victoria. It should release that data and evidence as it is something the participants in the payments business would no doubt want to respond to – because they have a profit incentive, not just in lower bad debts but in reassuring a public already pre-disposed to replace more and more cash transactions with a card that the risks and rewards are known.
There’s ample opportunity to share this information. There’s the Interbank Forum which meets every 3 to 4 months with participants from financial institutions and law enforcement across Australia. There’s also the APCA-organised Law Enforcement and banks meeting every 3-4 months with participants including APCA and superintendent level law enforcement.