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Visa Begins Bribing Merchants To Stop Taking Cash

Discussion in 'Coffee Shack (Daily News/Economy)' started by Goldhedge, Jul 13, 2017.



  1. Goldhedge

    Goldhedge Moderator Site Mgr Site Supporter

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    Hmmm...



    Visa Begins Bribing Merchants To Stop Taking Cash

    Authored by Yves Smith via Naked Capitalism blog,

    The war on cash is escalating. A big driver isn’t central banks who want to be able to inflict negative interest rates on savers, or Treasuries who see cash transactions as hiding revenues from their tax collectors, but the payment networks that want to kill cash (and checks!) as competitors to their oh so terrific (and fee-gouging) credit and debit cards.

    However, one bit of good news is there doesn’t appear to be much enthusiasm on the buyer, as in merchant, end.

    First, the overview from the Wall Street Journal:

    Visa Inc. has a new offer for small merchants: take thousands of dollars from the card giant to upgrade their payment technology. In return, the businesses must stop accepting cash.

    The company unveiled the initiative on Wednesday as part of a broader effort to steer Americans away from using old-fashioned paper money. Visa says it is planning to give $10,000 apiece to up to 50 restaurants and food vendors to pay for their technology and marketing costs, as long as the businesses pledge to start what Visa executive Jack Forestell calls a “journey to cashless.”​

    [​IMG]

    There are good reasons to think this initiative won’t get far.

    Customer resistance. Food vendors, and in particular restaurants, are low margin businesses with fickle customers who have little to no loyalty. Why risk driving business away?

    Aside from the fact that some customers prefer cash, a related issue is that using cards and smartphones often seem to be a tax on time. I really hate using chip cards. Mag cards were often faster than cash, since you swiped and could stuff the card back in your wallet while the transaction was being approved. Chip cards, by contrast, require you to keep the card in the machine while it is being approved, so one is very much aware of the wait. And when I’ve seen people using phones (often to buy small stuff like coffee, which really amazes me), I find that they are slower with it that they would probably be with cash, in that they seem to have to fumble with the phone to get the right app readied and then the payment doesn’t always go right through either.

    And that’s before you get to the fact that ApplePay and other smartphone payments time stamp exactly when you paid, adding to the information the surveillance state is gathering about you. By contrast, even if you use a credit card at a store, Clive informs us that the card network typically retains only the date of transaction.

    Higher merchant charges. I take credit and debit cards through PayPal, and also checks. And even though I am often slow to deposit checks because I find it hard to get to the bank, I’d still rather have checks despite the somewhat greater hassle because I save the 3% cut the card networks take. Visa makes the argument that handling cash has costs too, but they are the ones that have ginned up the numbers, and in my case, they don’t wash. As the Journal points out:

    Indeed, many merchants prefer cash because they don’t have to share the revenue with card companies. Credit-card interchange fees, which networks like Visa set and that merchants pay to the banks that issue their cards, are on average around 2% of the transaction amount, according to the National Retail Federation, the largest trade group that represents merchants in the U.S.​

    “The idea that merchants don’t want to accept cash is a myth,” said Mallory Duncan, senior vice president and general counsel at the National Retail Federation.​

    Negative impact on employees who get tips. As one of my tax attorney buddies drily remarks, “Some people have this odd idea that cash payments aren’t taxable.” Restaurant workers who have tips as the major source of their income almost assuredly prefer getting them in cash, rather than facing the delay of having their employer receive them through the payment network which creates delay as well as the not-trivial odds that the boss might cheat them either informally or declare that he’s entitled to a processing cut. And that’s before getting to the fact that restaurant pay levels probably pre-suppose a fair bit of tax evasion, so the business owner might risk losing his better employees to competitors who hadn’t gone the no-cash route.

    Enforcement. How is Visa going to police establishments that say they aren’t going to take cash? Will Visa have spies? Will Visa have audit rights?

    Risk of legal challenge. As a surprisingly large number of Wall Street Journal readers pointed out, cash is a legally sanctioned means of payment. For instance:


    Richard Tavis

    Merchants who will no longer accept cash won’t get my business, period. Call me a Luddite, but U.S. currency pretty clearly states that “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE”. It seems to me this will go to court eventually. Merchants must accept notes issued by the Fed. Sorry, that’s the way it is.​

    Richard Tauchar

    @richard Tavis
    That’s my take as well.
    And, as someone else mentioned, what happens if you refuse to pay with a Visa, or don’t have one, after having completed the meal? Will they take cash then, or is the meal free?​

    So I’d be surprised if Visa had a legal leg to stand on, when trying to make these deals.

    The Treasury does support the position that private business can refuse to take cash as payment for goods and services, as opposed to settlement of debts.

    However, as writers following David Graeber’s Debt: The First 5000 Years, like to point out, we incur and settle debts all the time. And a bar tab or restaurant bill is a debt. The vendor provides the service<strong> without being paid, then expects you to settle the debt you incurred.

    Thus the market segment Visa is targeting for this move (the Wall Street Journal headline says, Visa Takes War on Cash to Restaurants) would seem to be one where Visa is on a particularly weak legal footing. I can easily see someone with a penchant for mixing things up go to a restaurant, either not have a card or bring a card he knows will be declined (just to look like he didn’t intend to stage a stunt) and then video putting down more than enough cash to settle the bill and leave. The merchant will have no legal out. He’s been paid. And at least in any decent-sized city, no way will the cops intervene. They’ll regard this as a private dispute not worth their time. If the restaurant staff try to restrain the exiting customer, they could wind up with a very costly suit on their hands.

    Taking cash may be the real point of the merchant. A savvy New York City colleague regularly points out how many New York City businesses, like pizzerias and cheap jewelry stories that never seem busy, or nail salons that have economics that don’t seem to make sense, are probably partly if not mainly in the money laundering business.

    Visa has even bigger ambitions:

    Visa is trying to turn those numbers more in its favor. In the U.S., it is going after spending categories, such as parking and rent, that have been entrenched in cash and check payments for decades. Abroad, it is partnering with governments to move more payments onto its network, including an agreement that it recently signed with the Polish government to move the country to a cashless system.​

    For what it’s worth, my landlord (more accurately, his in-house management operation), who has an office building that takes up a full block on Park Avenue in the upper 40s, plus has seven residential buildings, takes only checks for rent. One factor may be that in NYC, if a landlord accepts a rental payment from a party, that party obtains a legal interest in the lease. That in turn means the landlord would lose one of his main axes for controlling who lives in the apartment (or worse, a corporation could pay make a rental payment and in theory let anyone it authorized stay in the apartment). It’s easy to see on a check who is making the payment. On a bank transfer, the landlord may regard it as too much hassle to verify the source of a bank auto-debit to be worth any potential labor-savings on other fronts. I’d be curious to learn from any readers who rent what types of payments their landlord accepts.

    In the meantime, those of you who like cash should not just make a point of paying in cash, but also tell the employees and in particularly, anyone who appears to be a manager that they will lose your business if they stop taking cash. Vocal customers may be the best way to head off Visa’s profiteering.
     
  2. Joe King

    Joe King Gold Member Gold Chaser

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    While I agree with the premise that cash should have to be accepted, the reality is that there is no requirement on any business or private person to accept cash in exchange for goods and/or services at the time of sale. A lot of people think that's how that phrase is supposed to be read, but they'd be wrong.
     
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  3. latemetal

    latemetal Platinum Bling Platinum Bling

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    If you don't take cash, I won't be back...
     
  4. Uglytruth

    Uglytruth Gold Member Gold Chaser

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    I see more and more "cash only" signs............
     
  5. Alton

    Alton Gold Member Gold Chaser

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    New word for the day! inimical

    inimical

    Also found in: Thesaurus, Medical, Legal.
    Related to inimical: Faustian
    in·im·i·cal
    (ĭ-nĭm′ĭ-kəl)
    adj.
    1. Injurious or harmful in effect; adverse: habits inimical to good health.
    2. Unfriendly; hostile: a cold, inimical voice.
    [Late Latin inimīcālis, from Latin inimīcus, enemy; see enemy.]
    in·im′i·cal·ly adv.

    Example:
    VISA is inimical to freedom, commerce and American life.

    VISA must die.
     
  6. gringott

    gringott Killed then Resurrected Midas Member Site Supporter

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    Taking cash may be the real point of the merchant. A savvy New York City colleague regularly points out how many New York City businesses, like pizzerias and cheap jewelry stories that never seem busy, or nail salons that have economics that don’t seem to make sense, are probably partly if not mainly in the money laundering business.

    Ya think? Anybody with a half a brain knows how these fake businesses stay in business. In my county I could point out several businesses that are obvious fake business to launder cash. This stuff has been going on forever, criminals have to account for income somehow.
     
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  7. the_shootist

    the_shootist The war is here on our doorstep! Midas Member Site Supporter ++

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    I have a right to take my business to whomever I please. If that means only merchants who accept cash then so be it!
     
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  8. Joe King

    Joe King Gold Member Gold Chaser

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    By all means, you should do that. Everyone should.
    ....but it still doesn't change the fact the only ones who must accept them are creditors. (and the tax man) Trying to make a purchase at a store is not considered to be tendering a payment of debt.
     
  9. the_shootist

    the_shootist The war is here on our doorstep! Midas Member Site Supporter ++

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    I see your point but don't think we'll get that far without some sort of martial law in place. Too many people would refuse to accept the fact that acceptance of cash would pretty much be banned. That would get lots of people off their couches I'll bet
     
  10. Ensoniq

    Ensoniq Midas Member Midas Member Site Supporter ++

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    What a great idea (sarc)
    - No more black market - hookers and blow can't go on the visa
    - Fully traceable transactions
    - no more income tax avoidance for people living on tips

    Resist we must
     
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  11. Joe King

    Joe King Gold Member Gold Chaser

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    Anyone here have a VISA card? If so, send 'em a note and tell 'em what ya think of their efforts to do away with cash.
     
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  12. Cigarlover

    Cigarlover Gold Member Gold Chaser

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    I post about this often. Same stuff too. I think this writer is reading GIM. :).
    Back in March when I went on vacation AA charged 25 bucks per bag when you check in. I handed them cash they said credit card only... On the way down AA on the US side did end up taking my cash as long as I had exact change.. On the way back they wouldn't take my cash so my bag traveled for free.
    I think everyone should pay their credit card bill at their local bank with cash. I'd also like to see a local business only accept CC. Something like an appliance or furniture store. That would be fun. Go in and spend a couple hrs with the sales rep letting them think they are getting a huge sale then whip out the cash to pay and wait for them to say CC only. :). You can then have all your friends do it too.
    2-3% doesn't sounds like much until you start doing mutiples of 100k. every 100k cost the merchant 2-3k although I am sure they price that into the items being sold.
     
  13. Uglytruth

    Uglytruth Gold Member Gold Chaser

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    Priced into the cost, just like pilferage and theft. I wonder how much of this is because of employee theft is out of control? They pay slave wages then wonder why they are stolen from?

    Seems a lot like health care or anything else....... it's their money they just find new ways to take it from you. The illusion ain't holding up anymore guys.

    Social outing last night ans the idiot on every govt program was bragging about his new (used) car and he had to spend money because it qualifying him for more free money. He already gets an appartment, health insurance, food, dental, glasses......... never misses a auto race........ Lets just say after he left the conversation was pretty much "why the hell do I work to support this shit". Then the I can't do all he does.
     
    Last edited: Jul 15, 2017
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  14. Aurumag

    Aurumag Dimly lit. Highly reflective Midas Member Site Supporter

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    Me too, and on the flip side of that, more places that grudgingly accept cash, and appear to make an effort to make cash transactions inconvenient for the purchaser.

    I prefer the former to the latter, but the cashless society is inevitable, and we are one or two (engineered) financial crises away from full-digital.

    Of course, I would prefer to use REAL MONEY in trade.
     
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  15. Rollie Free

    Rollie Free Midas Member Midas Member

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    If I had an eatery and Visa wanted to pay me to not take cash I'd agree on the deal only if they paid me in cash.
     
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  16. Rollie Free

    Rollie Free Midas Member Midas Member

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    Regarding CC charges to the merchant. This was a long time now but when we were in retail most
    everyone paid in cash or check, we didn't have a means to take credit but if we did, we most certainly would have. With checks, it was an endless job calling and tracking down bad check writers. A 2 or 3 percent off the top would have been worth it if the funds were guaranteed. Besides that cash always has a tendency to walk off.
    I am not advocating a cashless society but to a vendor it's probably a good thing, at the very least a wash. At this point not accepting cash sounds like a poor idea. Immediate and clear payment. Nothing faster or so pure. Would be interested in hearing why a business would refuse cash.
     
  17. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Around here no one needs to bribe anyone to stop taking cash. Hardly see peeps using cash. Seems like plastic is the preferred method of payment everywhere.
     
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  18. Cigarlover

    Cigarlover Gold Member Gold Chaser

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    Another thing you can do is get a bunch of prepaid debit cards and use up all the money on them..Then go in and spend 2 bucks someplace and try all the cards first. make sure its really busy at the time too. Then after all the cards have been declined just say sorry, and pull out 2 dollars, pay and leave. :)
     
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