Your cash is no good here. That’s what Southwest Airlines said in 2008 in not so many words when they made the switch to credit card only payments for their in-flight goodies. Not long after, many airlines followed suit. A poor business decision? Hardly. “It’s paying off,” Daryl Krause, Southwest’s senior vice president of customer service told the Dallas Morning News. Krause said the very day they made the change, drink sales increased by 8% (which translates in to 4 million dollars per year).
This is not an isolated incident. The world economy as a whole is taking a wide turn towards a cashless society.
Only 3% of transactions in Sweden involve any kind of cash exchange. In many major Swedish cities it’s not strange to find businesses that only accept cards, including public transportation. Yes, even the city busses aren’t taking coins. Tickets are either prepaid or purchased with a cell phone. Sweden’s statistic at 3% cash is a trailblazer in comparison to the 7% of cash transactions still taking place in the U.S. But our 7% is dropping rapidly. According to The Nilson Report, transactions at merchants on general purpose payment cards carrying the American Express, Diners Club, JCB, MasterCard, UnionPay and Visa brands totaled 135.33 billion for 2011, up 14.56 billion or 12.1% over 2010.
Two students from the Sloan School of Management at MIT, Drazen Prelec and Duncan Simester conducted a study about credit cards and spending habits. What they found is great news for businesses, considering this epic shift to a cashless society. They found that subjects paid more when they were instructed to use a credit card rather than cash. They found that they were willing to spend up to 100% more with plastic. 100%!!!!
Even God is taking plastic; in an interview with CBS news, Vicar Johan Tyrberg explained why recently installing card readers at the Carl Gustaf Church in Karlshamn makes it easier for worshippers to make offerings. “People came up to me several times and said they didn’t have cash but would still like to donate money,” Tyrberg says.
There are pros and cons to this evolution in the world of electronic payments. Not only does money cost money to make and maintain, but it’s kind of a huge headache. Storing money, counting it, security to protect it, armored cars to move it around- all contribute to the hassle of paper & coins. Not to mention, for the sixth year in a row, pennies and nickels cost more to produce in 2011 than they were even worth. Some argue that the circulation of cash allows for organized crime, tax evasion and counterfeiting. But can’t credit cards be counterfeited as well?
This is a major game changer.What are businesses going to do to protect themselves from the new kinds of vulnerabilities created in the virtual payment world? Criminals are resourceful — fake cards, identity theft, hackers or cyber attacks on the networks that act as guardians to the world’s transactions will create a new age of crime- and will require new kinds of protection.
So what exactly needs to be protected? According to Steven R. Chabinsky Deputy Assistant Director of Cyber Division for the Federal Bureau of Investigation security measures should be in place for, “On the technical side—the web servers, e-mail servers, databases, firewalls, routers, embedded network devices, internal networks, remote access, custom applications, off-the-shelf applications, backup and storage areas, and all telephone, PBX, and VoIP systems.
He continues, “On the human side, you need to secure your physical infrastructure, employee accesses and permissions, and connections to business and corporate partners. These are just the basics on the way to a secure network, all of which need to be monitored and updated regularly, as the technologies change constantly and so do our users.”
This is no small task…. As our society embarks on this major change, what are you doing to protect your business?