ICLE White Paper

The Cost of Payments: A Review

I. Introduction

Atlanta’s Mercedes-Benz Stadium in 2018 became the first major sports venue in the United States to switch to a fully cashless payment system. At the end of the new payment model’s first year of operations, the stadium reported that wait times had fallen by 20 to 30 seconds and per-capita food and beverage sales had risen by 16%, while saving more than $350,000 in operating expenses.[1]

Many other stadiums have since followed the Mercedes-Benz example,[2] and a growing number of restaurants and retail outlets are likewise going cashless. While some of these decisions were precipitated by COVID-19, the trend predated the pandemic and has continued in its wake, driven by a desire to reduce wait times and other costs associated with cash, such as counting and depositing it at the bank and mitigating the risk of robbery.[3]

Other merchants are keeping cash payments, for now, but many are no longer accepting personal checks. Target announced in early July that it would cease accepting checks July 15.[4] Several others—ranging from Whole Foods to Old Navy—recently have announced similar policies. The reasons for dropping checks are similar to those for cash: the cost of acceptance outweighs the benefits. Check transactions take much longer than cash, card, or mobile payments, and they come with a significant risk that the check will “bounce.” For Target, however, the final nail in the coffin was the “extremely low volumes” of check writing, which meant it no longer made sense to maintain check-acceptance facilities, which come with fixed costs.

Merchants are meeting their customers where they find them. In a 2022 Pew poll, 41% of Americans said they didn’t use cash in a typical week, while only 14% said they used cash for most or all their purchases—down from 24% in 2015.[5] These numbers are consistent with a Gallup poll the same year that found only 13% Americans stated that they used cash for most purchases.[6] It’s possible that the decline in cash use was exaggerated by the COVID-19 pandemic; a more recent Forbes poll found that 22% said they use cash most often for making purchases.[7] Nonetheless, the same Forbes poll found that 70% of Americans use cards most often, while 7% used digital wallets and 1% said they most often use buy-now-pay-later schemes.[8]

The Federal Reserve Board’s Diary of Consumer Payment Choice has also found a consistent decline in the proportion of payments made using cash. In volume terms, cash has largely been replaced by credit and debit cards (Figure 1).[9]

FIGURE 1: Share of Payment-Instrument Use for All US Payments (2016-2022)

SOURCE: Federal Reserve Board Diary of Consumer Payment Choice

Moreover, according to surveys by Pew (Figure 2), Americans at all income levels have reduced their use of cash and increased their use of cashless payments over the past decade.[10] In 2015, those with an annual income of $30,000 or less made substantially all their purchases using cash, while only 15% of that group made no purchases using cash. By 2022, the proportion only using cash had fallen to 30%, while the proportion not using cash at all had risen to 24%. In all other income groups, the proportion not using cash is now higher than the proportion only using cash.

FIGURE 2: Proportion of US Adults Who Use Cash for Their Purchases

SOURCE: Pew Research Center

Clearly, consumers have a strong and growing preference for electronic payments in general and cards in particular. But stories of the death of cash are premature. A recent YouGov poll found that, when asked to list all payment methods used in the past 30 days, cash was the one used by the largest proportion of respondents (67%).[11] This result does not necessarily contradict the other surveys: it is likely that most people who use cash do so only intermittently and for smaller purchases.

Despite this strong and growing preference for electronic payments by both merchants and consumers, there remains some confusion about the costs and benefits of different payment methods. The purpose of this white paper is to summarize the existing literature on the relative costs of cash, other paper-based payments (primarily checks), and electronic payments.[12]

In short, the evidence shows that, when all costs and all parties to a transaction are considered, electronic payments (debit cards, credit cards, and mobile payments) are more cost-effective than cash for most transactions. The main reason for this is that electronic payments enable consumers to spend more than they have in their wallet, which results in “ticket lift” for merchants. Card rewards, including cashback and merchant-specific loyalty programs, further increase this ticket lift.[13] In addition, “tap-and-pay” contactless payments can reduce the time it takes to tender payment relative to cash, especially when cash payments are eliminated altogether. This increases throughput, improving the customer experience and reducing labor costs. Finally, electronic payments enable merchants to sell online, including for in-store pickup.

It should be noted that this is not an argument for eliminating cash, which is likely to continue to play an important (if smaller) role in payments for many years to come. Rather, it is intended to offer a more balanced perspective on the role of cash and electronic payments in retail and other merchant settings—and to consider the implications for payments regulation.

A. Organization of the Review

Payments typically involve at least three parties: a seller, a buyer, and a bank. Where the buyer and seller use different banks, there will be at least four parties (unless one of those parties has chosen the self-custody option—also known as “cash under the mattress”). Depending on the payment method used, there may be other parties involved; for example, card payments may involve other processors, while cash payments may involve security companies moving physical cash to and from the merchant’s bank.

Each payment also typically involves a series of actions. For example, when making a purchase at a store, after items have been recorded at the register, the cashier tells the customer the total that is owed; the customer then proffers a means of payment (typically card, cash, or mobile); and the cashier processes the payment. In the case of cash, this will likely include calculating and returning change; for a chip-based card, it may involve dipping and either entering a PIN or rendering customer signature; or, if it is a contactless payment (card or phone) and the amount is below the floor limit, the customer may simply tap and go.

Most studies of the cost of payments use, in part at least, a version of “activity-based costing” (“ABC”) that seeks to account for all the costs associated with a particular payment type by assessing all of the associated activities.[14] There are, however, significant differences among the studies, both in what types of costs are included and how those costs are allocated. Broadly speaking, studies can be divided into those that focus exclusively on one party in the payment system (merchant, bank, or consumer) and those that seek to account for the costs to all (or, at least, most) parties—and hence to society. Reflecting these differences, the paper is organized as follows:

Section II reviews partial-cost studies, including those that focus exclusively on costs to merchants and costs to consumers.

Section III reviews social-cost studies that seek to evaluate the costs and benefits of different payment systems more broadly.

Section IV offers some conclusions.

II. Partial-Cost Studies

Many studies of the cost of payments focus primarily, if not exclusively, on the costs incurred by one part of the payment system—usually merchants. This section considers those studies, looking first at merchants, then consumers, then banks.

A. Merchant-Cost Studies

While merchant-cost studies are inherently narrow in scope and should not, by themselves, form the basis of public policy, they can offer valuable insights. For example, a 1983 study by the Federal Reserve noted that:

Many retailers tend to view the costs of handling cash transactions as equivalent to the cost of doing business—a sales clerk, for instance, must be on hand to conduct transactions of whatever type. Thus there is a tendency to regard the marginal cost of selling for cash as zero, but this view should not be adopted without critical examination.

There are many elements of cost associated with the handling of a sales transaction. Some costs may be higher for check or credit card transactions, but others may be higher for cash.[15]

The report went on to list many of the costs that should be considered, including the time to conclude the transaction, security costs, and counterparty risk.[16] Nonetheless, the study concluded that cash was generally less costly for merchants than other forms of payment, including cards, in part because it assumed that the use of payment cards does not result in a net increase in sales.

1. Robert M. Grant’s pioneering study

Another study published in 1983 (but undertaken prior to the Federal Reserve study) considered the costs of several different retail-payment methods in the United Kingdom: “Cash; Cheques; Bank credit cards (Access and Visa); Travel and entertainment (T&E) credit cards (American Express and Diners Club); and In-house credit accounts.”[17] The line items considered in this study can be seen in Table 1. Of note, in contrast to the Federal Reserve study, author Robert M. Grant concluded that, while the direct cost of credit cards and in-house credit were higher than the direct costs of cash and checks, these costs were more than offset by increases in sales, which the author accounted for as a reduction in the unit cost of overhead.[18] One reason Grant found such significant increases in sales associated with payment cards and store credit was that such payments represented 11% of sales in stores that took credit, compared with about 6% for all stores. Grant therefore reasonably assumed that between 20% and 30% of sales made using credit constituted “additional” sales.[19]

TABLE 1: Average Cost of Payment Methods as % of Retailer’s Revenue (1981)

SOURCE: Robert M. Grant

2. Accounting for ‘ticket lift’ and increased throughput: Layne Farrar (2011)

Many subsequent studies have sought to assess the relative costs to merchants of accepting different forms of payment. Unlike Grant’s original study, however, few of have attempted to account for the effect the method of payment might have on demand. One that did take such an approach was a 2011 study by Anne Layne-Farrar, who found that the use of payment cards were associated with higher per-transaction (“ticket”) amounts; this is known as “ticket lift.”[20]

Layne-Farrar looked at the costs and benefits of different payment methods at a range of different retail outlets: quick-serve restaurants (QSR), supermarkets, discount retailers, retail-gasoline outlets, and travel retailers (stores at train stations and airports). She begins her account of the QSR analysis with the following observation:

In 1998, Sonic Inc., an Oklahoma City based drive-in chain, became one of the first QSRs to accept cards at its 2,200 restaurant locations. According to an article published three years later, in 2001, the increasing relative costs of handling cash as compared to card payments was the primary motivation for Sonic. Technological advances over time have lowered the network and equipment costs of processing card transactions while the costs of handling cash appear to have remained flat. Sonic found that customer orders (tickets) paid by card were 80 percent higher than cash tickets. In other words, although Sonic decided to accept cards in order to lower its cash handling costs, it found direct benefits from card acceptance in the form of dramatically higher sales.

KFC began accepting cards in 2001, three years after Sonic. In contrast to Sonic, as its motivation KFC cited specific benefits expected from cards, rather than solely the savings derived from reduced cash handling. Specifically, KFC began accepting payment cards as a way to sell its higher priced group meals, such as large buckets of chicken with side dish containers and packages of biscuits.[21]

Following this prelude, Layne-Farrar provides a detailed analysis of the various costs associated with accepting different payment methods, the average sizes of transaction made with those methods, and the benefits of increased revenue resulting from the use of payment cards relative to cash.

Layne-Farrar found that, in addition to ticket lift, the use of payment cards reduced average transaction time, resulting in increased throughput of customers, which resulted in a further increase in revenue. Table 2 provides a summary of Layne-Farrar’s estimates of the costs and benefits from the use of different payment methods for an average transaction assuming ticket lift of 10%, which Layne-Farrar saw as a low amount (she also calculated the effects of 20% ticket lift).[22] While cash transactions were less costly to process at the average ticket size, when taking into account ticket lift and throughput improvements, the net benefits per-transaction were significantly higher for debit cards.

TABLE 2: Per-Transaction Costs and Benefits for QSRs (2011)

SOURCE: Layne-Farrar

Tables 3-7 are Layne-Farrar’s estimates of the net benefits of using different transaction methods at big-box discount retailers, supermarkets, gas-station retail, non-fuel convenience stores, and travel retail.[23] In each case, only the low-ticket-lift option is given (the net benefits of the high-ticket-lift option are always greater); nonetheless, the net benefits of debit cards exceed those of cash and, where checks are evaluated, those as well. The clear conclusion of this work is that, by the time Layne-Farrar undertook her analysis in 2011, acceptance of debit cards generated per-transaction net benefits for merchants that exceeded those of cash.

TABLE 3: Per-Transaction Costs and Benefits for Big-Box Discount Stores

SOURCE: Layne-Farrar (2011)

TABLE 4: Per-Transaction Costs and Benefits for Supermarkets

SOURCE: Layne-Farrar (2011)

TABLE 5: Net Benefit Per Fuel Transaction ($) for Gas-Station Retail

SOURCE: Layne-Farrar (2011)

TABLE 6: Net Benefit Per Non-Fuel Transaction ($) for Convenience Stores

SOURCE: Layne-Farrar (2011)

TABLE 7: Net Benefit Per Fuel Transaction ($) for Travel Retail

SOURCE: Layne-Farrar (2011)

3. Economists Inc.

In 2014, Economists Inc. carried out a study similar to Layne-Farrar’s, but went into even more granular detail regarding the merchants’ processes for accepting payments, focusing on five merchants: a fast-food restaurant, a full-serve restaurant, a gas station, a convenience store, and a small independent grocery store.[24] They also included both credit and debit cards in their analysis.

Table 8 shows tender times for cash and credit (including debit run as “credit”) at the five merchants.[25] It is noteworthy that both the mean and median tender times at the fast-food restaurant and grocery store were slightly lower than for cash, whereas the in-person tender times at other merchants were slightly higher for credit.

These differences may reflect different rates of throughput and associated investment in technology and training. At higher-throughput merchants, such as grocery stores and fast-food restaurants, there are likely greater returns on investments in technology that integrates checkouts with point-of-service (POS) machines, for example, such that the checkout operator does not need to re-input information to the POS machine.[26]

The tender time for self-service gas pumps is, perhaps unsurprisingly, considerably shorter than the time when paying in-store, as this avoids the shoe-leather time involved with walking to the store to pay and back.

TABLE 8: Tender Times at the Merchants Studied by Economists Inc

SOURCE: Economists Inc. (2014)

Like Layne-Farrar, Economists Inc. found that the use of payment cards resulted in significantly higher purchase amounts relative to cash. This ticket lift can be seen in Table 9, which shows that, for every establishment, the minimum, maximum, mean, and median payments are nearly all higher for payments made using credit cards (or debit run as “credit”) than for cash.[27] (The one exception is the minimum for in-store gas and joint sales at the gas station.)

Economists Inc. also reported that merchants themselves had indicated that, when they began accepting card payments, they noticed a significant increase in sales.[28]

TABLE 9: Amounts Spent When Using Cash or Credit

SOURCE: Economists Inc. (2014)

4.  Ticket lift and increased throughput from contactless

Contactless payments use RFID to transmit tokenized payment information from a card or from a smartphone. While the first contactless payment cards were introduced in the mid-1990s, and an EMV contactless standard was first developed in 1996, their uptake by both card issuers and merchants was initially low, especially in the United States.[29] However, the vast majority of U.S. debit and credit cards now support contactless payments, more than 150 million Americans have used contactless payment apps on their smartphones and, as of 2020, 58% of U.S. merchants accepted them.[30] Evidence from other jurisdictions suggest this switch to contactless is likely to result in both ticket lift and increased throughput.

A 2020 study by David Bounie and Youssouf Camara looked at the effects on 2018 sales of the shift to contactless payments at 275,580 merchants in France.[31] The researchers found that merchants who accepted contactless payments had card sales that were 15.3% higher, on average, than merchants who did not accept contactless payments.[32]

A 2022 study by Sumit Agarwal, Wenlan Qian, Yuan Ren, Hsin-Tien Tsai, and Bernard Yeung looked at the effect of the introduction of “quick-response” (QR) code mobile payments in Singapore in 2017.[33]  The researchers found that “monthly business creation among business-to-consumer industries increased by 8.9% more than among business-to-business industries.”[34] Meanwhile, use of mobile payments tripled, while use of automated-teller machines (ATMs) fell dramatically. Of particular note, consumers increased their credit-card spending by 3.3%, driving most of the increase in consumer spending that led to the increase in B2C business formation.[35]

5. Fumiko Hayashi’s comparison of debit and cash

In a 2021 study, Federal Reserve Bank of Kansas economist Fumiko Hayashi compared the cost of merchant acceptance of cash and debit cards in different countries. Table 10 reproduces the summary table in her study.[36]

TABLE 10: Merchant Acceptance Costs in Selected Countries, Various Years

SOURCE: Hayashi

Hayashi’s data for the Unted States are based on two studies: the first is the Food Marketing Institute (FMI) study from 2000 that formed the basis of the GHL analysis discussed at-length in Section III of this white paper, and the second is a Bank of Canada study that Hayashi coauthored with Marie-Hélène Felt, Joanna Stavins, and Angelika Welte[37].

There are several problems with both of these studies: first, as GHL point out, the FMI study does not consider costs associated with either theft or counterfeit when calculating the costs of cash.[38] Second, the “2018” data from the United States is based on 2015 survey data on the cost of acceptance in Canada that has been adjusted by using certain U.S.-specific data.[39] This was done despite Hayashi herself arguing in a previous paper coauthored with William Keeton that such practices are inappropriate, especially where the United States is concerned, noting that:

The danger of relying on other countries’ cost studies is particularly apparent for the United States, where checks and credit cards are used on a larger scale and more parties are involved in the payments process.[40]

Among other things, these differences in the mix of payment type will have an effect on the optimal fees charged by parties to the system, due to the two-sided nature of payments.[41] For example, the “interchange” fees retained by issuing banks might be higher in the United States due to issuers seeking to increase their share of the payments market by offering incentives for consumers to switch from checks to cards (for example, in the form of cashback or other rewards).[42] (These fees and incentive payments are essentially transfers within the system, not a net cost. Indeed, to the extent that they result in a shift to more socially efficient modes of payment, they are, on net, beneficial.)

At a more general level, Hayashi’s survey suffers from inappropriate aggregation. That is to say, whereas it is likely true that debit-acceptance costs exceed those of cash for some proportion of payments, it is unlikely to be true for all merchants and all amounts. Indeed, the study of the Netherlands that Hayashi used notes that, although the average cost of acceptance for debit was notionally higher than for cash in 2002, the “breakeven point” (when taking into account costs for both retailers and banks) was €11.63, which was below the average ticket size for debit (€44).[43]  Meanwhile, in 2009, the merchant-acceptance cost for debit was on average lower than for cash; the breakeven point had, however, fallen to €3.06, not zero.[44]

Finally, and related to the problem of inappropriate aggregation, Hayashi fails to consider the ticket-lift effect identified by Grant and confirmed by Layne-Farrar, Economists Inc, Bounie & Camara, and others.

6. Problems with generalizing across jurisdictions

There is broad agreement that the cost of using different payment types for a transaction of a given amount varies significantly across jurisdictions and sectors. For example, in their 2003 study of the Norwegian payment system, using data from a 2001 survey, Olaf Gresvik and Grete Øwre found that Norwegian banks operated payments at a loss (although technological improvements had decreased the cost of the payment system over time).[45] By contrast, at least until 2010, debit payments in the United States were used to cross-subsidize checking accounts.[46]

Within the United States, costs can vary considerably from state to state. For example, a cashier in San Jose, California, might earn $20/hour, while a cashier in Louisville, Kentucky, might earn $10/hour. If both cashiers take the same amount of time to tender payments, the tender costs in San Jose could be twice what they are in Louisville. Even within a state, salaries can vary somewhat, with cashiers in Smyrna, Tennessee earning an average of $14.36, according to Indeed.com, while those in Jackson, Tennessee earn only $11.45.[47]

But that is far from the whole story. While salaries might be higher in, e.g., California, the average ticket is also likely to be higher. Thus, the number of sales required per-dollar of income will be lower. This means that the average time to tender any specific dollar amount will be lower in California. How this affects the net costs to tender per-dollar depends on the ratio of spending to salaries, which is not only location-specific, but also merchant-specific.

7. Tender-time studies

A subcategory of merchant-cost studies focuses more narrowly on the time taken to tender a payment. These are essentially “time and motion studies” of the parts of the retail-checkout process that involves payment. Table 11 provides some examples of such studies. (These studies also have implications for consumers for whom the time taken to process payments and, relatedly, the time spent queuing has an opportunity cost, as discussed in Section III.)

TABLE 11: Tender Time Studies (Time to Complete Tender in Seconds)

[48][49][50][51][52] SOURCE: Polasik et al., adapted by author

8. Studies of the cost of accepting cash

A final subcategory of merchant cost-of-acceptance studies looks in greater detail exclusively at the cost of accepting cash. A relatively recent example in the U.S. context was produced by IHL Group, which undertook a very detailed activity-based costing.[53] Specifically, IHL identified nine activities associated with the cost of cash:

1. Start/Rebuild Drawer-Functions related to opening drawer from initial deposit to rebuild of for next cashier.

2. Closing Drawer-This includes functions related to closing out a drawer. Time for cashiers, managers, or cash office personnel to count and reconcile the drawer with POS or cash register totals.

3. Pickups-This is inclusive of pickups during a shift for too much cash in the drawer or bills that are large denominations.

4. Change Orders-Cost associated with a cashier requiring change throughout the shift

5. Audits/Discrepancies– These are costs of redoing counts, auditing tills, and time associated with recounts for any discrepancies.

6. Prepare/Coordinate Deposits-Costs associated with preparing or coordinating deposits.

7. CIT/Deposit Costs-These are costs of Cash In Transit companies (armored trucks) or cost for managers or other employees to go to bank to make the deposits.

8. Bank Charges-These are charges surrounding bank fees. This includes statement fees, reconciliation, cash value fees and change orders among other things.

9. Cash Shrink-This is the cost of theft, fraud or other cash loss activities. This is cash that just disappears in the process. For this study we used previous data from other studies as a value.[54]

IHL then undertook several hundred interviews and numerous modeling exercises to establish the amount of time associated with actions 1-6 and, using wage estimates for each relevant job in each relevant location, they calculated the total cost for each such activity. They then added costs 7-9 to arrive at a total for each business.

IHL found that the average cost of cash across all segments was 9.1% of the revenue of the businesses studied.[55] Of this, the largest component was “close drawer,” accounting for about 40% of the total, whereas bank charges were only 4.3%.[56]

Table 12 shows the range of costs incurred by different businesses for accepting cash.[57] Even the lowest of these (food/grocery) has a cost of cash (4.7%) that is higher than the highest merchant-discount rates charged by acquiring banks.

TABLE 12: Cost of Cash by Segment

SOURCE: IHL

B. Consumer-Cost Studies

While most partial-cost studies focus on merchants, some look at consumers. Several studies have shown that transaction value is a key determinant of the method of payment. One explanation is that consumers want to avoid receiving a significant amount of change in the form of coins. Thus, Heng Chen, Kim P. Huynh, and Oz Shy of the Bank of Canada found that “a significant number of cash users … switch to paying with debit or credit cards at transaction values marginally above $5 and $10.” [58] They attribute this to “the burden of receiving coins as change associated with the currency denomination structure.”[59] (The Bank of Canada withdrew the $1 note in 1989 and the $2 note in 1996, leaving $5 as the smallest denomination bill.[60])

C. Bank-Costs Studies

A third category of partial-cost studies considers the costs to banks. The most notable example of this is the study undertaken by Olaf Gresvik and Grete Øwre mentioned above, which formally introduced the concept of activity-based costing (ABC) to payments and applied it to the processing of payments by Norwegian banks, based on a 2001 survey.[61]

III. Social-Cost Studies

The second category of payment-cost studies seeks to evaluate not only the costs to merchants, but the costs to society as a whole. An early focus of such studies was checks, which at the time were the dominant form of noncash payment. A 1990 paper by David Humphrey and Allen Berger considered the divergence between the private and social costs of payments in the United States, with a particular focus on checks, which the authors argued were overused because payor businesses (in particular) benefitted from the float[62] associated with checks that had not yet cleared.[63]

A 1996 paper by Kirstin Wells, using data from 1993, compared the social cost of checks with that of automated-clearinghouse (ACH) payments and concluded that, in contrast to the 1987 data used by Humphrey and Berger, there was not a significant difference in float cost between using checks and ACH.[64] Indeed, Wells estimated that the value of float fell 91.3% from an average of $1.04 to $0.09, mainly due to increases in the efficiency of check processing.[65]

Starting in the early 2000s, the focus of social-cost-of-payments studies shifted to retail payments and, specifically, to the relative cost of cash and payment cards (although checks were also evaluated in some studies in the 2000s, as they were then still quite widely used). This section focuses on such studies.

A. Garcia-Swartz, Hahn, and Layne-Farrar

In a study originally published by the AEI Brookings Joint Center for Regulatory Studies in 2004, and subsequently updated and published in the Review of Network Economics in 2006, Daniel Garcia-Swartz, Robert Hahn, and Anne Layne-Farrar (“GHL”) undertook arguably the first and still one of the most comprehensive social-cost (or benefit-cost) assessments of retail payments.[66]

1.  Merchant costs

The starting point for GHL was a study undertaken by the Food Marketing Institute (FMI) in 1998 that sought to calculate the direct costs of accepting various payment types, namely: cash, checks (verified and nonverified), credit cards, and debit cards (signature and PIN). These direct costs (as categorized by the FMI) were:

1. “Tender-time”: this is the cost of the time spent by cashiers processing a transaction after ringing up all the items (this was based on another FMI study, from 2000, at which time cash remained quicker than card, and wages from the 2002 Bureau of Labor Statistics survey);

2. “Deposit preparation”: this is the cost of the time taken to prepare a cash deposit (e.g. counting cash, reconciling the register drawer, preparing a deposit slip, etc.);

3. “Bank charges”: these are the explicit fees charged by banks, such as a deposit fee for cash and checks, or the merchant discount rate for cards;

4. “Other direct costs”: these include costs such as using armored cars to transport cash, collection costs and losses on “bounced” checks, and credit card chargebacks.[67]

Table 13 reproduces GHL’s summary table showing these initial calculations.[68] As can be seen, based only on these costs, the per-transaction cost of cash is lower than that of other payment types. The amount tendered in the average cash transaction is, however, much lower than the amount tendered in other transaction types. When scaled to $100 of sales, cash is the second-most costly for the merchant, after credit cards, while verified checks are the least costly.

GHL then note that the FMI analysis omits two potentially significant costs: (1) theft and counterfeit losses for cash and (2) float loss for all payment types.

TABLE 13: Grocery Stores’ Per-Transaction Processing Costs for Various Payment Instruments, Modified ($), (2003)

SOURCE: Garcia-Swartz, et al.

2. Consumer costs

GHL identify the following payment-related consumer costs:

1. Processing time: this is the opportunity cost of the consumer’s time while waiting for the transaction to be processed.

2. Queue time: this is assumed to be equal to processing time

3. Explicit price: this is the explicit bank service charge associated with withdrawing cash and processing cheques and debit transactions.

4. Implicit price: this is the “shoe-leather” costs of obtaining cash (i.e. the opportunity cost of the time taken to travel to/from an ATM and withdraw cash).

5. Seigniorage: the profit made by the central bank from printing money (basically the difference between the face value of the currency and the costs of production)

3. Bank costs

In addition to merchants and consumers, banks also incur costs in the form of ATM maintenance (applies to cash); production of cards (applies only to cards); transaction processing (applies to all payment methods); and card rewards (applies mainly to credit cards, but also to a lesser extent to debit cards).

4. Central bank costs

A fourth set of costs arise from the involvement of the central bank in producing and processing banknotes and coins, as well as in processing checks (approximately $0.0015 and $0.03, respectively, for a transaction of $11.52). The cost of check processing, however, is recovered from banks, is therefore included in banks’ processing costs.

TABLE 14: Grocery Stores’ Per-Transaction Processing Costs for Various Payment Instruments, Cash Transaction of $11.52 ($), (2003)

SOURCE: Garcia-Swartz, et al. (2006)

Putting these all together, GHL calculate the total marginal cost for transactions of $11.52 (the average size of a cash transaction) and $52.24 (the average size of a check transaction).[69] Table 14 replicates the figures for the $11.52 transaction.[70] Once double-counting is eliminated, the social cost of paying with cash and card are roughly the same.

Meanwhile, for grocery-store transactions of $54.24, debit cards have the lowest social cost ($0.94 for PIN-authorized transactions and $1.00 for signature-authorized transactions), followed by verified check ($1.08), credit card ($1.32), nonverified check ($1.40) and, finally, cash ($1.98).[71]

5. Accounting for (social) benefits

But the story does not end there. GHL note that there is a range of benefits arising from the use of certain payment methods that, at least partially, offsets these costs. For consumers these include:

1. Float: while checks, credit and charge cards impose float costs on merchants, they provide consumers with some float (in the case of credit cards used purely transactionally this may be quite large).

2. Credit option: the option to use the credit function of credit cards

3. Record keeping: electronic transactions and even cancelled checks provide a record that is valuable to many consumers.

4. Cashback at POS saves a trip to the ATM (but the amount is limited)

5. Rewards cards (mainly credit) provide marginal benefits about twice their cost

6. Discover cards provide marginal benefits equal to their marginal cost

7. Privacy, the exclusive domain of cash, offers users significant benefits [albeit at a cost in terms of dramatically increased costs of recourse] [72]

For banks, the benefits include a small amount of float (this is basically the counterpart of the float costs incurred by consumers who use cards) and processing revenue, which is part of the amount earned by banks for processing transactions. Meanwhile, central banks earn seigniorage and a small amount for processing transactions (which, as noted earlier, is netted out).

The marginal benefits associated with a typical check-size transaction (for 2003, when such transactions were more common) of $52.24 are shown in Table 15. The payment methods providing the greatest marginal benefit are credit ($1.61 per transaction) and cash ($0.92 per transaction).

By adding the marginal benefits to the marginal costs, GHL are then able to calculate the net social marginal cost associated with the different payment types. For a transaction of this size, in 2003, the authors estimate that credit cards would have the lowest net social cost, followed by PIN debit, signature debit, verified check, cash, and nonverified check.

TABLE 15: Adding Benefits to Grocery-Store Transactions of $52.24

SOURCE: Garcia-Swartz, et al.

GHL use the same methodology to calculate the net social marginal cost for transactions at two other types of merchant: discount stores and specialty electronics stores.

TABLE 16: Net Social Marginal Cost for Transactions at Discount and Electronics Stores

SOURCE: Garcia-Swartz, et al.

In the case of discount stores, for purchase amounts of $15.49, the social cost of cash, bank credit, American Express, and debit are about equal. Meanwhile, for larger amounts, cash is more costly than all other payment methods except check.

6. Sensitivity analysis

GHL then undertake a “sensitivity analysis,” in which they adjust some of the parameters of their estimates. For example, increasing the number of people queueing for checkout increases the net social cost of checks relative to cash quite significantly and increases the net social cost of cards slightly. The result is that, for example, if there are three people queuing at GHL’s average grocery store spending the average cash amount at such a store ($11.52), cash becomes marginally socially beneficial.[73] Payment cards, however, remain superior at the amounts typical for those purposes ($33 for signature debit, $41.05 for PIN debit, and $44.59 for credit). In other words, the “break even” point for those payment types shifts to the right.

7. GHL’s conclusions

It is worth repeating the conclusions GHL drew from their research (in a separate study published alongside the detailed analysis described above):

First, transaction size assumptions are critical in analyzing payment-processing costs. At smaller transaction sizes, the net social marginal cost of all payment instruments – paper and electronic alike – are remarkably similar. No one instrument stands out as more socially efficient. At larger transaction sizes, however, significant differences emerge. For grocery store transactions, electronic payments are considerably less costly on net for society than paper methods. Yet another pattern emerges for the larger transactions conducted at electronics stores. Here credit cards with a large proportion of reward cardholders have the lowest net social marginal cost. This pattern is consistent with observed behavior: namely that cash use dominates smaller transaction sizes but drops precipitously as transaction size increases.

Second, retailer type influences the individual cost elements and thus affects private cost calculations. Since the distribution of transaction sizes differs across venues, this result follows naturally from our first finding.  Added to the transaction size effect are apparent differences in merchant costs, such as point of sale time and back-office processing costs.

Finally, and most importantly, the relative merits of different payment methods change significantly when all parties are counted and benefits are included. Merchant studies have found that paper methods are the cheapest for merchants. This is confirmed in our study of the distribution of private costs and benefits. But what is cheap for merchants is relatively expensive for other parties to a transaction. Certain parties, especially consumers, receive considerable benefits from payment cards, which tip their net private costs in favor of that method of payment.[74]

B. Shampine Critique of GHL and GHL’s Response

Allan Shampine undertook a critical review of GHL, questioning their assumptions regarding the amount of time taken to obtain cash from ATMs, the value of card rewards, the range of nonpecuniary benefits that consumers derive from different payment methods, and the appropriateness of some other cost categories, such as seigniorage.[75] He then applied his own sensitivity analysis—which, by making very different assumptions, found that, for certain payment sizes that GHL had identified as lower cost for cards, cash may be lower cost.

GHL responded by noting that, of course, if one makes different assumptions, it is possible to achieve different outcomes.[76] But where the assumptions that GHL made were at least supported as far as possible by empirical evidence, most of the adjustments Shampine made had no empirical basis and should therefore not be treated as reliable. Moreover, as they note, there are very significant individual differences among consumers, merchants, and banks regarding the costs and benefits of any particular payment type.

Ironically, one of the GHL assumptions that Shampine criticizes as insufficiently generous is the privacy benefits of cash. While it is no doubt true that some consumers benefit from the anonymity of cash payments, for most consumers, that is not the main priority. Moreover, there is a social cost to privacy when consumers use cash to engage in illegal activity. Indeed, security is typically more important, and since cards are far more secure than cash, it is possible that the relative benefits are tipped even more toward cards for most consumers.

C. Other Social-Cost-of-Payments Studies

Numerous researchers have undertaken studies to estimate the social cost of payments in other jurisdictions. While several of these studies seek to account for costs borne by consumers, none of those we identified has been as comprehensive or detailed as GHL.[77] Specifically, none adequately account for the social benefits of different payment modes. Also, to our knowledge, none of them focus on the United States. Nonetheless, the studies have introduced some valuable insights. Perhaps most notable is the importance of differentiating fixed and variable costs (although, as discussed below, these costs change over time).

1. Fixed v variable costs, and the ‘breakeven’ point

In their analysis of the Dutch payments system, Hans Brits and Carlo Winder show that payment cards have relatively high fixed costs and much lower variable costs. As a result, in 2002, the “breakeven” point for debit transactions occurred at €11.36.[78] Above that amount, it is more socially cost efficient to pay with debit than with cash. This can be seen in Figure 3, which shows the relative cost of making a payment with cash, debit card, or “e-purse” (this last is a rechargeable smart card that can be used to pay for a range of goods and services in the Netherlands).

FIGURE 3: Breakeven Points for Different Payment Types, Netherlands (2002)

SOURCE: Brits & Winder (2005)

In a study of the private and social costs of payments in Sweden in 2002, Mats Bergman, Gabriella Guibourg, and Björn Segendorf of Sweden’s central bank found that the unit transaction costs of cash (4.6 SEK) was higher than for either credit cards (4.4 SEK) or debit cards (3.1 SEK for PIN, 3.2 SEK for signature).[79] They then sought to identify the breakeven point for each payment method, and found that debit cards became more cost-effective than cash at about 72 SEK (U.S. $7), while credit cards became more cost-effective than cash at about 160 SEK (U.S. $16).[80]

Technological improvements have reduced both the fixed and variable costs associated with card-based payments. For example, the fixed cost associated with the time taken to process a card-based transaction has generally fallen.[81] Meanwhile, both the fixed and variable costs associated with card-based fraud has fallen by more than 75% as a result of the introduction of the Europay, Mastercard and Visa (EMV) Chip.[82]

FIGURE 4: Breakeven Points for Different Payment Types, Sweden (2002)

SOURCE: Bergman, Guibourg, & Segendorf (2007)

2. Technological change lowers the breakeven point

While technological improvements have also increased the efficiency of processing cash, there are some human aspects to cash processing that are almost impossible to eliminate, and that are inherently proportional to the transaction amount.

Increased use of a payment method can create a virtuous circle for that method, while having the opposite effect for other methods. So, for example, the shift from cash to debit in the Netherlands resulted in lower average debit-acceptance costs, but increased the average acceptance costs of cash. Thus, Nicole Jonker found the breakeven point for merchant acceptance of debit in the Netherlands had fallen from the €11.36 found by Brits & Winder in 2002 to €3.06 in 2009.[83]

A similar phenomenon appears to be happening with both cash and checks in the United States, as demonstrated by the examples given in the introduction. It is reasonable to ask why this shift seems to have happened later in the United States than in Europe. Aside from “culture,” one argument is that U.S. banks implemented more-efficient check processing in the early 1990s, thereby reducing the incentives for merchants to switch. Another is that the Durbin amendment in 2010 reduced consumers’ incentives to pay with debit, and resulted in their switching from debit to credit for lower-value payments, which increased the relative cost of acceptance for merchants.

D. Partial Social-Cost-of-Cash Studies

Many other studies advertised as assessing the social costs of payments have considered the effects on a somewhat narrower range of participants. For example, a study published by the European Central Bank titled “The Social and Private Costs of Retail Payment Instruments: A European Perspective” notes:

Due to the considerable effort necessary to collect viable data on the costs incurred by all of the parties in the payment chain, the analysis focuses on the most important parties issuing authorities, i.e.:

• central banks and governments;

• banks and interbank infrastructure providers (automated clearing houses, ATM networks, etc.);

• retailers and companies; and

• cash-in-transit companies.[84]

There would appear to be a rather significant omission from this study: consumers (indeed, the ECB acknowledges this deficit). The same omission is present in many other similar studies. This is both rather odd and rather troublesome, since consumers clearly are important participants in the payment system—indeed, without them, the system would be pointless. Moreover, if GHL are correct, consumers tend to benefit more from electronic payments than from cash—indeed, cash is typically a net cost for consumers—so omitting them from the analysis seems more than a mere oversight.

IV. Conclusion

This review shows that both the partial and social costs of different modes of payments vary considerably by location, type of merchant, and over time. Nonetheless, several broad conclusions emerge:

First, retailers that accept card payments tend to experience ticket lift; many also benefit from increased throughput. As a result, retailers such as quick-serve restaurants that sell low-ticket items and might be below the “breakeven” point for cards relative to cash (if considering only the direct transaction costs) but benefit on net from adding cards because of the significant ticket lift and increase in throughput.

Second, over time, there has generally been a reduction in the “breakeven” point for electronic payments. This has likely been driven by such innovations as the EMV Chip and contactless payments, which have reduced fraud and tender-time costs, and increased benefits to all parties.

Third, while innovations in cash management have also reduced the cost of accepting cash in general, the cost of multimodal payment acceptance means that the relative cost of continuing to accept cash has increased, especially in locations where throughput is of the essence, such as ballparks and quick-serve restaurants. This has led some such merchants to drop cash acceptance.

[1] Mercedes-Benz Stadium Achieves Success in First Year of Stadium-Wide Cashless Initiative, Mercedes-Benz Stadium (Mar. 9, 2020), https://www.mercedesbenzstadium.com/news/mercedes-benz-stadium-achieves-success-in-first-year-of-stadium-wide-cashless-initaitive (“MBS’s expected first-year results have been realized, once again locking in the No. 1 spot for food and beverage including speed of service across all NFL venues for the third consecutive year.  Due to the new cashless model, roughly 95 percent of fans noticed the same or an increase in speed at concession lines and at peak times a 20-30 second reduction in wait times. Results also include an increase in food and beverage per capita numbers for close to 50 events at MBS through 2019 including a combined 16 percent increase for Atlanta Falcons and Atlanta United all while saving more than $350,000 in operational expenses… Since going cashless, more than 2.5 million guests have attended events at MBS. Of those, only 1.2 percent have used the cash-to-cards kiosks, showing that fans are bringing their own credit cards or using mobile payment options.”).

[2] See Ben Gran, More Stadiums Are Going Cashless. What Does This Mean for Your Personal Finances?, the ascent (Feb. 13, 2024), https://www.fool.com/the-ascent/personal-finance/articles/more-stadiums-are-going-cashless-what-does-this-mean-for-your-personal-finances (“America is quickly becoming a more cashless society, and sports venues are leading the charge. As of 2022, nearly all Major League Baseball ballparks had gone cashless, along with most NFL stadiums and NBA/NHL arenas like the United Center in Chicago.”).

[3] See, e.g., Benjamin Gottlieb, Why Some Restaurants in LA Are Going Cash-Free, Marketplace (Aug. 19, 2019), https://www.marketplace.org/2019/08/19/why-some-restaurants-in-la-are-going-cash-free.

[4] Nate Delesline III, Target to Stop Accepting Personal Checks, Retail Dive (Jul. 9, 2024), https://www.retaildive.com/news/target-to-stop-accepting-personal-checks/720792.

[5] Michelle Faverio, More Americans Are Joining the ‘Cashless Economy’, Pew Research Center (Oct. 5, 2022), https://www.pewresearch.org/short-reads/2022/10/05/more-americans-are-joining-the-cashless-economy.

[6] Jeffrey M. Jones, Americans Using Cash Less Often; Foresee Cashless Society, Gallup (Aug. 25, 2022), https://news.gallup.com/poll/397718/americans-using-cash-less-often-foresee-cashless-society.aspx.

[7] Ketherine Haan, People Are Twice as Likely to Spend More Money When Using Card than Cash in 2024, Forbes Advisor (May 16, 2024), https://www.forbes.com/advisor/business/software/people-twice-likely-spend-using-card-than-cash.

[8] Id.

[9] See Emily Cubides & Shaun O’Brien, 2023 Findings from the Diary of Consumer Payment Choice, The Fed. Res. Fin. Serv. (Jul. 2023), at 6, available at https://www.frbsf.org/cash/wp-content/uploads/sites/7/2023-Findings-from-the-Diary-of-Consumer-Payment-Choice.pdf (which notes that “The category ‘other’ includes payments made with pre-paid [debit], checks, mobile payment apps, money orders.”).

[10] Faverio, supra note 5.

[11] Kineree Shah, Cash Remains King – 67% of Americans Still Use Traditional In-Store Payment, YouGov (Feb. 12, 2024), https://business.yougov.com/content/48650-cash-remains-king-67-of-americans-still-prefer-traditional-in-store-payment.

[12] A survey of the available literature was conducted using EconLit, the Social Science Research Network (www.ssrn.com), the IDEAS database (ideas.repec.org), and Google Scholar. This enabled us to identify the primary methodologies used to evaluate the value, costs, and benefits of different payment technologies. Initially, we used search terms such as “cost of cash” and “cost of payments” (with and without the restrictive use of speech marks). As the research progressed, we expanded this to a range of other terms, including “speed of payments,” so as to capture a wider range of studies addressing the issues under consideration.

[13] Credit cards take this one step further, enabling consumers to spread their spending out, reducing temporary liquidity constraints without the need to arrange an overdraft or other loan, thereby further increasing ticket lift—especially for higher-value items.

[14] In a traditional activity-based costing study, the aim is to account for the costs of each activity undertaken by a business and thereby enable management to make better decisions on resource allocation, investments in innovation, and so on.

[15] Board of Governors of the Federal Reserve System, Credit Cards in the U.S. Economy: Their Impact on Costs, Prices, and Retail Sales 36 (Jul. 27, 1983), available at https://fraser.stlouisfed.org/title/credit-cards-us-economy-5331.

[16] The study notes some of the costs: “Included among the relevant cost concepts, for example, would be the time required to complete a trans­ action, which may in turn influence the number of check-out stations and sales clerks that a store needs. Credit card transactions absorb time because credit slips must be written and frequently some sort of authorization procedure undertaken. Personal checks usually trigger certain time-consuming precautionary steps, such as inspecting and copying down identification data or summoning a manager from elsewhere in the store to approve acceptance of the check. Cash transactions most likely consume less time than check or credit card transactions, but the counting of cash received, the making of change, and the stocking and replenishment of cash registers with currency and coin are cash-related activities that occupy an employee’s time. Time consumed in reconciling sales records with cash, checks, and credit slips on hand may vary with the proportion of sales transacted by each means, and from one business to another. Security-related expenses comprise a large family of costs in which further variation may be found among the different means of payment. Included in such a concept would be both direct expenses of security precautions plus an allowance for any uncovered risk associated with each transaction medium. An obvious risk, for example, is the possibility of theft. This particular risk is likely to be more pronounced for cash because the full negotiability of cash makes it an attractive target. Acceptance of personal checks entails the risk that the check may be uncollectable, because the writer may not have sufficient funds on deposit or for some other reason.  Security risks borne by operators of in-house credit card plans include the costs associated with delinquent and uncollectable accounts.” Id. at 36-37.

[17] See Robert M. Grant, Transaction Costs to Retailers of Different Methods of Payment: Results of a Pilot Study, 4(2) Managerial & Decision Econ. 89-96 (Jun. 1983).

[18] Id. at 91. Grant is one of the most-cited social scientists, with nearly 100,000 citations and an H index of 58. See Google Scholar Profile of Robert M. Grant, Google Scholar (last accessed Aug. 22, 2024), https://scholar.google.com/citations?user=CQ8P0PcAAAAJ&hl=en.

[19] Grant, supra note 17, at 93, 95-96.

[20] Anne Layne-Farrar, Are Debit Cards Really More Costly for Merchants? Assessing Retailers’ Costs and Benefits of Payment Instrument Acceptance (SSRN Working Paper Sep. 9, 2011), available at https://ssrn.com/abstract=1924925.

[21] Id. at 6.

[22] Id. at 16-17.

[23] See id. at 23, 27, 34, 35, 39.

[24] Retailer Payment Systems: Relative Merits of Cash and Payment Cards, Economists Inc. (Nov. 19, 2014), available at https://ei.com/wp-content/uploads/2015/01/Cost_of_Cash_Study.pdf.

[25] Id. at 52.

[26] Id. at 21.

[27] Id. at 5.

[28] Id. at 58-60.

[29] See Tom Akana & Wei Ke, Contactless Payment Cards: Trends and Barriers to Consumer Adoption in the U.S. (Discussion Paper 20-03, May 2020), available at https://www.philadelphiafed.org/-/media/frbp/assets/consumer-finance/discussion-papers/dp20-03.pdf.

[30] See US Contactless Payment Statistics, Finical Holdings LLC (last accessed Aug. 22. 2024),  https://finicalholdings.com/us-contactless-payment-statistics.

[31] David Bounie & Youssouf Camara, Card-Sales Response to Merchant Contactless Payment Acceptance, 119 J. Banking & Fin. 105938 (Oct. 2020).

[32] Id.

[33] Sumit Agarwal, Wenlan Qian, Yuan Ren, Hsin-Tien Tsai, & Bernard Yeung, The Real Impact of FinTech: Evidence from Mobile Payment Technology (Working Paper, NUS Business School, National University of Singapore, September 2022), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556340.

[34] Id. at 4.

[35] Id. at 5.

[36] Fumiko Hayashi, Cash or Debit Cards? Payment Acceptance Costs for Merchants, 106(3) Econ. Rev. Fed. Res. Bank of Kansas City 53 (Aug. 2021), available at https://www.kansascityfed.org/Economic%20Review/documents/8213/EconomicReviewV106N3Hayashi.pdf.

[37] See Fumiko Hayashi, Marie-Hélène Felt, Joanna Stavins, & Angelika Welte, Distributional Effects of Payment Card Pricing and Merchant Cost Passthrough in the United States and Canada (Fed. Res. Bank of Kansas City, Research Working Paper no. 20-18, Dec. 2020), available at https://www.kansascityfed.org/Research%20Working%20Papers/documents/7595/rwp20-18.pdf.

[38] See Daniel Garcia-Swartz, Robert Hahn, and Anne Layne-Farrar, The Move Toward a Cashless Society: Calculating the Costs and Benefits, 5(2) Rev. of Network Econ. 202 (2006) [hereinafter “GHL”] (“The FMI study omits… theft and counterfeit loss for cash…”).

[39] Specifically: “The total cost of accepting cash, debit card, and credit card payments is based on the Bank of Canada Retailer Survey, but by using United States–specific information as follows: merchant service charge, the average wage for cashiers and back-office workers (from the U.S. Bureau of Labor Statistics Retail Trade Earnings and Hours), cash theft and fraud as a percentage of cash sales (from the National Retail Security Survey), the fraud and chargeback rate for cards (derived from Hayashi et al. 2018 and FRPS), and the average terminal rental cost (using the low end of $30 to $100 per month listed on merchant acquirers’ websites). We then calculate the average fixed cost and proportional cost per transaction for each of the three payment methods.” Hayashi, et al., Distributional Effects, supra note 37, at 59.

[40] Fumiko Hayashi & William R. Keeton, Measuring the Costs of Retail Payment Methods, 97(2) Econ. Rev. Fed. Res. Bank of Kansas City 38 (2012).

[41] See Todd J. Zywicki, The Economics of Payment Card Interchange Fees and the Limits of Regulation, (ICLE Financial Regulatory Program White Paper Series, Jun. 2, 2010), at 36-38, available at https://laweconcenter.org/images/articles/zywicki_interchange.pdf.

[42] Id. at 16-18.

[43] See Hans Brits & Carlo Winder, Payments Are No Free Lunch, 3(2) DNB Occasional Studies 27 (2005).

[44] See Nicole Jonker, Social Costs of POS Payments in the Netherlands 2002-2012: Efficiency Gains from Increased Debit Card Usage, 11(2) DNB Occasional Studies 32 (2013).

[45] Olaf Gresvik & Grete Øwre, Costs and Income in the Norwegian Payment System 2001. An Application of the Activity Based Costing Framework, (Working Paper No. 2003/8, Norges Bank, Sep. 17, 2003), at 1, available at https://hdl.handle.net/11250/2498619.

[46] Todd J. Zywicki, Geoffrey A. Manne, & Julian Morris, Price Controls on Payment Card Interchange Fees: The U.S. Experience, (ICLE Financial Regulatory Research Program White Paper 2014-2), at 5-8, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2446080 (noting the loss of free banking accounts, higher monthly maintenance fees, and average minimum holdings required to avoid fees post-Durbin amendment).

[47] See, Cashier Salary in Tennessee, Indeed (last accessed Jul. 24, 2024), https://www.indeed.com/career/cashier/salaries/TN?from=top_sb (salaries based on averages posted on the website on Jul. 24, 2024).

[48] Contactless Payments: Delivering Merchants and Customer Benefits, A Smart Card Alliance Report (2004).

[49] Elizabeth Klee, Paper or Plastic? The Effect of Time on the use of Checks and Debit Cards at Grocery Stores (Finance and Economics Discussion Series, No. 2006-02, Washington Board of Governors of the Federal Reserve System).

[50] Guy Quaden, Costs, Advantages And Disadvantages of Different Payment Methods, Report, Bank of Belgium (2005).

[51] Brits & Winder, supra note 43.

[52] See Michal Polasik et al., Time Efficiency of Point-of-Sale Payment Methods: Empirical Results for Cash, Cards and Mobile Payments, 141 Lecture Notes in Business Information Processing 312 (2013), (Figures given are the mean times for the merchant).

[53] See Greg Buzek, Cash Multipliers: How Reducing the Costs of Cash Handling Can Enable Retail Sales and Profit Growth, IHL Group (2018).

[54] Id. at 7.

[55] Id. at 10.

[56] Id. at 11.

[57] Id. at 10.

[58] Heng Chen, Kim P. Huynh, & Oz Shy, Cash Versus Card: Payment Discontinuities and the Burden of Holding Coins (Bank of Canada Staff Working Paper 2017-47), at ii, available at https://www.econstor.eu/bitstream/10419/197853/1/1011056011.pdf.

[59] Id.

[60] About Legal Tender, Bank of Canada (last accessed Aug. 22, 2024), https://www.bankofcanada.ca/banknotes/about-legal-tender.

[61] Gresvik & Øwre, supra note 45.

[62] Float is working capital; float loss is the cost associated with the time taken for transactions to clear and settle, which means that additional working capital is required to cover outgoings.

[63] David B. Humphrey & Allen N. Berger, Market Failure and Resource Use: Economic Incentives to Use Different Payment Instruments, in The US. Payment system: Efficiency, risk and the role of the Federal Reserve: Proceedings of a symposium on the U.S. payment system sponsored by the Federal Reserve Bank of Richmond (1990), at 45-86.

[64] Kirstin E. Wells, Are Checks Overused?, 20(4) Quarterly Rev. Fed. Res. Bank of Minneapolis 2-12 (1996).

[65] See id. at 4.

[66] GHL, supra note 38.

[67] See id. at 200.

[68] See id. at 201. The authors make certain modifications to the data from FMI, including updating the processing time for transactions and the cost of armored cars.

[69] Id. at 202.

[70] Id. at 204.

[71] Id. at 208.

[72] See id. at 209-12.

[73] See id. at 225.

[74] Garcia-Swartz, et al., supra note 38 at 196.

[75] See Alan Shampine, Another Look at Payment Instrument Economics, Rev. of Network Econ., vol. 6(4), at 495-508 (2007).

[76] Daniel Garcia-Swartz, Robert Hahn, & Anne Layne-Farrar, Further Thoughts on the Cashless Society: A Reply to Dr. Shampine, 6(4) Rev. of Network Econ. 509-524 (2007).

[77] See, e.g., Kerstin Junius, et al., Costs of Retail Payments – An Overview of Recent National Studies in Europe (ECB Occasional Paper No. 294, May 2022), available at https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op294~8ac480631a.en.pdf.

[78] See Brits & Winder, supra note 43, at 27.

[79] Mats Bergman, Gabriela Guibourg, & Björn Segendorf, The Costs of Paying – Private and Social Costs of Cash and Card Payments, at 15 (Sverges Riksbank Working Paper No. 212, Sep. 2007),  available at https://archive.riksbank.se/Upload/Dokument_riksbank/Kat_publicerat/WorkingPapers/WP212.pdf.

[80] Id. at 2.

[81] Brits & Winder, supra note 43, at 27; Layne-Farrar, supra note 20, at 7; Smart Card Alliance, supra note 48; Polasik et al., supra note 52.

[82]  Visa EMV Chip Cards Help Reduce Counterfeit Fraud by 87 Percent, Visa (Sep. 3, 2019), https://usa.visa.com/visa-everywhere/blog/bdp/2019/09/03/visa-emv-chip-1567530138363.html.

[83] Jonker, supra note 44, at 32.

[84] Heiko Schmiedel, Gergana Kostova, & Wiebe Ruttenberg, The Social and Private Costs of Retail Payment Instruments: A European Perspective (ECB Occasional Paper Series No. 137, Sept. 2012), at 12, available at https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp137.pdf.