Vrinda Kadiyali is the Nicholas H. Noyes Professor of Management and Professor of Marketing and Economics at the Samuel Curtis Johnson Graduate School of Management at Cornell University.
We at Johnson at Cornell University are hosting the CEO of MasterCard Ajay Banga for a conversation on “A world beyond cash.” I will serve as the moderator for this discussion. As background, I do research in economics, marketing and strategy.
It is easy to see the costs of using cashless payment systems. Some of these costs are interchange fees for retailers, annual fees and high interest rates for customers, and loss of privacy. Also, cashless systems are prone to what we economists and strategy folks call “increasing returns,” that is, they favor large companies over smaller companies, and can lead to anticompetitive practices. Finally, going cashless, especially in developing economies, might require joint efforts of the public and private sectors, such as maintaining unique identification numbers for each citizen and good communication systems. What are the returns to the taxpayer of these subsidies that benefit cashless companies?
To balance out these arguments against cashless, let’s consider the cost of using cash or the benefits of going cashless. I can see how going cashless might reduce theft, corruption, and tax avoidance in developing societies, by creating electronic trails of transactions. In developed countries, fraud protection and ease of commerce are facilitated by cashless. Also, there is evidence that new business models of cashless are emerging that might lead to more vibrant competition.
We’re looking forward to hearing more about these and other issues around “cashless” from Mr. Banga. Stay tuned!