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Beyond the Transaction: Every Transaction Has a Story

A Cash-Only Christmas?

There was a minor kerfluffle in the press just before Christmas regarding the supposed shift to cash in gift buying for the holiday. We were supposed to believe that American consumers were walking into a big box store and counting out fifteen $20 bills to purchase a new PS3. This is hardly plausible.

How could it be? According to MasterCard SpendingPulse, luxury sales excluding jewelry for December 2010 rose 8.5 percent over the same month a year earlier, while jewelry itself rose 10.4 percent. Again, the notion of Mr. and Mrs. America counting out cash at the local mall store, even for a gold chain, strains credulity.

A closer reading of what consumers were really telling the reporters reveals a more interesting story. While consumers said their intention (important point that) was to pay in cash, what they meant was they intended to pay on the nail, either with a debit card or in full when the bill arrived one cold January day. Most likely, the latter. At least that was their intention.

That’s a different story. The shift to thrift is as permanent as it is real. Americans have come to realize they can only afford what they can pay for. But the notion that they have abandoned electronic payments in favor of currency for consumer goods (as opposed to gas to get to the mall or a soda at the food court) will not bear scrutiny.

Here’s another indication: everybody was giddy at how well e-commerce did last Christmas. According to MasterCard Spending Pulse, during the holiday season U.S. consumers spent $36.4 billion—15.4 percent better than last year. In the U.K., one e-zine says e-commerce picked up 18 percent over the year previous Christmas . In the U.S., at least, nobody was paying cash for all those e-goods.

There’s no doubt the American consumer has changed. Figuring out how he or she has changed is the hard part.

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