And that's assuming you're depositing all of your revenue. If your business allows you to pay some of your suppliers in cash, you could have >50% of your revenue in cash and never pay a bank for cash handling because you're immediately spending it on business expenses rather than depositing it.
> If small businesses give discounts for cash it's because they're committing tax fraud, I presume.
I have seen governments charge a convenience fee for credit card processing. Is the government committing tax fraud?
> Cash handling is typically in the neighborhood of 0.2%-0.3%, so you were apparently overpaying […]
This is not universal, and banks in different countries charge different cash collections fees. The cash collection fees are also structured, e.g. whether the daily collection is required, or every other day, or once a week.
It does not end there.
Many banks still require the business to sort collected coins into separate money bags according to the coin denomination, e.g $1 coins go into one bag, $0.50 coins go into their own bag. Coin bags have a weight limit, 2 or 3 kg, which means that the business has to weigh the money bag up before handing it over, or it will not be accepted.
Now that we are done with material things, we also have to consider all things immaterial that the cash handling entails.
Before the money bag is handed over, the collected cash has to be counted and reconciled against the cash register records on premises, otherwise it will create annoying and time consuming to fix discrepancies in the accounting system. If a staff has accidentally mislaid a note or a few coins, amounts won't reconcile and incur a cash collection delay as the armoured truck can't wait for the reconciliation to complete. Which may consequently increase the risk of leaving cash in the shop overnight with all expected consequences of a potential burglary and losing the cash.
That is just some of the peculiarities of how cash is handled, and I am not sure whether cash handling turns out to be cheaper for an average business with a substantial number of cash payments a day.
Electronic payments, on the other hand do not have any of those shortcomings, vastly reduce the margin for human errors, automate the reconciliation and accounting and reduce the risk (i.e. no money is kept in the shop overnight).
And it's so much easier to pay by phone! I can be through the payment process in 20 seconds at a supermarket if I pay with my phone, and need nothing on me than my phone. Meanwhile cash takes fumbling, counting either by a machine or by a person, calculation in my head what I need to provide, making sure I always have not too little and not too much on me, making sure the total amount of coins doesn't get out of hand, etc.
> This is not universal, and banks in different countries charge different cash collections fees.
This would not seem to be relevant unless you're in one of those countries.
> Many banks still require the business to sort collected coins into separate money bags according to the coin denomination, e.g $1 coins go into one bag, $0.50 coins go into their own bag. Coin bags have a weight limit, 2 or 3 kg, which means that the business has to weigh the money bag up before handing it over, or it will not be accepted.
There are machines that sort and count coins. Coins have uniform weights, so the number of coins in a 3kg bag will always be the same and the machine's count tells you when you're at the weight limit.
Also, what kind of business are you in that you're accumulating small denomination coins? Typical behavior is the customer shows up with three $20 bills to buy something for $52.37 and then you need to disperse a $5, two $1s and some loose change. You don't bring coins to the bank, you bring them a stack of $20s and $50s and then withdraw more small denominations to make change with.
> Before the money bag is handed over, the collected cash has to be counted and reconciled against the cash register records on premises, otherwise it will create annoying and time consuming to fix discrepancies in the accounting system.
So you dump the cash into the counting machine at the end of shift. It's really not that complicated.
> If a staff has accidentally mislaid a note or a few coins, amounts won't reconcile and incur a cash collection delay as the armoured truck can't wait for the reconciliation to complete.
Why would you wait until the truck arrives to do the count? You count the money and put it in a safe. Also, why would you pay for armored car service? If you have $300,000 in annual revenue then your daily take is less than $1000.
> Which may consequently increase the risk of leaving cash in the shop overnight with all expected consequences of a potential burglary and losing the cash.
Shops typically have more value in inventory than they have in cash. Breaking into a safe to steal $1000 in cash isn't even worth the trouble when they can break the glass on the display case and walk away with $10,000 in electronics or tools or small appliances.
> Electronic payments, on the other hand do not have any of those shortcomings, vastly reduce the margin for human errors, automate the reconciliation and accounting and reduce the risk (i.e. no money is kept in the shop overnight).
And they'll be great as soon as we have a system to use them that has low transaction costs and preserves the buyer's privacy by not creating an electronic record of everything they buy tied to their government ID. Until then they can GTFO.
With all due respect, you are wildly projecting based on the lack of knowledge and experience in the problem domain citing the information you have gleaned into (but not gained from) using the first random link that a search engine has turned up in. The reality is vastly different from what you might have conjured up.
Cash handling is a fairly obscure process that is ridden with absurdities and edge cases that most people are oblivious of. The claim that accepting cash is cheaper for the business than taking card payments becomes false once the cash turnover exceeds a certain threshold.
> This would not seem to be relevant unless you're in one of those countries.
«Not happens in my backyard» is not helpful. Cash is handled in nearly all countries around the world, and the cash collection and handling process is more or less similar everywhere. The basics of the cash collection and accounting principles have not changed since the times of Sumerians.
> There are machines that sort and count coins. Coins have uniform weights, so the number of coins in a 3kg bag will always be the same and the machine's count tells you when you're at the weight limit.
Such machines exist in bank branches only, and the bank branches usually close before the business shuts the doors for the night. Most importantly, they do not scale. If it is a family run grocery store or an arts and craft shop, you do your banking yourself during business hours or send your eldest offpsring who is old enough to whack collected coins into a machine and bank the money.
It does not work with larger and big retailers, government agencies and alike with a substantial regular cash intake. Cash has to be collected, usually daily, and it comes with «processing» constraints, e.g. manual counting, receipting and bagging the cash.
A money bag has a weight limit that can't be exceeded, but it can be underfilled because there has been simply a smaller number of coins collected in a specific denomination. A money bag has to have a transaction receipt affixed to it stipulating the amount deposited into the bag – the bank requires it, and it also goes into an accounting system for reconcilliation. If amounts counted by the bank and by the business end up differing, there will be a reconcilliation problem in the transaction feed from the bank into the accounting system even if it is 1 cent off. This is why cash gets counted twice. If you make a mistake counting coins, you have to start over again.
> Also, what kind of business are you in that you're accumulating small denomination coins?
Any medium to large grocery chain that accepts cash for payments where by COB coins are overfilling cash registers. Schools on donation and charity days, e.g. the «gold coin donation» days, where each child brings a $1 or $2 gold coin with them. Service stations and small grocery stores in suburbs and in the country.
> Typical behavior is the customer shows up with three $20 bills to buy something for $52.37 and then you need to disperse a $5, two $1s and some loose change.
Yes, the 37 cents is the problem here. Please allow me to introduce you to the Australian (and previously in New Zealand, too) 50¢ coin that has a dodecagonal shape, has a mass of 15.55 g and a diameter of 31.5 mm, followed by the 20¢ coin with a diameter of 28.65 mm and a weight of 11.3 g. Five such 50¢ coins will burst most wallets and will warrant a purse to carry more.
Back to your example. The change for the $52.37 amount paid by $60 will entail:
1. A $5 note (almost weighless).
2. A $2 coin (6.60 g) or 2x $1 coins (2x 9.00 g == 18.0 g).
3. A 50¢ coin (15.55 g)
4. A 10¢ coin (5.65 g)
5. A 5¢ coin (2.83 g) – due to rounding rules because of 1¢ and 2¢ out of circulation.
The coin change will amount to a net 48.63 g (or 37.23 g for 1x $2 coin scenario) weight, but this weight for now will make a transfer out of the cash register into someone's pocket / wallet. So far so good.
And then you have a customer (in fact, many customers) who is fed up with lugging the metal scrap with them who will pay $7.58 in its entirety in coins (just to offload the burden), and that is how the business ends up with having to fill up money bags for coins at COB. This is ubiquitous, however, the bulk of the change still comes from a constant stream of small purchases in cash.
> Why would you wait until the truck arrives to do the count? You count the money and put it in a safe. Also, why would you pay for armored car service?
Because people still break in and moreso in low-socio areas where people with substance abuse problems will absolutely break in and take any money even if it is $5 in the safe – their conscience does not operate on the ROI level, and they take whatever they can get a hold of. And you would pay for the armoured service because most banks do not offer non-armoured services.
> Shops typically have more value in inventory than they have in cash. Breaking into a safe to steal $1000 […]
Stolen inventory has to be sold first, it can be traced (moreso so for high value inventory items), so there is no instant gain. Stealing even $10 is a net gain, the stolen note is untraceable and it is an instant net gain. Most breakins are small value ones, and the high value breakins are an entirely differen cattle of fish.
> And they'll be great as soon as we have a system to use them that has low transaction costs and preserves the buyer's privacy […]
The reason why we do not have them is because Visa and Mastercard colluded quite a while ago in their quest to eliminate cheap and low transaction fee national payments networks around the world (hello, Cirrus/Maestro, EFTPOS, Switch and similar) that were detrimental to their business. Technically, the national payment networks still do exist but are almost not seen anymore.
Initially, Visa and MC only had one product: credit cards. First, it was an exclusive product for affluent customers with a high net worth that later became a mainstream product for the masses, and the internet was a major driver for the credit cards to become mainstream.
Then Visa and MC figured that they could also tap into the cash payments and came up with the debit card product, approached national payment networks (granted, via connections in governments) to convince them first to co-brand the national payment networks with Visa/MC debit cards (a dual purpose card and the first fix is free) to later proceed to eliminate the national payment cards altogether, which has now successfully happened almost everywhere. Granted, Visa/MC debit card processesing and interchange fees are much higher than the corresponding national networks' ones and for a reason. Governments in many countries have had to intervene and cap the transaction and interchange fees in recent years.
So Visa/MC did not stop there, of course, and are now tapping into the transaction information to gain further from results of their collusion with each other, and they absolutely loathe any privacy related changes that will thwart their PII and behavioural information collection attempts.
The current trend seems to be national payment networks making a slow comeback by way of instant bank payments, payments to mobile numbers and similar ways, so Visa/MC are at odds and do not seem to have a strategy. At least not for now.
The next wave of instant/mobile payments is going to be exciting.
And this is why small businesses are more likely to offer cash discounts than larger ones.