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Sasot ( @srsasot) is out her league with this post. She has no idea how the payment economy works. She should stay away from topics she has no expertise on. A THREAD. (1/n)
Unfortunately, she touched on a topic that I am passionate about — which is bringing better payment facilities to the underprivileged and the under-banked. (2/n)
First, let me correct a misconception. Transacting with a vendor — be it a sari-sari store, a small food kiosk, an online vendor, a 7-11 store, or a luxury store — has transaction costs. Even if you pay cash, there is actually a transaction cost that is borne by the store (3/n)
One such cost is the cost to move the cash out of the store to a bank for safekeeping. No prudent vendor wants to carry around cash. They could be robbed. There is an associated cost with that risk and some choose armored vans and security to mitigate that risk. (4/n)
The other cost is the cost of reconciling the cash with the sales transactions. This requires people to count the cash and then reconciling it with sales invoices to make sure everything tallies. This takes time and manpower to do, which adds to the cost of business (5/n).
Online / cashless transactions have a transaction cost. That’s because the provider (ie the transaction acquirer) has to support the infrastructure and manpower for the service. Bancnet charges fees. VISA and Mastercard charges fees. Someone has to pay for all those (6/n)
So to answer @srsasot, depending on the business model, it is either the buyer, the vendor, or the acquirer that bears the cost. Rarely is it the government. (7/n)
Why would a small vendor agree to pay the transaction cost? Because it might be cheaper to pay a transaction cost that to spend time counting the loose change and running the risk that the cash is stolen. Especially if the transaction cost is low enough. (8/n)
This entire ecosystem between buyer, acquirer, and seller can be complex as there are several biz models. For example, the company supporting the vendor can absorb the transaction costs, hoping that there would be more sales and the cost of cash management will be offset. (9/n)
So while @srsasot is correct in saying that there are transaction costs with online and cashless payments, she is wrong to think that the “transaction cost” of online or cashless transactions is more expensive that the handling of physical cash. (10/10).
