One of the first reactions to COVID-19 was a sharp uptick in merchants preferring card over cash transactions at their Point of Sale. Card transactions include credit and debit purchases with PIN as well as contactless payWave and Tap and Go transactions.
The world’s response to COVID-19 has been to impose social distancing and limit contacts between people. We don’t shake hands, hug or kiss anymore. And contactless payments have also been promoted as safer.
Mastercard says it saw 40 percent growth in contactless transactions globally in the first quarter of 2020. In Australia, the uptake of contactless card payments surged in April when the limit on no-PIN purchases was doubled to $200.
Fact Check: Are cards cleaner than cash?
No credit and debit cards are not ‘cleaner than cash.’ Credit and debit cards can carry more bacteria and viruses than bank notes. Cards can transmit germs to a terminal. As always, the best defence against picking up or passing on a virus is hand sanitiser, good hygiene and social distance.
The vast majority of Australia’s shops and retail outlets welcome cash. Most Australian businesses prefer cash.
But increasingly some retailers are preferring card payments and discouraging the use of cash. Some merchants have been incentivised by deals from their banks into preferring cards over cash. Some have been influenced by health concerns and the fear of virus transmission. Many saw fake news about fake World Health Organisation warnings but just as many read ‘real news’ that seemed to confirm their worst fears.
Some of that news started in March and April 2020, fuelled by lobbying and PR surveys released by the big international card schemes Visa and Mastercard.
Why did they do it? Five months ago, before COVID-19 panic really set it, Mastercard and Visa faced big cuts to their revenues. The Reserve Bank had their 1.6% surcharge firmly in its sights.
“Visa and Mastercard are concerned the Reserve Bank of Australia could set an international precedent pushing fees even lower, after stricter caps were introduced in 2017,” wrote James Eyers in the Australian Financial Review in February.
“The Productivity Commission called for them [debit and credit card fees] to be banned in a 2018 report.”
A ban on credit and debit card fees? Six months ago, Mastercard and Visa were furiously lobbying to prevent this from happening.
And they face another huge problem as well. The government wants banks to implement Least Cost Routing as soon as possible. That is bad for Visa and Mastercard because they are not the cheapest way to pay.
Least Cost Routing means every time a customer taps their card at the Point Of Sale, their transaction is routed to the network with the lowest fee. The cheapest network usually isn’t Visa or Mastercard, it’s usually Australia’s homegrown Eftpos network.
Right now, most banks send your transactions straight to Visa or Mastercard, regardless of the high cost. And the difference isn’t small. Not implementing LCR costs the Australian economy $550 million per year. That’s how much extra we are giving Visa and Mastercard (mostly) over the cheapest option.
Master Grocers Chief Executive Jos De Bruin said small business wants LCR because high card fees have a significant impact on small shopkeepers.
“Our independent retailers play a vital role in the community, but these fees are costing them a fortune – thousands every year.”
So, in the face of this criticism, Visa and Mastercard got on the front foot and invested heavily, in public relations.
Is the news fake? Is fake news a thing?
Yes - there is serious intentional fake news out there, then there is also plenty of politically motivated news which can create real problems, and then there is just really badly researched news, often promoted by big companies with big public relations budgets. Some experts believe public relations is the new propaganda.
Expensive public relations surveys and market research can be used to influence news editors and media outlets of ‘the facts’ as discovered by the company themselves. Let’s have a look at how Mastercard and Visa have helped influence the news about COVID-19, cash and card transactions.
And keep in mind, Visa and Mastercard share in the around $8 in merchant surcharges for every $500 you spend.
‘8 out of 10 people in a worldwide survey are going contactless,’ the implication being we all fear viruses. We do all fear viruses, that’s true.
Then Mastercard’s senior executive follows that up with a statement about “the dirtiness of cash.”
Let’s look closer at the facts. Firstly, Mastercard’s survey compares contactless payments with insert and swipe, PIN or signature required card transactions.
Cards and Eftpos machines can carry a virus, so yes that’s true. Contactless card and phone transactions are potentially safer than handling the terminal.
But then Mastercard follows up with statements about the dirtiness of cash. The World Health Organisation hasn’t made a warning about cash, except to remind people about good hand hygiene, so where is this coming from?
Mastercard’s 17.000 people worldwide is not a selection of random individuals found on street corners. They are overwhelmingly people already using Mastercard contactless cards and phones! Many are affluent in affluent countries, they are young but many are very concerned about COVID-19.
Most concerning of all, the numbers simply don’t seem to add up. 1,000 people in Australia, 500 people in Brazil. And most countries don’t get a look in at all.
So Mastercard’s global survey of 17,000 is a collection of online responses from young, affluent Mastercard contactless card users.
Visa said it worked with governments and banks around the world to lift contactless no-PIN transaction limits.
Visa chose to focus on fraud concerns. Raising contactless transaction limits will surely encourage more card fraud at the point of sale? And that encourages criminals to steal our cards doesn’t it?
Relax, said Visa, no need to worry said Visa.
“ Australians can rest assured that contactless payments experience among the lowest fraud rates of any type of payment and that fraud at the physical point of sale has remained at historically low levels in countries where contactless payments have been widely adopted.”
How could what Visa is saying be true? Contactless payWave cards have a low fraud risk?
Well that kind of payment fraud was trending down in Australia before COVID-19 struck, but what about now? Now that you doubled the no-PIN limit to $200?
The industry self-regulation agency won’t report those numbers for many months, but police in Australia and New Zealand seem to be increasingly posting and warning about it.
In fact here is fifty times the cops have warned and posted wanted pics about debit and credit card fraud in the last few months.
When you compare the numbers, the picture is clear. The losses from fraud are immaterial.
Even $50 million lost to payWave and Tap n Go stolen cards is small compared to more than $50 billion in card transactions per year in Australia.
Mastercard is very concerned about our health and Visa says we can rest assured about card theft and fraud.
Mastercard, Visa and other card companies, banks and even merchants are raking in more transaction fee and merchant surcharge income than ever before. And this revenue is flowing through to increased interest in their shares from investors.
Mastercard’s share price on the New York Stock Exchange is up 50 per cent since bottoming out on 23 March. Visa’s lucky shareholders have also done well since March.
Visa is up over 40 per cent since March.
But card and Eftpos transactions are not necessarily safer than cash transactions. Plastic cards can be dirtier than bank notes and Eftpos terminals can be touched by hundreds of people and cards per day.
As for fraud, it is hard to believe that the increase in the limit on no-PIN transactions to $200 won’t lead to a spike in theft and fraud.
In addition to the fees we are paying on card transactions, the banks and card companies also get our data. Our information on where we spend money and, in many cases, what we spend money on.
As usual, there is just one way to buy safely, avoid surcharges, avoid data collection and help prevent card theft and fraud. That’s by keeping our cash economy strong and using cash in shops, at markets, garage sales and in day to day life, while keeping our hands clean and sanitised, according to WHO advice.
Experts line up to criticise CSIRO research: Unnecessary fear, 90% of transmission is airborne
The essential role of cash in the economy is recognised in last week’s Reserve Bank of Australia Payment System Board update. However, unlike the RBNZ, the RBA does not propose concrete actions to protect the cash economy.