Cash is king: helping small businesses survive

Having worked in retail payments policy for several years now, I tend to notice cool, new technology whenever a merchant has it deployed at their checkout, and I’m very much in favor of most innovations. I also tend to notice signs like these, which are a constant reminder of why we are focused on making the payments process better not just for our retail customers, but also for the everyday businesses where we buy our groceries, fill up our gas tank, pick out a new wardrobe, grab a burger, see the latest Star Wars movie, pick-up a prescription or our dry cleaning, and the list goes on. 

I took a picture of this sign at DC’s Union Market. For large and small businesses alike, the market for payment acceptance has opened many doors, but with those open doors have come tremendous challenges.

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The rules of the road for payment card acceptance are confusing and not transparent to many small businesses and consumers. That leaves many people wondering why in this age of technology, innovation, and convenience, a small business would post a sign “Cash is King: Help small businesses survive. If it’s under $10, please pay cash.”

For many businesses – both large and small – the cost of accepting plastic cards and other forms of electronic payments is one of their highest operating costs. Most business owners have no qualms about paying reasonable fees for business services, and they do so every day for items such as cleaning services, security systems, Wi-Fi, and other basic needs. However, they have the ability to negotiate for those services in a fair and transparent marketplace, which they do not with the two major credit and debit card networks.

Credit card and debit card fees are dictated directly by Visa and MasterCard and are imposed on the majority of merchants in a take-it-or-leave-it fashion. Most businesses feel that failing to accept these major card brands is not a competitive option so they continue accepting electronic payments even though the costs are squeezing their business, and the inflexible acceptance rules fly in the face of free market enterprise, while also inviting more fraud into the payment system by favoring the less secure and efficient signature card brands.

These card acceptance rules are one of the biggest concerns for businesses of all sizes. Payments can and should be a frictionless part of the retail experience. No one dines in a particular restaurant simply because of the way they can pay; people choose their restaurant based on the food. Businesses generally know how to provide the best, most secure, and most seamless experience for their customers, and card network rules interfere with the way in which they choose to operate.

Congress began scrutinizing these card acceptance practices over ten years ago now. And, while much more still needs to be done, lawmakers took a huge step in the right direction six years ago when they passed debit reforms to re-empower business owners to make choices about how best to run their businesses.

Two items the debit reforms protect are the ability of a merchant to ask for another form of payment – something that my local sub shop has done when I’ve pulled out my high fee credit card to pay - or ask for a $10 minimum on credit because on low dollar credit and debit sales, businesses often pay more in card fees than they profit on the sale.

Repealing debit fee reforms is certainly not going to help Main Street businesses when policymakers and regulators really should be focusing increased oversight of the card network business rules – rules that are enforced with starting fines of $5,000/day - that inhibit free market choices by merchants.

Additionally, the U.S. should be concerned that per transaction credit card fees continue to grow at outrageous rates without explanation even though technology has improved, volumes have gone up, and card networks have shifted the majority of payment card fraud losses onto merchants with the recent EMV liability shift. There is no rationale for these price increases other than lack of a transparent and well-functioning marketplace.  Growing costs will continue to frustrate and disadvantage U.S. merchants while the majority of international businesses operate at a fraction of the cost.

Next time you’re shopping at your local merchant ask them what they think about credit and debit cards. I do this quite often, and it’s very telling.  Many merchants have a love/hate relationship with plastic, which should make us all think twice about whether or not enough has been done to correct the inefficient card acceptance marketplace and pave the way for true innovation as the U.S. moves toward mobile commerce and future payments.

If more Americans knew the challenges both large and small businesses face with swipe fees and inflexible card acceptance rules, more would understand why “Cash is King” for many businesses.


Liz Garner is a Vice President at the Merchant Advisory Group, a merchant trade association focused on payments.  Liz has previously represented the restaurant and grocery industries on payments and technology policy.