Software Firm CEO: Data Breaches Likely to Drive Consumers Back to Cash

Friday, 22 Aug 2014 12:08 PM

By Michelle Smith

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Data breaches are becoming more commonplace and may drive consumers to cash, American Banker reports.

The use of cash has been on the decline for sometime. Data shows only about 29 percent of retail purchases in 2012 involved cash, wrote Douglas Ceto, CEO and President of CetoLogic, a provider of software and analytics solutions.

Credit and debit cards have been promoted as a safer alternative to cash, which can be lost or stolen, but the reality is that today's consumers may view identity theft and data breaches as more likely than a pilfered wallet, he notes.

Editor's Note: Seniors Scoop Up Unclaimed $20,500 Checks? (See if You qualify)

When the Target data breach was announced millions of people felt a twinge of anxiety but cash customers had no need for anxiety, said Ceto.

In the article, he cites data from the Pew Research Center that shows, in January, 18 percent of online survey respondents reported having their personal information stolen, up from 11 percent in 2013.

As the spate of data breaches involving credit cards and debit card grows, so will customer awareness of the inherent risks, he asserted.

Consumers that use cash ultimately avoid the high levels of risk associated with swiping plastic and leave no trail for hackers to follow — advantages that never go out of style, he says.

EMV cards, which have an embedded microprocessor chip, are expected to be game changers, offering more security. But Ceto said until they are rolled out in the U.S. cash remains the most trusted and secure form of payment.

Many consumers are already starting to take that attitude according to a Forbes article, which cited results from a survey of grocery shoppers conducted after the Target data breach.

It revealed only 39 percent of respondents claimed they were “very confident” about the safety of plastic. And, 32 percent of those surveyed expressed intentions to use cash as a method of payment more frequently.

An increase in the use of cash has its benefits not just for consumers but also for businesses.

It will drive people to ATMs and bank branches, increasing revenue possibilities for banks and credit unions. And, those financial institutions might be able to cut back on the cost of card replacements, which average $10 each, said Ceto.

According to the Credit Union National Association and Consumer Bankers Association, the cost of replacement cards for just the Target data breach topped $200 million, he added.

Using plastic also requires retailers to pay big bucks for processing fees. The average processing fee is 1.9 percent of the sale for credit card transactions and 1.3 percent for debit cards, according to a study conducted last year. In total, for retailers such as grocers, that’s a major bite out of profits, writes Forbes contributor Paula Rosenblum.

Editor's Note: Seniors Scoop Up Unclaimed $20,500 Checks? (See if You qualify)

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