Cash is the Past, Cashless is the Future
MasterCard President and CEO Ajay Banga Sparks Dialogue on the Cost of Cash
While cash remains the dominant method of payment throughout the world, students and faculty heard from Ajay Banga, president and CEO of MasterCard, on the misperceptions around the cost of cash and the value of electronic payments during a visit to the Samuel Curtis Johnson Graduate School of Management on March 4.
Featured as a Distinguished Global Leader Speaker, Banga said, “cash is only a friend of the rich man, cash is not a friend of the poor man,” and explained that cash has actual costs. In fact, the cost to society of using cash is between .5 and 1.5 percent of the GDP annually.
During a fireside-chat-style conversation on the question "Do you believe in a world beyond cash?" Vrinda Kadiyali, Nicholas H. Noyes Professor of Management and professor of marketing and economics, challenged Banga noting, "A common misperception, and arguably to some extent true, of going cashless is with credit cards, retailers have to pay interchange fees, consumers have to pay annual fees, and if they don’t use their credit cards responsibly they have high interest rate charges.”
Countering the argument, Banga highlighted that there is a common misperception that cashless equals credit cards. Even in the U.S. there are more debit cards than credit cards, and retailers pay lower interchange fees — the charge for accepting electronic payments — with debit transactions than with credit purchases, but don’t necessarily pass the savings back to consumers.
While 85 percent of the world’s retail transactions are conducted with cash and checks, each country is different. Fifty percent of retail transactions in the U.S. are made with cash; that figure is 99 percent in India. Only in South Korea and Scandinavia are electronic payments more common than cash, and that is because the governments actively pushed the evolution of society away from being cash reliant, according to Banga.
The conversation was not limited to the cashless discussion, as Banga also shared his experience and insights on what it takes to effectively lead in a global economy. “Global companies will have scale, will have advantages of cost, but they will only succeed if they think global and act local,” said Banga. “Being what I call glocal.”
It was clear that students, faculty and staff appreciated hearing from MasterCard’s CEO. “The talk is not over but I do have to say, Ajay Banga is hilarious, smart, and witty!” tweeted MBA Student Natalie Wossene. And before Banga departed, he offered one last piece of advice to the future leaders. “Don’t plan your career too seriously,” Banga said. “You can over-plan your career into the ground. Be open to change and flexible to adapt.”