I recently spoke with Tufts researcher Ben Mazzotta about the section of his new study looking at costs of cash for businesses. What findings surprised you or do you think are the most important?

Cash theft costs business far more than I would have anticipated. Businesses spend a lot on security; but cash-specific security expenses are not the biggest of the bunch. The total size of the armored car industry in the United States is less than the value of cash thefts from retail business, according to survey evidence.

It probably is not news to business owners that the retailers lose more from cash theft than the whole country spends on cash logistics, or that retailers lose more from cash theft than banks do. From where I sit as a researcher, though, it makes me search for explanations. Do retailers view cash theft simply as a cost of doing business? Is it a risk you cannot control, like the risk of a traffic accident on the way to work, just an unavoidable part of your day that you do your best to mitigate? Do they have a sense of control that leads them to expect it's someone else's problem? According to an American survey of drivers, 90 percent of people rate themselves above average safety. Maybe everyone just thinks they can control the risk. Or, perhaps it's that the costs of cash (security, accounting, logistics) are lumpy, and it's very hard to whittle the line items down without getting rid of cash entirely.

The most common thing business owners said they would do differently if more customers paid cash was to invest in counterfeit detection. That surprised me. I expected theft prevention to trump counterfeit as a problem. Perhaps I'm too trusting of the official numbers on counterfeit detection, but nationwide figures on counterfeit bills passed total less than two hundred million dollars, versus billions of dollars in cash theft from business every year. It might indicate that cash theft is more of an insider problem, where the employees are stealing from the business, and therefore smart safes and armored cars might not fix the problem. And there was not much consensus about how far cash use would have to fall before associated costs would also drop, but the median was about 20 percent.

The survey proved to me that large and small businesses see the world differently. A trip to the bank is a very different thing if you own a business in a small town, compared to running a global corporation with billions of dollars in retail revenues. Big businesses can realize meaningful gains from optimizing cash processes. When electronic payments replace cash, they can leverage transaction data for predictive analytics and process automation. Small business owners were very frank with us about how overhead can eat into their time, and what that time is worth. Still, they may not see armored cars or the latest smart safes as the solution to their problems. Choosing to accept only certain payments may not be realistic for everyone. Small town businesses may not be in a position to dictate to their customers to please use a card or prepay your account instead of paying in cash.

AuthorDavid Wolman