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пятница, 27 июня 2014 г.

The Hidden Costs of Cash (Скрытая стоимость налички)

Cash – by which I mean paper currency and coins — has many benefits. It’s safe from hackers. It doesn’t require any special hardware or software. There is no fee charged to retailers who use it and no exorbitant interest rates lying in wait for consumers. It’s accepted almost everywhere and it offers anonymity.
While it has been steadily displaced by a variety of competitors, such as credit and debit cards, mobile payments, and cryptocurrencies, there are many good reasons paper money has stuck around. There’s an assumption that cash is best when money is tight – best for the poor, and best for small businesses running on tight margins.
And yet cash does carry costs. My colleague Benjamin Mazzotta and I have been studying the costs of cash across a wide range of countries: U.S., Mexico, Egypt and India.  With the exception of the U.S., these other countries represent economies primarily conducted in cash.  The U.S. offers an interesting case study in what happens when only about a third of all transactions are conducted using cash payments.
The use of cash involves several social costs to individuals — especially the poor — as well as business and the government.
For individuals, cash usage imposes a regressive tax with the highest impact on the unbanked. By FDIC estimates, 8.2% of U.S. households are unbanked and 20.1% of U.S. households are underbanked.  The unbanked pay four times more in fees to access their money than those with bank accounts, and they pay $4 higher fees per month for cash access on average than those with formal financial services. Examples of such fees are those charged for payday lending, buy-here-pay-here auto loans, and check cashing. The unbanked have a five times higher risk of paying cash access fees on payroll and EBT cards.  Poorer consumers have to spend far more time getting cash. On average, Americans spend twenty-eight minutes a month travelling to get cash, but that time isn’t evenly distributed. People who don’t use a bank spend about five minutes longer getting to the place where they can get cash, and unemployed people spent nearly nine minutes more.
For businesses, paper money has to be managed: it must be stored, guarded, and accounted for. It can be difficult to transport and is inherently insecure. U.S. retail businesses lose about $40 billion annually because of the theft of cash alone.  This cost is also disproportionately borne by mom-and-pops, many of which operate in poor neighborhoods and rural areas. These cash-dependent small businesses cannot afford sophisticated security and cash transportation services.
For the government, the annual value of under-reported taxes in the United States is $400 billion to $600 billion. According to the national taxpayer advocate’s estimates, 52% of this gap is because of under-reporting by self-employed taxpayers. If even half of this under-reporting is directly enabled by a cash economy, the U.S. Treasury loses at least $100 billion annually because of cash.  The implications for a shortfall in tax revenues are quite direct in terms of their impact on the poor (even after accounting for the fact that many of those who under-report are themselves poor).  About 12% of the federal budget in 2012 supported programs that provide aid (other than health insurance or Social Security benefits) to poor families. Such government safety net programs kept some 25 million people out of poverty in 2010. The existence of the tax gap puts pressure on the government to cut back on safety net programs, because they are the ones that are among the first to get cut.
What about the costs of cash in developing economies, where cash use is much more prevalent?  We have been analyzing cash usage behavior in emerging markets on different continents and experiencing different socio-political and economic challenges through our research in Egypt, India, and Mexico.  While all of these countries have their own idiosyncratic challenges, all have an overwhelming reliance on cash and a very low penetration of alternative payment systems.   In Egypt, only 10% of adults have a bank account and less than 2% have a credit card; therefore, it is not surprising that 94% of financial transactions are conducted in cash. With the political instability in Egypt, financial institutions themselves face questions about their own future, a factor that will further deter consumers from embracing their services in the near-term.  India, where about 60% of adults are unbanked according to McKinsey, is also a cash-heavy economy for transactions and high in its use of gold as a store of value.  Not only is cash prevalent, its use as a percentage of GDP has been increasing by about 2% over the past two decades, possibly because of concerns about inflation.  In Mexico, 53% of the value of consumer payments are cashless, according to studies done by MasterCard Advisors.  However, this proportion is not growing; it has remained relatively static over the period 2005-2011, even as Mexico’s economy has grown. How can this be?  Well, a sizable proportion of the transactions remain unrecorded because of the prevalence of the drug cartels in the country.
Each of these countries pays a price for the heavy usage of cash. Much like the U.S., the lion’s share of this cost is borne by society at large because of the lost tax revenues due to the under-reporting of earnings and transactions.
While the overall costs of cash usage in all these markets are daunting, the U.S. pays a price as well of a different kind.  In cash-dependent emerging markets, people and businesses at every level face the same challenges. But because in the U.S. it’s primarily the poor who use cash, they are the ones who disproportionately bear the burden of its costs. This observation should be a call to action for decision-makers who care about social justice and inclusive policy.  It is time we acknowledged the cash paradox: while cash may be considered the poor man’s best friend, it also places a disproportionate burden on the poor.

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