Something that the public at large is generally not aware of, but that the payment industry knows all too well is that moving little pieces of paper around- like checks and dollar bills- is a rather expensive activity. As was pointed out in Motley Fool, when you are a really, really big bank, like Bank of America, the costs can add up:
In the fourth quarter of last year, Bank of America (NYSE:BAC) didn’t earn $4.3 billion from one customer in one transaction. It instead earned a few cents each time customers used their debit or credit cards to make purchases. Or it earned a handful of dollars each time customers over-drafted their checking accounts, which probably happened tens of thousands of times.
The point is that each incremental addition to its top and bottom line was small. But because there were so many of them, they added up to a big number.
The same is true on the expense side. Bank of America CEO Brian Moynihan made this point in a recent interview on CNBC when he mentioned how much the bank spends each year on the mundane task of handling cash and checks:
We still spend about $5 billion moving cash, currency, and checks around our company. Our ATMs distribute about $200 million a day in cash. Do you know how much work it is to get that cash in those machines?
It only makes sense that financial institutions put good strategies in place around to reduce the cost of managing cash and checks. It’s also important to optimize the experience when consumers do use these older payment forms. Consumers are using cards, P2P apps and mobile remote deposit capture which are reducing the reliance on paper payments, but cash and checks are instilled in consumers’ payment mix and will be here for years to come.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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