Working in the IT and finance fields for work, I find security issues very interesting for their unintended impacts on business. Sarbanes-Oxley compliance is more of a bureaucratic headache than fraud prevention mechanism. For what I do, it simply wastes my time, thereby costs my company money.
I rarely venture to the hard investing blogsites, but this article caught my eye at PFBlogs. If MasterCard and Visa are fining their small merchants for poor security of information storage, I could easily see a small merchant drop taking credit cards.
My mom used to keep her credit card swiper right on the countertop. In a small dry cleaning storefront, you don’t have lots of extra space for a secure area for computer storage. Basically it’s a box for the dressing area for alterations, a bathroom, a counter and then all your equipment. There’s usually no secure area for counting cash. I remember at our first store, hiding behind the counter area because of the layout of the store allowed for this.
So what’s going to constitute storing data improperly? Having a computer system/server under the counter? Waiting till there is an actual violation of the system before punitively imposing a fine on the merchant? Who knows?
All I know is that for a slim margin business like dry cleaning, paying extra for secured storage will probably reduce margins further and place pressure on the business to drop taking cards entirely and move back to cash. Spinning that line of argument out, if customers want the convenience of electronic transactions, then it’s going to keep driving mom and pop out of business. Not a good thing.
What are MasterCard and Visa going to do to support their merchant network in these security initiatives?
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Interesting thought….Cash based does have its advantages and disadvantages. One item I thought about reading your post was the role of technology and the decrease in cost year over year. So the storage costs (secure) would be cheaper year over year yet the Liability of holding the information is where I see the real hidden cost in this situation. One thing I believe is happening is pay with cash and I will give you 3% off the bill. I have noticed some small business owners using this type of strategy which no doubt saves money on the transaction costs. Interesting thoughts and I enjoy your blog very much!
Hi KS!
Ok. First of all, if a merchant is offering a discount for a cash purchase, they are likely to be in violation of their agreement with the credit card company.
Second, storage price is not the issue. Disks are cheap. SECURE storage is often the problem. I know that we rarely kept $100 in cash in the till for the dry cleaner. I guess I explained poorly that a lot of the storefronts we owned did not have a ’secure’ location. You’re basically talking about buying a safe for your server so it can’t just be ripped out of the wall and taken away. ‘Secure’ locations are usually a waste of retail space when calculating revenue per sq. ft.
Thank you for the comment! I am glad you enjoy what I write!
I just sold my office supply store. There are MANY pressures on small business. You are correct, many cannot handle any more.
You are also right about the cash discount violating merchant agreements…however whenever I see the discount thing I have no problem with it. It’s a wash for the merchant…pay the fee or give the discount. Same (or similar) cost.
I think that cash may be making a resurgence but I haven’t done any official polls. Just watching at the store. I still carry a pocket full of cash and have yet to own a debit card…but many people have a debit card habit. That is not a bad thing, just not what I do.
I have other reasons to believe people are using cash. Your identity can’t be stolen off a dollar bill. You can’t be tracked or marketed at by the Feds if you use cash for your daily transactions, etc.
When the zombies arrive, you’ll see. Cash is king.