Cash is a special public good. Private MM solution will never replace public good cash, but will need a cash access. Three cash gateways options explained.

Cash is a special public good. The production and initial delivery of cash are financed by state budget which consists of taxes and duties.  The cost of cash for society is significant. As estimated by European Payments Council the size of cash industry in Europe is about 50 billion euros, around 14 euro cents per transaction.

But in practice it means that no matter how the customer pays for bread at a bakery in Paris, the part of the bread price will already include the cash processing fees.

Banks have cash handling fees for shipping, manipulation, storage etc. These charges banks recover from customers. Companies calculate the price of goods and services taking into account its costs of handling cash and bank charges.

Finally consumers pay all costs of the industry of cash that are included in prices and in taxes. But because of the public good’s nature the perceived cost of using cash is equal to zero.

This is the main reason why it is problematic to replace cash by MM, the other reason is the legacy of big cash industry.

To claim that your MM solution is better than cash and will replace cash is just a marketing argument. Other common mistake is to charge for MM transactions in cash-like applications.

Private solution MM will never replace public good cash, but will need a cash access. The necessity to include cash in solution architecture is specific to the project. In general, the smaller is the MM system MM, the bigger is the needs for cash gateways, and the harder is to obtain it.

Cash gateway

1. Standard approach

The standard approach is to use a standard existing cash resource: ATMs and banks. Two standard ways exist: 1) the direct partnership, customer pay directly to the bank , 2) disguised use, cash gateway is inside of MM system, customer pays to the MM system.

2. Innovative approach

In France we have alternative postal services:  Point Relays and Kiala. They use small local businesses instead of La Poste. MM system can use a similar partnership with small businesses. Anyhow, it is important to have as many users accepting your MM as possible.  Small businesses sell products, but they can also sell cash. There are more small companies then  ATMs.

3. Peer-to-peer approach

Theoretically, we can get the money wherever it exists. In the P2P MM system any MM user is able to become a virtual ATM. I can get cash even on the beach – I receive 11 euros per SMS and my neighbour delivers 10 euros in cash after Wi-Fi, NFC or Bluetooth exchange.