In the movie "Office Space," three computer programmers have the bright idea to write a computer virus that will round up all of the fractional cents at the end of every banking transaction, and transfer the hundredths-of-a-cent into a savings account for themselves — thinking that this is a slow, foolproof way to make a fortune.
One day after their plan is implemented, the friends find that their bank account holds over a half million dollars — an amount the company they defrauded certainly couldn't overlook.
It's a fictional film — and a comedy, at that — but it does paint a good picture of how quickly small sums of money can add up.
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More plastic, less paper
Randa Ghnaim, spokesperson for Visa, said that the consumer move toward using plastic for small purchases is unquestionably taking place, and in a big way.
"We see consumers using cards for everyday payments, from fast food to gasoline to coffee at Starbucks," she said. "They're really replacing cash with cards, because of the convenience, the security, and potentially the rewards they get."
The same trend is taking place at American Express, according to spokesperson Christine Elliott. She said that two main factors are driving this move: the explosion in popularity of music downloads, which almost single-handedly made the 99-cent credit-card charge acceptable in the customer mind; and the consumer desire to take advantage of credit card rewards and organizational benefits, like tracking spending on a monthly statement.
In Dec. 2005, the third annual Micro and Small Payments Conference was held in New York City. A quantitative survey, conducted by research firm Ipsos Insight and payments technology company Peppercoin, was released at the conference. Among the survey's findings:
- Approximately 45 million Americans are willing to use plastic for purchases of $5 or less, an increase of 23 percent from the previous year.
- Almost 20 million Americans above the age of 12 have made an online purchase of less than $2 in the past year, up 29 percent from 2004 and 350 percent from 2003.
- More than half of the respondents to the survey said they would use plastic at c-stores if they could. Other top responses for desired usages included quick-service restaurants, transportation, coffee and parking fees.
- When asked which purchases they had made with cash at least six times in the past 30 days, 43 percent responded coffee, 35 percent QSR and restaurant food, and 18 percent products and services from vending machines and kiosks.
A boon to merchants?
In the past, conversations about micropayments on plastic often turned pessimistic, as retailers pointed to the processing fees that take a bite out of profit for every sale made on credit or debit. By the "old school" retailer's way of thinking, taking cash is always cheaper than taking plastic. But Ghnaim said those retailers are mistaken.
"When you look at the whole picture and consider your costs of accepting cash and check, it's a myth that there is no cost — there absolutely is a cost to accepting cash," she said. "Think about going to the bank, or potential shrinkage, or the safety issues. These are things people don't consider."
Even so, she said Visa has lowered the rate it charges merchant account providers on small purchases, cutting the bottom-line cost for the retailer. And it appears to be making an impact — Visa's small-ticket program has grown 45 percent since its introduction in Oct. 2003.
Elliott pointed out that the increase in plastic use for small purchases can be a boon to retailers, if they position themselves properly. She gave as an example the American Express Corporate Card, which many companies require their employees to use when they travel.
"Therefore, an employee will seek out locations where the card is accepted," she said. "As you know, with the increase in the mobile workforce, not all business meals are white tablecloth experiences — many are just drive-thru stops."
Plus, there is the unmistakable and undeniable fact that people spend more when using plastic. Ghnaim said that recent Visa studies have shown that QSR diners, for instance, spend 30 percent more on the average transaction when paying with a card than with cash. "It's not necessarily that they're eating more, it's that they're able to buy the meal that they want without having to fumble for cash."
