Physical money will disappear, as paper condemned metal to a secondary role as small change. For almost three decades, digital money has been gaining ground and it looks inevitable that, in the near future, most financial transations take place via electronic systems: using cards, cell phones or subcutaneal chips. Who knows which technology, but it’s for sure that it will not be old paper bills.
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By then, if we do not move to avoid it, the whole planet’s economy will be paying a private tax to Visa, Mastercard, American Express and other companies in this industry, almost with every purchase. The main tax paid by Europeans will be a private one, going into US banks’ coffers. It will be a completely irrational tax, opposed to any fiscal logic. But there is no need to wait for the future: it is already happening. Currently, department stores, if they do not issue their own card, pay percentages under 1% for each purchase. On the other hand, a small retail business pays up to 5% to the plastic money companies. An Internet store, however, pays up to 10% of revenue, and it doesn’t even get warranties that it will get paid if the purchase turns out to be fraudulent, as it happens too often. Consumers are not aware of these taxes because we pay them indirectly. But they badly affect our wallets. All of us are paying them.
There are no figures available about how much the banks get via this currency tax. But most worrying is the power accumulated by payment systems, which almost equals the power of the Finance Ministries themselves. By deciding on which industries pay more or less for their services, they wield the ability to redistribute resources and have some of them prevailing over the rest, according to their own interests. Therefore, e-commerce’s biggest problem is not consumers’ distrust of the Net, but the lack of user-friendly payment systems that do not burden us with excessive commissions. On the other hand, the cut –up to 10%, and even higher in some cases—that plastic money gets from online stores shows how outrageous they can become if left alone, when public money can’t compete, as happens in the Net.
This could be the future: the oligopoly of private money that the Internet suffers today. ¿What would happen if the advances in digital imaging increased the number and quality of counterfeits until consumers abandoned paper currency altogether due to lack of trust?. In some countries, specially in Latin America, this is already happening, fueled by the risk of carrying cash on you in many cities. There, electronic money is almost the only option, and so commissions for using cards are even higher.
True, in many instances, electronic money provides services beyond mere payment. A debit card, which only triggers a bit exchange devoid of any additional financial services, is not the same as a credit card, where the issuer finances the purchase, risks its funds and charges for the benefit of a delayed payment. In the latter case, the commission is fully justified; the former provides a benefit over bulky cash and there is a cost of service. But, why isn’t it a public service?
This is not the first time we face such a situation. Currency was also a creation of private banks, which found this technology a splendid way to avoid risks and traveler overweight. First were the Chinese private banks in the 9th Century. Currency was issued by bankers with backing from the State during the Tang dynasty. Later, the Song dynasty transformed this exchange system into a state monopoly, free of commissions. In Europe, the story ran almost the same. Early currencies were born from private banks: Venetian merchants and the Templars were the pioneers, until nation-states assumed that function by creating central banks.
Today, technological advances would allow developing a good public electronic payment system for a bit more than what it’s already spent in manufacturing reliable and unforgeable bills. The European Central Bank has the means for making this a reality. It must do it. A public, commission-free alternative is the only way to avoid that future money becomes a private oligopoly. But it’s not only a good idea from the point of view of consumers and merchants alike. An electronic Euro would also cement our currency as the currency of the future and would promote e-commerce and the Information Society much better than one thousand advertising campaigns. Nobody better than Europe, the world’s first commercial power, to do it.
Plastic money should not be banned. There’s room for other private payment methods, like bills do not conflict with checks. The technical details of developing the idea should go to specialists, who would be much welcome into this debate. Many issues remain, such as the most appropriate model: anonymous electronic money, which ensures privacy, or fully regulated money, which avoids tax fraud and hidden economy. This article is just intended to open a currenty non-existing discussion. It’s not about nationalizing banks. It’s about avoiding privatization of currency.
Commission rates mentioned in the article for debit and credit cards are those applied in Spain. The rates may vary in other countries.
Copyleft: Ignacio Escolar – Escolar.net
This article can be freely distributed. Copy it, paste it, translate it, multipy it. Please pirate my ideas.
Original article (in Spanish) at escolar.net
This story has been translated from the Spanish original by Thesaurus Serveis Documentals, providers of language services for the technology industry.
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