Community

Lest anyone inadvertently get the idea that "once an ePayment, always an ePayment", cash is replacing ePayments in eticket booking and other traditional areas of ecommerce that have hitherto only accepted ePayments. Note that, as I've highlighted here, this is an empirical fact and not crystal ball gazing into what may or may not happen in the future.

Not that reconciliation cost is irrelevant in the larger context but, at least in the case of UK, HM Treasury rescinded UKPC's proposal to ban cheques because the banking industry wasn't in a position to offer a more convenient alternative to cheques even by 2017-18, so it's entirely down to mode of payment. 

As a payment instrument per se, cheque may or may not be relatively costly. However, what really counts for a business is the end-to-end cost of introducing ePayments, including RECON cost, which is clearly higher for ePayments according to the aforesaid attendee at the Remittance Coalition meeting in the USA.

This reminds me of an online university in Virginia, USA, which stubbornly refuses to move from cheques to ACH. According to its calculations, the high IT and SI costs of migrating to ePayments won't pay back even after 5 years of savings in reduced instrument costs.

Going back to Bitcoin, the main topic of @BrettK's blog post, does the following news item make it more or less real?

Every Important Person In Bitcoin Just Got Subpoenaed By New York's Financial Regulator 

To this small, but growing, collection of folk sayings, let me add one more:

You can put lipstick on a pig but you can't take her to the prom.

Leave it to all you readers to map it to bank / IT company whichever way you wish to!

@BrettK:

I was confining myself to retail payments when I was referring to friction and tracking of electronic payments. By no stretch of imagination are 95% of payments happening electronically in this space.

Even in corporate payments, with cheques very much in use in B2B payments in many parts of the world (e.g. USA, India), I strongly doubt if 95% of payments are happening electronically. Notwithstanding cheque truncation technology, cheque is still a non-electronic mode of payment.

Currency notes carry central bank guarantee of legal tender. I don't see how a government can ban them and still claim that it's honoring the overall currency. If a government were really serious about banning the use of cash for everyday payments, it'd have begun by demonetizing the EUR 10, not EUR 500, banknote. I'm not sure how many people handle EUR 500 banknotes in their day-to-day lives.

HM Treasury's reversal of UK Payments Council's proposal to abolish cheques in the UK made it amply clear that the government doesn't share banks' views regarding modes of payment. Banks will continue to clamor for reduction of cash due to their own vested interest of keeping as much money in the banking system as possible (e.g. interest on float). But, as in the case of cheques, I expect governments to be more sensitive to the preferences of the average man on the street. Instead of banning cash altogether, I expect the government to enforce greater traceability of cash in order to curb money laundering and other nefarious activities. For example, according to Indian law, customers depositing over INR 50K in cash into their bank accounts must quote their so-called Income Tax Permanent Account Number. As a result, the government enjoys the same level of visibility into cash transactions as noncash ones.

@AndrewS:

1. TY for clarifying that a web portal can be used in the absence of QR code reader or smartphone. Not sure if the ensuing manifold increase in transaction processing time will be acceptable in an in-store checkout environment, though.  
2. Since CloudZync doesn't seem to require any hardware addon to the smartphone, I guess a merchant who already accepts SQUARE / iZettle - and hence uses up a port on the smartphone for their dongle - can still accept CloudZync, which is good.
3. I know that stores want to engage with consumers but, if you believe that there are enough consumers wanting to engage with stores, that's great for CloudZync.
4. I agree that deferred payment could be a powerful value proposition for consumers who are used to enjoying it with credit cards.
5. Apart from enabling consumers to "sign up to loyalty schemes" as stated on your website, if CloudZync also lets them scan their existing loyalty cards to CloudZync (a la iOS Passbook, KeyRing, etc.), that would enhance its value proposition to consumers.

"no additional hardware is required" is a tall claim when (a) Existing POS terminals can't read QR codes off of consumers' smartphone screens, and (b) the company's website says that a smartphone or tablet is required to run its mobile app.

As with Dwolla and other payment methods not using card rails, the value proposition of CloudZync to consumers is not clear. According to this TechCrunch post, CloudZync is expecting merchants to push consumers to adopt CloudZync. Not sure why consumers should forego deferred payment and rewards, two benefits they enjoy with their existing credit cards, and start using CloudZync just because their merchant nudges them towards it.    

Long before governments did anything to block the use of cash owing to AML concerns, tax evaders and many other types of money launderers abandoned cash, favoring realtime wire transfers across offshore venues as a much more convenient method of moving money anonymously. If Bitcoin takes off, they might switch to transferring Bitcoin - instead of dollars and pounds and euros - electronically, making no great impact on the volume of cash in circulation. 

I have no ax to grind for cash or cheque or mobile wallet or any other method of payment. However, I can't help noting that currency note / cash is the only legal tender I know that is guaranteed by a country's central bank / regulator directly ("I promise to pay the bearer..."). On the other hand, cheques, electronic payments and every other form of noncash instrument involves one or more non-sovereign intermediaries e.g. private sector banks. Against that reality, I find it extremely far fetched to imagine the same regulator / central bank suddenly disowning cash.

@FinextraM:

As the author of the post in which the aforesaid "interesting debate on Finextra.com regarding the death of cash" is happening, I predicted the revival of cash for different reasons, but not the one you've mentioned, namely, to avoid being tracked. Personally, as of now, I don't think the average person-on-the-street realizes that noncash MOPs come with tracking. As this point strikes home, I agree with you that more and more people might turn to cash.

Having worked in the IT industry for 25+ years, I'll pull out all my money from banks and put them under my mattress if banks started working like IT companies. Anyway, my personal opinion hardly matters since a company is known by where it earns its money from, not what it spends its money on. By that count, banks are, *duh* notwithstanding, banks, not IT companies. While IT plays a strategic role in many areas of a bank, it's still a support function.

@JaneA:

I remember my FitnessClub gym card in Germany being contactless several years ago. If your gym card is contactless and still manages to accommodate the PayTag, then you've found a permanent solution. If not, will you be back to square one the day your gym card becomes contactless? 

@FinextraM:

TY for the clarifications. However, many other industries - including retail - are equally guilty of the same non-transparent, vendor-lockin practices. My question is, if they're able to get away with their practices despite free market dynamics, why should the courts entertain lawsuits only from the retail industry.