Written by Technorati Tags: e-purse, payments, retail
I remember going to a conference in Scandinavia some years ago and being told that such surcharges for utility bill payment were already normal there. No-one thought it was odd that a utility should surcharge cash payments, since they are inconvenient and expensive to handle. Precisely. Why should people like me, who pay by direct debit, have to subsidise people who insist on using physical means of exchange?
Mind you, there is a genuine problem. It’s troubling because, as always, it is manifest in the poorest people paying the highest transaction charges, which is always a hallmark of a payments environment that is not serving society properly. Nearly three million Britons do not have a current account, meaning that one in 12 households is unable to pay domestic bills via a bank transfer. For them, avoiding BT’s penalty is not an option. The solution is obviously inexpensive pre-paid e-money rather than expensive bank accounts. So let’s get on with it.
Incidentally, the Aussies have opened up another front in the war on cash with some suggesting that cash should be banned in slot machines. With the arrival the first super-casino in Britain now imminent, we should probably go the same way, shouldn’t we?
My opinions are my own (I think) and are presented solely in my capacity as an interested member of the general public. [posted with ecto]
There is a lot of noise around this announcement and one of the things that has gone largely unnoticed is that it does not just cover cash but all payments not made by Direct Debit. This means you will be charged £4.50 for making electronic payments via your internet banking connection. This is, I think, more about controlling cash flow and gaining excess, interesting earning customer balances than CRM.
I hadn’t really thought about the idea of cash as the marketeers nightmare, the end of CRM.
Andrew Odlyzko has done some great work on the subject. To dramatically oversimplify, he puts privacy on one end, price discrimination on the other.
I think an alternate framing of the question is why should people like me, who pay in cash, subsidise your flatter, transparent pricing? 😉
“why should people like me, who pay in cash, subsidise”
But you don’t. That’s the point: electronic payments subsidise cash. If you had to pay the real cost of cash at the ATM, you would never use it 🙂
David, your enthusiasm for all things contactless is clouding your judgement. Contactless growth is undoubted but to equate it with demise of cash is just plain stupid.
Oyster card is replacing (paper based) tickets, not cash. Londoners now flash their Oyster card to enter and exit the tube system. This is a great improvement on the previous ticket gate input process. How Londoners pay has NOT changed. The payment options for Oyster remain the same – cash or card payment. An analysis of Oyster card funding would be interesting as I suspect cash retains a 1/3rd share of the pot. I bought a travel card (paper based ticket) today and paid by debit card. The two individuals ahead of me both used CASH to top up their Oyster card. You have me in the 5% bucket and them in the 95% bucket.
Contactless credit cards are the same story. Users will settle their credit card balance by direct debit or cash settlement (Post Office counter, prepaid card users etc.). They will settle their bills this way irrespective of whether the bills relates to a PIN or a contactless transaction(s). e.g. contactless has no bearing on whether someone pays by cash or card. Contactless mobile when it arrives will be driven by the 2/3rds of all mobile users on prepaid contracts – the users who pay cash to buy airtime.
Interestingly the Cash which you so dislike is driven by banked consumers. APACS 2005 stats report consumer cash spending at £273 billion of which 85% was bank account funded (ATM, cheque cashing or cash back). These consumers have bank accounts and card plastic but still elect to manage some of their budget in cash. This will never go away as is evidenced in the yoy increases in ATM withdrawals. Included herein are the vast majority of people in this country who earn an average weekly wage/income. Cash is fundamental to their budgetary process. Their usage statistics are somewhat more relevant than those of a director at Consult Hyperion. They tend to hold a bigger float than £5.80.
Roll on contactless, cash or card funded.
apologies above comment was meant for the “Contactless growth” blog post
Many of us refuse to use direct debits because it puts someone else in some control over our bank accounts. Moreover, direct debits on utilities etc force us to leave an amount of money (a few hundred) in our bank accounts permanently for fear that we will miss seeing a bill and a direct debit will make us go overdrawn and subsequently be bank charged for this. Whereas if we are sent a bill to pay by cheque or cash, we can select from which account we wish to pay the bill from, having made sure FIRST it will not make us go into overdraft and be charged.
I strongly believe the REAL reason Banks encourage people to use direct debits is a) because with them there is a greater probability people will go overdrawn by carelessness/oversight and consequently be charged (as already explained) and b) the extra margin of cash left in current accounts by millions of careful people to ensure direct debits don’t make them go overdrawn the bank can use a proportion of which to gamble on the currency markets and thereby make more “money for nothing” then they would otherwise have done if people had left less in their current accounts. I understand (from James Robertson- famous monetary reform expert) that Banks don’t as many people believe, keep their own and their customers money separate, so because of this they can gamble some of their customers’ money on the money markets.
Incidentally, if you are interested in learning more about the unbelievable injustice where a small elite of private banks create the electronic money for mortgages and loans OUT OF THIN AIR- how the money lent is not depositors money at all; how they are charging a tribute- interest- for money which did not exist before the loan was made, so getting money back in the form of interest for nothing; as I say if you are interested in learning more about this then please have a look at the extremely concise and easy to understand article at http://www.bilderberg.org/monref.htm.
BT says their charge is a legitimate one for administration but I simply don’t believe that it costs them anything like £4.50 for EACH customer to process a cheque with the enormous economies of scale for millions of people who still pay by cheque. And what about people who would make an electronic payment (eg telephone banking) in response to a bill? BT still has to send out a paper warning bill even for people who pay by direct debit. And even if BT said the charge was because their bank charges THEM for cheque processing, BT like all big institutions TENDERS out its banking contract (currently with Barclays)- it could simply say if you are going to charge our customers eg £4.50 per quarter through us, we will simply place our huge revenue stream with another bank who doesn’t. I wonder if in the above ways BT is colluding with the banks so they can make even more silly profiteering out of us?.
BT has got a monopoly on home phone LANDlines as follows: I have found you can only get one from a cable TV provider if you take broadband &/or cable TV as well- relatively highly expensive. And if you get a landline from another provider such as the postoffice (PO) home phone scheme its still via the BT landline and even though your contract is with the PO, they have to pay BT much of your line rental charge. You see BT have realised that they have a monopoly on people who want landline only so are cynically imposing new charges. But its still worth switching to PO (see below) because your contract once being with them will not force you to pay by Direct Debit and ALSO Post office will pay BT quite a bit LESS as a wholesale charge for the multiple landlines than lots of people paying BT as direct customers. So we’ll still be punishing BT for their outrageous and cynical soul-less corporation new charges.
In summary I believe the £18 annual surcharge for paying by cheque to be outrageous and must be resisted by customers, pressure groups and OFCOM at all costs.
Finally & MOST IMPORTANTLY may I suggest that people leave BT immediately- before MAY 2007 when BT will also start charging an exit fee it seems- IN DROVES- for the Post Office’s Telephone account the terms of which I have just checked are not levying charges on people for paying by cheque or cash. Its charging is fairly similar to BTs (cheaper for certain calling patterns). Pick up a leaflet from the post office. I promise you I do not work for them I just want to hit BT for these OUTRAGES and Banks in the pocket where it hurts and so force a re-think.