I wanted to talk about what was wrong with payment systems and suggest a few ideas for further investigation, hoping that the geeks would pick up on one of these and knock up a revolutionary new payment system in the bar afterwards. I started by remembering the three key points that I discussed in this context a few years. These were written up in “E-Money and Payment Systems Review” (Central Banking Publications) back in 2002: payment systems are too slow and too expensive, they are opaque and they are not suited to e-commerce. These seemed like a reasonable starting point but for some reason I was sure that they weren’t going to connect with the audience and I felt that I need some more context.
When I was chatting at the coffee break, I had the idea of trying to explain to the assembled geekhood why they should be interested in digital money but re-interpreting the key issues in a more social context, and I ended up with a quick three-point manifesto that seem to go down quite well. Are you with me!
The manifesto was:
- The social cost of money is too high, and the high cost falls disproportionately on the poor.
- The transaction costs associated with our current money are too high and the high cost reduces trade (and therefore prosperity).
- The current system does not have enough competition, and therefore enough innovation.
Taken together, I think these give a useful impetus to efforts in the retail e-payments field because they broaden the focus to give new business models a wider context. They address, succinctly, many of the agendas that have been touched on at the Digital Money Forum over the years. Social inclusion and financial exclusion, payment costs and payment-related costs, alternative payment mechanisms and so on.
I think it’s important to have a three point plan, to complete the three point manifesto. I haven’t quite nailed it yet, so further suggestions would be gratefully received, but my draft plan is currently:
- Stop the cross-subsidisation of cash and remove the stealth tax of seigniorage. If people want to use cash, then let them, but make sure they pay for it.
- Lower the regulatory barrier for to non-bank entrants and “passport” their permissions.
- Encourage provision of payment services by lightening the regulatory burden on low-value pre-paid schemes.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]