Small change we can believe in

[Dave Birch] You can’t accuse this blog of not keeping up with change in current events. For example, I notice in my Daily Telegraph that there has been an election in the United States and there’s going to be a change of President. At these times of great change, I turn to economists to inform us as to the key monetary and fiscal changes that the new leader of the free world should adopt. I heartily endorse these two important policies concerning change:

# Get rid of pennies.
# Replace the dollar bills by dollar coins.

[From Economic Logic: Change I can believe in]

Hear, hear. I cannot understand the attachment to the dollar bill, even taking on board the inherent conservatism of people towards money. My American wife, who suffers taxation without representation here in the Mother Country, tells me that the issue is psychological. A dollar coin would make people feel that a dollar isn’t worth very much any more. Which it isn’t: it’s worth literally a fraction of what it was worth when it was first issued as a note.

One group that used to be enthusiastic about the potential for a dollar coin was transit operators. I can remember from my days commuting on BART what a total pain it was to have to keep a selection of pristine, ironed and perfect dollar bills to use on the subway. A dollar coin would have been great.

The cost to process one thousand dollars worth of one dollar bills at SEPTA is approximately $10.11. The cost to process the same amount in coins is $1.22. The reason for the large difference is that handling paper currency is more labor-intensive.

[From United States $1 Coin Act of 1997 – Wikipedia, the free encyclopedia]

But surely technology has overtaken the debate. Transit operators are converting to contactless smart tickets (like Oyster in London) and in the not-too-distant future you’ll just be using your phone or your MasterCard anyway. A key reason for this is that some transit operators have already recognised that the payment industry is finally starting to produce products that are fit for purpose in their domain. Someone who really knows his stuff is Sashi Verma, the head of fares and ticketing at Transport for London, and as he puts it

“We had to invent tickets because the financial services industry would not provide us with a product… That is now changing.”

[From Tickets old hat, says British expert – New Zealand’s source for technology news on Stuff.co.nz]

Both Visa and MasterCard are working hard to make their contactless offerings desirable in the sub-500ms transit environment and I expect this to have useful spin-offs in other environments (eg, vending machines) where quick and convenient cash replacement would be welcomed by the cash-using general public. In fact, it’s something of a priority for them at the moment: as Payments News has noted, the number of transit-related announcements from Cartes seems to overrun even the mobile payments hype for the time being.

Today seems to be the day for contactless transit payments – apparently the new “killer app” for contactless

[From Payments News: MasterCard, RATP Testing PayPass Contactless in Paris – November 04, 2008]

It looks as $1 coin has been permanently sidelined by the $1 contactless chip.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]