Elf regulation

[Dave Birch] If you thin that European regulators are having a hard time trying to sort out SEPA, the Payment Services Directive, KYC, AML and all the rest of it, remember that they do at least have the advantage of trying to control money that sort-of-exists, even if they aren’t able to control it terribly well. Elsewhere, as most economists would predict, I’m sure, other kinds of money that sort-of-exist are beginning to suffer from the exactly the same problems.

Police in China have arrested 2 men for running a World of Warcraft gold farming operation and charged them with “unfair revenue distribution” (presumably a crime against socialism of some kind). The two men ran the operation for 7 months and earned 1.4 Million RMB (just over US$200,000). They had 20 computers and 20 employees and were based in Chengdu’s Shuangliu county.

[From Only in China – Gold Farmers Arrested! Earned over US$200,000 in 7 Months – PlayNoEvil Game Security News & Analysis]

Of course, if your local constabulary don’t respond when you dial 999 to complain that there’s been a jack and your friend’s World of Warcraft Guild has been rolled over for a hundred gold pieces, because they’re busy helping people look for their glasses and so on, you’ll have to look for alternative law-and-order structures. I doubt that the Financial Services Authority (FSA) would be much help either, although it enough players got together they might be able to persuade the government to underwrite the gold pieces and have WoW Gold Institutions regulated under the Payment Services Directive (PSD). There is an alternative, though. As in any other frontier community, a long way from centralised authority, virtual communities can choose to police themselves.

disgruntled Alliance players have come up with a clever, though perhaps somewhat EULA-non-compliant hack to enable community self-help (aka murder) as means of silencing n00b bot gold spammers

[From Terra Nova: The Bot-Slaughtering Totems of Stormwind]

It’s the Wild West. Economics may work differently in wholly virtual environments, but human nature does not.

The reduced interchange world

[Dave Birch] The Revolution card seems to be gaining an amount of traction in the US:

Since being launched 9 months ago, the card has already garnered acceptant 150,000 merchants with plans to reach 1 million by the end of the year.

[From National ACH: Revolution Card Acceptance Rising]

Their essential tactic is, as we’ve discussed before, to provide a more merchant-friendly payment card scheme (although I still don’t really understand why merchants don’t just do this for themselves if payment cards, as they claim, are taking such a big chunk out of their profits) that is geared up for the reduced-interchange world of the future:

The main advantage to merchants is that accepting the card costs only 0.5% of each purchase amount, significantly less than the discount rates merchants pay to accept credit cards. In addition, the company recruits merchants as distribution partners and rewards them to provide an incentive to promote usage of the card. Merchants have the option of co-branding the card.

[From National ACH: Revolution Card Acceptance Rising]

Price and promotion are only part of the future reduced-interchange world, because one might hope that the kind of new technologies that we are always talking about here will provide platforms for new value-added services to benefit all of the stakeholders. Falling interchange might even stimulate some new developments:

This strategy is especially relevant if interchange gets cut. Merchants will be paying less, so there is an opportunity for the merchant’s acquirer to offer new value added services that are paid with a portion of the money freed up by lower merchant discount fees.

[From Aneace’s Blog: Are some banks already preparing for lower interchange fees?]

There’s a great deal of scope here, because the “narcotic” of interchange (to use Steve Mott’s provocative description) has meant that such value-added services (loyalty, coupons, rewards,, management, control, folio, groups and so on and so on) are still in their infancy. Retailers pay large amounts in interchange for (as they see it) very little.

He also notes that IKEA pays some €90 million annually and Tesco pays about €128 million in fees to the banks for processing credit and debit cards – that’s more than €210m p.a., between these two firms alone.

[From Retailers count the cost of interchange]

it therefore ought to be easy to co-opt retailers into using a deploying value-added services and charging them for the “something” of these services rather than the “nothing” of interchange.

Different keystrokes for different folks

[Dave Birch] In a very good piece about the location of risks in retail payment systems, discussing Obopay’s decision to end instant bank transfers, Jim Salters from our good friends at Glenbrook reinforces a key point:

it is important to understand that mobile banking and mobile payments are wholly different animals.

[From Glenbrook Partners: Mobile P2P Payments Continue to Evolve in the US]

He’s absolutely right, of course, and it appears that as time goes by the two animals are evolving into different species. A great many of the people who want mobile banking are in the developed world, have PayPal accounts and don’t need another P2P service (mobile or otherwise). What’s more, in the US the services that they are using are not even really “mobile” services at all (in that they don’t use any of the services or functions of the mobile network, SIM or handset), just web services jammed on to a smaller screen. Conversely, a great many of the billions of people around the world who want and need mobile payments do not need a bank account or anything like it. What they want is a simple, cheap, transaction system.

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