At some point, I assume, fraud will get so bad that banks will be worried about it. That’s some way away, of course, since in the U.S. fraud is well under 1% in card portfolios that have bad debt well in excess of 6%, so I know which area will be attracting most management attention for the foreseeable future. It’s clear that chip and PIN isn’t going to crack the problem by itself, so we’ll have to start looking around for the next generation of card technology. Since the cards themselves will be disappearing into mobile phones, that would suggest that the banking sector begin ramping up their efforts in mobile. Which, of course, they already are.
With SEPA, the PSD and MiFID all paling into relative insignificance as the major banking markets explode globally, there are questions about whether the European plan will succeed or is even needed now[From The FinanSer: Are Europe’s plans for Banking, MiFID and the PSD irrelevant?]
This is a very good point. If regulation serves only to hamper innovation but fails to deliver any commensurate benefits in stability of security, then what’s the point of it? Right now, it looks as if European initiatives in the finance sector have been a waste of time and money. They certainly haven’t worked as intended, either through a process of watering down (as in the case of the Single Cards Framework, the SCF) or through irrelevance in other cases. The Banker, more charitably, says that the EU is undergoing massive regulatory upheaval and while the goal of a single market in financial services may in principle be worthwhile…
As with all regulatory initiatives, not all the outcomes are exactly what the policymakers intended and The Banker has reported faithfully on a number of significant deviations. There are lessons to be learned from these failures as, no doubt, other parts of the world are planning to adapt the European model for their own uses.[From The world can learn from EU’s regulatory shake-up mistakes – The Banker]
Still, as The Banker notes, we should take comfort from the fact that some scraps of usefulness might accidentally be left behind as many regulatory initiatives are swept away, saying that
Some of it will eventually come out right and Europe will be left with a half-fixed system.[From The world can learn from EU’s regulatory shake-up mistakes – The Banker]
Frankly, given the costs of SEPA et al (which are several billions of euros), I think we ought to expect a little more than an almost coincidentally “half-fixed” system. When it comes to payment systems, I’m certain that a further separation between banking and payments is a way to move forward. It’s a combination of inactivity and accident that has led to payments being regulated, managed and delivered within banking and the goals of initiatives such as the Payment Services Directive are hardly coincident with the goals of banks
Imagine my surprise at the recent announcement that the U.S. will be issuing four new versions of the penny, the first of which comes out in February, in honor of Lincoln’s bicentennial. What a waste of resources… It’s time to join the rich world; it’s time to stop wasting resources; and it’s time to stop transferring taxpayer money as subsidies to zinc producers.[From Pennies: Enough Already! – Freakonomics – Opinion – New York Times Blog]
Surely the U.S. doesn’t more pennies does it, not unless the old ones are disappearing, which under the normal laws of economics you might expect. I imagine they are being smuggled over the border to Mexico because
all pennies up to 1982, which are made of a 95% copper alloy are worth twice as much as scrap metal than as currency.[From Pennies: Enough Already! – Freakonomics – Opinion – New York Times Blog]
Fascinating. But if you read the comments you can that there’s an element of conservatism about money (and an almost paranoid suspicion of any proposed change) the we e-money persons ignore at our will.
The number of fake £1 coins in circulation has doubled in the last five years and now stands at more than 30 million, the BBC has learned.[From BBC NEWS | UK | Number of fake £1 coins ‘doubles’]
It seems like a reasonable business to be in, if the figures given in respect of the recent arrest of a counterfeiter are correct:
It is thought that at one stage he was making 10,000 to 12,000 coins per day and was paid about £2,000 in cash a week by the two men.[From BBC NEWS | England | London | Man jailed over 14m fake £1 coins]
I wonder how much it costs the Royal Mint to make a £1 coin? Anyway, the reason why this story is worth mentioning here, is because one of the experts quoted in, Mr. Robert Matthews (until recently the Queen’s “Assay Master”), says that 2% is the threshold at which people become nervous and begin to feel uncomfortable about accepting coins. At this point, Gresham’s Law steps in to drive the good coins out of the marketplace and confidence in the circulating coin of the realm collapses. The Royal Mint rather unhelpfully say that if you find yourself with a counterfeit coin you should not attempt to spend it, but that is of course precisely what any sensible person will do with it, since as a rational economic actor I want to dump bent coins on mug punters at the first opportunity, carefully stashing away the coins that I know to be authentic. Oddly, The Royal Mint also say that this counterfeit incidence is “comparatively low” by global standards, which it may be when compared to some developing countries but it is not when compared to the forgery rate for euro coins, which is down at 0.1%. More to the point, it’s considerably higher than the retail card fraud rates, which are well under 1% (card-not-present fraud is much higher).
The headline conclusion, for me, was that a fifth of U.S. households are either unbanked or underbanked and that some of them have already begun to turn to non-banks to deliver financial services to them. An example used in the article is the Wal-Mart Money card, exemplifying the point that simple, transaction-oriented financial services are well-suited to the core skills and competitive approach of mass-market retailers. With the growth of, in particular, government use of prepaid card products to provide better and more cost-effective services to the unbanked, it seems plausible that non-banks might do rather well in this space. Leave the “lending money” part of banking to banks (who seem hopeless at it, but there you go) and treat the “moving money” part of it as a business up for competition just like any other business.