Friday, February 16, 2007

How the US pays... changing business models

Payments news links to this research report on the way the US population pays:
The Pew survey finds that nearly three-in-ten adults (28%) say the most common way they
take care of their regular monthly bills is by an online or electronic payment. A bare majority (54%) mostly uses checks, and a small minority (15%) mostly uses cash.

The survey also finds that at or near the top of the public’s list of regular expenses are cable or
satellite television service (78% of adults say they pay such bills every month); cell phone service (74%) and internet connections (65%). These information age staples either didn’t exist or were in their infancy a generation ago.

While we already know that payment patterns vary per country, there is an interesting conclusion here. Within one generation a whole generation gets used to new cost items in the household. And all this happens to such an extent that the new items (internet) are deemed to be equivalent to basic household cost; a necessary thing. And, most interesting, no-one complains and all take this new direct pricing business model for granted.

Let's have a look at the Netherlands. Ten years ago there was free internet access (dial-up) for everyone. And now the business model shifted in technology terms to ADSL and in fee-terms to monthly fees of at least 20 euro. And there's no one complaining about the fact that ISPs first hooked up the population to Internet and then started charging for it.

Yet, a similar and far more gradual change in the payments business model (accounts for free in the 1960s, which slowly evolves to a situation of a 30 € a year account fee nowadays) is still part of the collective memory. And banks are almost unable to make any fee move without all the politics and public getting agitated or finding this outrageous. Still, if we were to look at the actual budget items of a household, we find that by choosing an ISP that charges € 3 less per month, a household would be able to cover its direct payment expensesof that whole year.

Shouldn't we conclude that (perceptions of) bank fees are not a matter that lend themselves for rational analysis?