Article: Australian businesses plan credit card surcharges

This is an interesting article outlining that Australian businesses plan credit card surcharges. And explaining that:
"The Reserve Bank of Australia re-regulation assumed merchants wouldn't surcharge as this would push customers away, but the surcharging sea change that is taking place now seems to be having the opposite effect."

Now, interestingly, the Australian Reserve Bank did look at the Dutch situation, where the no-surcharge rule was lifted but had no effect on merchant pricing behaviour. Yet, the reason for this little effect in the Netherlands may have been the limited spread of credit-card use in the Netherlands and the availability of a good and cheap POS-debit-card-system as an alternative.

Which may go to show that you just can't copy policy reasoning from the one country to another.

Eufiserv announces it will live by SEPA Cards framework

See the press release here. We can expect more of those announcements from all over the place as the market will hurry to explain they all go for SEPA.

Bank fails; deposit guarantee increases...

At the end of last year, a small Dutch bank failed. And Parliament got involved some 2 months later, when the Minister of Finance explained how all this could occur (and how supervision is never a guarantee that banks will not go broke). As a part of the discussion he also promised to investigate if the 20.000 euro deposit guarantee limit could be raised to 40.000 euro.

In this letter (in Dutch) he explains that he will indeed do so, but that he will most likely introduce a 'own risk' for the consumer as well. So while a larger sum of money may be protected, the first 500 or 1000 euro will not be paid back.

Interestingly, the Dutch banks jointly decided to apply the 40.000 rule for the current customers of van der Hoop (the bank that went broke) and just for this time, even without a 'own risk' rule.

Once more, this shows that incidents are the best trigger for regulatory intervention. Whether incidents are simultaneously the best argument for such interventions remains to be seen of course...

Paypal experiments with GSM-payments

Dutch technie magazine Automatisering Gids informs us that Paypal is experimenting with GSM-payments for a small user internal user group. A spokesman of the company explained that Paypal would be providing more information in a number of weeks.

TILEC study on universal services in banking

The tilburg university has done something worthwhile by applying the concept of universal services to banking. This line of thinking may be(come) quite relevant, if not now, then in the next decades (as cash is replaced with private digital currencies and we all wonder if there is one single currency to allow partcipation in society). Read their report here.

RBA: Speech-The Evolution and Regulation of the Payments System

See this link for the speech "The Evolution and Regulation of the Payments System"

Study on improving the efficiency of workers’ remittances by EIB

It's remittance time this week....

Here's another report, now by the European Investment Bank, on the efficiency of workers’ remittances in Mediterranean countries.

The interesting question is of course, if one compares different ways of sending money back to one's home country, what would you do...?

If you knew your brother or nephew would be visiting the home-country, would you then give the money to him, or would you go to Western Union...?

Could it be that it is not just the financial side of sending money that is relevant in choosing the optimum method for remittances.... but that the trust factor needs to be factored in....?

And if so, do studies, assuming a rational choice based on the price of remittance instruments in order to achieve maximum efficiency, make sense?

General principles for international remittance services - BIS consultative report

See this draft report with general principles for international remittance services. It's a consultative report of the Bank for International Settlement, so one may react.

Generally, however, the BIS does not really change the contents on the basis of such reactions. So unless one really has an additional contribution, don't bother... ;-)

European payments are coming.....

This week, a lot of news dealt with the effect and impact of the upcoming standardisation of European payments. That had to do with a conference on SEPA in Amsterdam. In the aftermath a couple of interviews shed more light on topics such as:
- the approval of the EPC-rulebooks; banks can now start develop their systems so that cross-border payments and direct debits in euro may be standardised as of 1-1-2008,
- the possible effect on jobs, with a Unisys official stating that in Europe a total of 100.000 jobswould be lost as a result of SEPA,
- the effects on the clearing houses in Europa, now about 25, but most likely some seven or nine remain,
- the disappearance, in the long run, of the local debit- (PIN) and e-purse schemes (Chipknip); with those being replaced with about on of the five remaining panEuropean products (2 of which undoubtedly Visa / Mastercard).

Whether or not all this will be enough in the eyes of the Commission and the European Central Banks remains to be seen. I am quite confident however that in 20 tears time, we will look back at this period in time, wondering how the regulators could be so stupid to force this European standardisation and the speed of consolidation for the sake of increased competition. While the end game will be more efficient and beneficial to all, we musn't speed ourselves too much.

Clearing and settlement: Competition and Internal Market Commissioners will act unless there is further action from industry

And the beat goes on, as demonstrated in this press release:
Unless market players come forward with effective and realistic changes to improve the clearing and settlement (C/S) of securities in the EU, the European Commissioners for Competition and the Internal Market intend to propose action on the basis of EU competition and single market rules before the summer break. The current fragmented national monopolies in trading infrastructures such as exchanges, clearinghouses and securities depositaries, create high costs for the EU economy and represent significant impediments to efficient cross-border trading in the EU. The securities Industry needs to accelerate work on removing a number of barriers significantly, and provide a firm timetable for change.

Been there, seen it, done that. And the SEPA discussion shows that the Commission will regulate regardless of what happens in the market.

This banging on the EU-drum.... is that really what the citizen wants..?

'Cheerful message': Commission will intervene in EU-Cards market

The Financieele Dagblad reported yesterday that Commissioner Kroes left a prepared speech aside during the Hofstad Lecture in the Netherlands. Just to inform the banks around Europe that price differences between bank-cards in Europe varied more than 400 % in the EU-market. Which will result in further measures by the Commission. In the speech, she called this the 'cheerful mesage'.

The basis for the intervention would be that it is 'incomprehensible' why prices would vary so much in Europe. As Mrs Kroes stated.

Well, perhaps a bit of evolution theory might do good here. What if the Commissioner would just imagine that commercial behaviour, law and history between the EU-countries varies in such a respect that each national retail payment domain is a perfect equilibrium, resulting in the most efficient payment solutions for that specific environment.

Now let's try the comparison with nature. Imagine we take one single rabbit, plant it in 25 EU member states, and wait a couple of hundred years. It would disappear from some EU-states while breeding happily in others. Meanwhile nature would evolve and the rabbit would be distinct in each natural habitat.

Let's go on to imagine that the Commission would decide that this variety of rabbits (some varying even more than 400 % on distinct features) would be no good for the European Integration and market. So the Finnish rabbit, with too much fur compared to the EU-average, needs to be stripped. And the Spanish rabbit, with little fur, needs to grow hair. And so on for all the other countries.

My guess is that, unless you complete egalize the natural habitat in all EU-countries, there's not much use in killing the country-specific variations of rabbits and replacing them with an average rabbit. That average rabbit will freeze in Finland and overheat in Spain.

Let's hope the Commission has the wisdom to intervene in such a manner that a 'guided evolution' of the EU-cards-market may occur, rather than a quantum leap into an ice-age where cards business will not be as interesting any more. Because that ice-age would result in prolonged use of good old costly cash rather than the more efficient cards.

OFT launches new Mastercard investigation

See the press release here to see the UK reglator on its quest to the ideal world.

Are the bank-individual contracts on debit-cards a good thing for the small retailer..?

Since 2004 the Dutch retailers need to negotiate price for POS-authorisations with their banks directly rather than via Interpay. An investigation into the result of all that for prices can be found in the Financial Monitor 2005 of our competition authority. The research shows that small retailers get a worse deal than big retailers.

So, the effect of all this effort of retailers protests against the monopoly price setting by Interpay is that bigger retailers end up with better deals than smaller ones. While in theory this may be more efficient on a macro-economic level, the result is that, if applied to other purchase processes as well, in the end small retailers will have a higher cost base.

Perhaps someday scientists will come to conclude that the 'monopolistic' provision of services by Interpay wasn't soo bad after all, as it worked as a coordination mechanisms that ensured accessibility/payability for the small retailer, effectively funded by the big ones.

TOP: the good old times of Dutch Gross Settlements....

In a couple of years the Dutch Gross Settlement Solution TOP will be a thing of the past. And we will undoubtedly come to regret the fact that this up-to-date system had to be replaced for Target2. Which costs a lot of effort to get reduced functionality. But there will always be this working paper on TOP that allows us to remember the good old times...

Launch of the International Network of Money Transfer Agents

See the press-release:
Leading money transfer networks and banks have launched The International Association of Money Transfer Networks (IAMTN) to increase the understanding of the role of this major and rapidly expanding financial services sector which until a recent World Bank report has been largely ignored.

Official Google Blog updates work on Google payments

On this official Google Blog you can read an update on the Google Work on Payments. It explains that at first Google needed a payment infrastructure for itself to pay out for the Ads. That used to be all checque based, but over the years Google improved towards ACH and bank-links. Having done all that, it's a smaller step to using the payments connection for users themselves as well (see an example of the purchase and payment process here on Scot Wingo's E-bay blog).

A perfect example of how new forms payments always pop-up on the back of some other primary activity:
- parking,
- buying/selling via e-Bay (Paypal)
- making phone calls (m-Payments)
- travelling (travelers cheque/ credit-card).

It wouldn't pay for anyone to develop a Google-payment product from scratch. But it does if very similar technology and the user base is already in place.

Dovetail Systems take: is SEPA worth doing ?

In all the debate on SEPA and Target2, we may lose track of economic reality. As an unexpected and pleasant surprise I stumbled on the website of dovetail systems. Where the obvious economical questions are at the center of the debate. Which is the cost-benefit rationale for EU-developments.

In their analysis on Target2, they analyze the EU-cross border traffic via current systems (EBa, Target etc), to conclude that merely 10 % of Targets traffic is cross-border. Which raises the question:
Is it worth changing the whole system (TARGET) to permit just over 10 percent of the traffic to be handled more efficiently?
Their answer is that the question of whether TARGET 2 is economic, sensible or just the right thing to do is not a banking question, or an economic one. It is a political one.

Continuing to their article: So, is SEPA worth doing?, the best is to quote the conclusion here:
The pat answer would be that it depends on the cost case. Has anyone ever made one? Will anyone argue that this regulatory reform, made by European politicians and Central Bankers in the name of European customers is worth the $9 billion it is going to cost, rather than simply justify it on the basis of a political agenda?

From a bank's perspective, the huge sum of money is being spent in the name of a small part of the business, and being subsidized by all of it, in order to conform to an idealised view of what Europe should be. Therein lies its weakness. The banks also argued that free market competition would have naturally led to solutions to some of the problems that SEPA solves. The regulators argue, tellingly, that there were no signs of these solutions emerging from the free market and, therefore that regulatory reform was necessary.

There is no doubt that the wheels of international trade need to be greased better, in particular to ease the complexity and cost burden of money transfer for corporates paying and receiving funds both cross-border and domestically. SEPA will make a difference to this, but not enough of one, mostly because the limited geographic scope of SEPA only eases the burden for part of Europe, and not at all for the rest of the world.

Regrettably, the answer as to whether SEPA gives sufficient benefit is a hesitant maybe.

P+S-News 34... a new Mondex-like try to eliminate cash..

The 34th edition of Payments and Settlements News has a lot on the recent SEPA statements of the ESCB and the Commission (see elsewhere on this blog).

But is also features this Mastercard press release that outlines a trial to eliminate cash by introducting a contactless debit card for payments below Eur 15.

Which looks as if, more than 10 years after the Mondex trial, there's another attempt to kick out cash. Well, let's wait and see if this one will fly....

Mobile phones as development aid...(?)

The worldwide GSM Association has published this report that describes cases where the mobile phone can be made to allow access to funds in underdeveloped countries. It's an interesting report, showing that it may be possible to skip some of the general stages of payment system development. Furthermore, it's of course a comfort that at least some part my steepingly high bill for the mobile may end up being put to use for the poor and underdeveloped.

Skype Chooses GlobalCollect for Alternative Payment Methods Processing

See the press release here. GlobalCollect today announced it has been selected by Skype to process payments for its premium offerings. For Skype, GlobalCollect will process local bank transfer payments in local currencies worldwide, including real-time online bank transfers in countries where this payment method is available.

Postbank does trial with Skype for the younger

Planet Multimedia reports that retail bank Postbank will be doing a trial to allow customers to use Skype to 'phone' the bank for free. The trial focuses on the younger account holders and students. Planet Multimedia have tried the service and found out it worked fine.

How a bank my fail under supervision

This document describes how the small Dutch bank 'van der Hoop' went broke while being supervised. Van der Hoop was actually a small niche bank with 'rich' customers.

The case goes to show that supervision is never a guarantee for your funds. Furthermore the Dutch central bank (which is also the supervisor of banks) is quite embarrassed of course. And will undoubtedly step up its supervisory efforts even more.

As a final touch of irony, the Hoop in the name 'van der Hoop', means hope.
Well, there's little of that left for the customers that held more funds/deposits than the 20.000 euro of the Dutch Deposit Guarantee System.