Monday, March 12, 2007

Less bang for your bucks....

According to the Independent, Peter Ayliffe, CEO of Visa said:-

"by 2012, using credit and debit cards should be cheaper and more convenient than cash".

Cheaper than cash? Yep, apparently:-

"retailers could soon start surcharging customers if they choose to buy products with cash"

Hmmm, well a number of my friends have recently complained that they've been sent a fee for not using their credit card often enough. According to one of them, the apparent "reason" for this is basically they weren't making enough money for the bank.

This is quite concerning, but it seems that there is a growing trend towards imposing such annual fees according to the BBC.

So, soon it'll be cheaper to use your card than cash (because cash will be surcharged) and banks are going to start charging you for the privilege of using their services, especially if you don't use them much.

That's another way of saying - your savings are our financial opportunity. In other words, if you have small amounts of money, low interest rates and you avoid debt by saving then please just go hand your money into your local "money" service with the kind words:-

"there you go, you've earned it".

I can understand that some of them must be a bit strapped for cash, only estimated to earn in profit more than the GDP of Luxembourg. I often find myself feeling the same way ..... if only I had a few more billion.

Hence I do understand what "cashless" society means; it means I'm going to have less cash than I used to or my bucks are going to be worth less.

They have got to be kidding, right?

The net effect would be in the long run to disadvantage those whom use cash, and do not want to or either cannot partake in the debt frenzy or be involved with the financial services for personal or other reasons. We should especially not disadvantage those that save or can least afford.

Now money & banking services are infra-structural (or essential) needs of society, just like power, water, food etc. Now it's reasonable that I should be charged for what I use (utility consumption), and in many case pay a fee for access to the service.

However is it reasonable that the cost of access to such services should vary according to how much I use them?

Maybe I don't buy enough food for the supermarkets liking - would it be reasonable for them to charge me extra for access?

Maybe I don't consume as much electricity as the power company would like - would it be reasonable to therefore increase my access charge because I don't use enough?

No it's not reasonable! It discriminates against thrift and those who can least afford to pay, but must pay.

So here is a petition (I'm waiting for them to approve it, so it may not be there yet) to make it an offence to:-

  • financially discriminate against cash customers by providing a service at a lower rate than that which would be charged to a customer paying in cash.
  • financially discriminate against savers as opposed to other consumers.
  • financially discriminate against consumers for connection or access to an essential service (banking, power, communication, water, food etc) because of a low rate of consumption.

I've called it Wealth-Neutral (as in Net-Neutrality) since it relates to access, but obviously I need to fit within the 16 character limit of E-Petitions


Tony said...

I think I agree with what you're trying to say (particularly on the discriminating against cash part), but I'm a little confused by some of it.

Buying in bulk generally entitles you to discounts, and various places structure this as an annual fee to be a member (cost of entry), but which you can then theoretically save if you spend enough over the year. Is charging you less when you spend more not just a better spin of charging you more when you spend less?

swardley said...

Hi Tony,

First of all this refers to only those services which are a necessity (banking, power, water, food etc) and therefore ones which a member of society needs access to.

Now it is perfectly fine to provide discounting on utility - i.e. bulk buy, then lower price per unit etc.

What however is not fine is to have differences in the access charge (if any access charge exists - which for a necessity is something that I would debate should not be allowed).

If you have differences in the access charge, it enables companies to create a minimum payment situation which includes utility use and to therefore increase this over time.

To take a fairly twisted example

Supermarket access - 50GBP per week, includes upto 60GBP of food.

Next week

Supermarket acess - 100GBP per week, includes upto 120GBP of food.

As a consumer I need food, but now I need to pay 100GBP to access food (albeit I get 120GBP worth of food, as priced by the supermarket) .. but what if I only ever consume 50GBP worth.

If I'm poor, then I'm being severely penalised here. If I'm wealthy .. well I notice no difference, I spend more than that on a bottle of wine and I'll easily exceed the minimum amount.

So with banking, you have a situation where they wish to go from zero access to charged access if you are a low user.

This penalises those that save and those that least can afford it.

Now for a luxury item - fine, but for an essential?

Gerry said...

This is exactly what the credit card companies want, to frame it so consumers start attacking merchants. I work with the Merchant Payment Coalition and its the interchange fee that is the real problem.

Visa and MasterCard arbitrarily set the interchange fees without any input from merchants and consumers. As a result, consumers foot the bill in the form of higher prices for goods and services.

Tony said...

In your 'twisted' supermarket example, are you saying that supermarkets shouldn't be allowed to introduce a scheme like this?

Clearly you don't want a cartel developing such that this is the only way you can buy food, but I don't think the way to prevent that is to say that no supermarket should be allowed to operate like this...

swardley said...

Not quite.

What I'm saying is that if you are going to have an access fee for an essential service then it should be a flat fee and any utilisation charge is on top of this flat fee.

What I'm against is an access fee which varies with usage, for example a charge for not using a banking facility enough, where such a facility is considered a necessity.

With a clean & clear separation, you can fight access charges - which should be zero for essential services - or at least compare them.

So in the "twisted" example (or should I say lousy example in the way I used it, I was tired at the time) - it's not reasonable to say "you didn't shop enough with us - here's a bill for £50".

You force consumers to spend minimum amounts, regardless of use of a necessity.

Now doesn't an access charge do this? Yes, but if the banks said to everyone they were going to charge for access - they'd have a revolt on their hands.

In the case of credit cards, you can argue that they are not a necessity - fair enough. But they are using an argument that an access charge can be used on those who don't utilise the card much - my concern is that this later spreads to other more essential services (like having a bank account, debit cards etc).

By forcing a clear access charge, seperated from utilisation - you can create pressure for the access charge to be zero. Which is where is should be for an essential or necessary service.

Now of course, you can as you point out "charge less when you spend more" by bulk discounting. I have no problem with that.

However, by having an access charge which is rebated on usage, you can constantly increase the access charge to remove the non-profitable customers. Fine, except when the service is essential and no alternative exists.

The basic alternative is to just keep cash - however it looks like they are going penalise you for using that. So now we are relying on a perfect marketplace to provide a reasonable alternative? Problem with this ideal is that markets are based upon profit, and it is wishful thinking to believe that a market will serve the needs of the unprofitable.

What I feel is reasonable is a standard access charge (ideally zero) for an essential service, then a utility charge which can of course diminish with high usage.

Equally I'm against discrimination against cash payment. Ideally all transactions should be method neutral but in any case, cash should not be discriminated against.

Tony said...

I need to ponder the wider question, but on the issue of cash discrimination, do you think ExampleSupermarket PLC shouldn't be allowed to do a "Get 5% off when you purchase using our ExampleSupermarket Visa card" offer?

swardley said...


Tony said...

Isn't that discrimination against cash payment?

swardley said...

Hi Tony,

I should have been more clear, I missed the negative in your statement.

No, I don't believe that ExampleSupermarket PLC should be allowed to do a "Get 5% off when you purchase using our ExampleSupermarket Visa card" offer.

I believe that any offer should be available to cash purchasers as well.

Tony said...

OK. That makes sense again :)

So, to follow this through then, does this mean supermarkets shouldn't be allowed to issue credit cards that have a different rate of cashback when used in their stores?

Or what about different interest rates for instore purchases?

Cards like, say, this one

swardley said...

My apologies for the confusion.

I have (as yet) no strong view on providing different interest rates, as long as there is no penalty for paying with cash.

Now you can argue that 0% interest on purchases, provides an opportunity loss for cash customers. I have less of an issue with this than 5% discount for using the card or additional loyalty rewards (or cash back) for using a card to buy necessities.

This I do have an issue with. The minimum standard for me is cash neutral for essential or necessary services.