Sunday, November 26, 2006

"The Day May be Coming When Cell Phones Will Replace Credit Cards, Cash and Checks" (The Mercury News)

One of the most visionary profiles about new electronic payment solutions was reported on today (Nov. 26) by Mark Schwanhausser in The Mercury News.

Several new products, from using cell phones to magnetic chips could speed up payment transactions. The result will reduce costs, fraud and speed up transactions.

However, the article also reminds us of GM and the electric cars. Before the Prius, a decade ago, an efficient, non-emission electric car used technology to reduce dependence on petroleum. History showed us what happened when giant cartels stepped in to protect their fiefdom.

What will happen this time as new technologies increase efficiencies and lower costs for electronic payments? Richard K. Crone, founder of Crone Consulting in San Carlos, commented in the article that running a debit or credit transaction through a network like Visa or MasterCard costs [merchants] 1 percent to 6 percent of the purchase price in so-called interchange fees.

Currently, there is deficient competition, as Visa® and MasterCard® controls a staggering 80% of the U.S. card market, according to ATM Marketplace. As technology cuts down costs while increasing efficiencies, it becomes clearer why the banks and card associations stand accused of illegal price fixing. How can interchange rates be as high as 6%, according to Mr. Crone, when new products are poised to change this leaking system. [Interchange was designed to cover the costs of a four-party system when antiquated credit card imprinters and carbon-copy receipts required manual payment processing].

While the new technologies and cost savings are visionary, reading between the lines of the article has the makings for a sequel to the documentary, Who Killed the Electric Car - and the depth's big business might assert to protect their cash cow.

[Source:, via The Mercury News]