According to a recent study published by Boston Consulting Group, revenues earned by the payments industry will grow to an astonishing $2 trillion by 2025.
Woopie you say, how can I get my share of this windfall? What the study fails to point out is that revenues of $2 trillion for someone also represent costs of $2 tillion for someone else. The reality is that the bulk of this $2 trillion dollar expense will be due to our use of credit cards. Generally speaking I thought there was a broad consensus that we are already paying too dearly for the privilege of using our credit cards so you would have thought this report should have proven alarming.
I understand as we migrate from shopping in physical stores to shopping on e-commerce sites, there are some benefits of credit cards, however I’m pleased to more use of debit cards for online expenditures. I also know there are even better way to digitize cash than tying it to our identities and certainly better ways than tying to our identities and a financial product which is post paid. Sure it’s convenient to put everything on plastic and being totally truthful here, I have to also admit I often fine myself totally devoid of cash in my wallet and coins are one of my pep peeves. But be assured my fellow countrymen we do have a problem here?
The problem is the $2 tillion number along with the ugly realization that the size of this number directly correlates to the number of places refusing to accept cash, which will only grow. First it was gas stations who made it nearly impossible to purchase gas without a credit card, then it was car rental agencies, have you ever tried to rent a car by paying cash? Where will it all end, being forced to pay for every service and every good consumed with a credit card? Are we going to be satisfied with leaving little digital tracks of everywhere we go throughout each and every day. How big will the number be $5 trillion, $10 trillion…. do I hear $20 trillion? I worry about us as individuals being free of both big Government and big business. I ridicule those who are naive enough to believe a “Cash Back” credit card is a good deal. Maybe good to beggar thy neighbour if you escaped unswatched by annual fees and pay off your debt each month. If I am forced to use a Credit Card for everything I purchase then I begrudge my loss of personal choice, my subjection to increased risk of ID theft and yes I feel the cost in terms of merchant fees is simply too large an extraction of wealth from each and every human exchange or interaction.
My I suggest it may be wise for us all to pause for a moment and perhaps offer up some resistance to our collective urge towards this “plastic pay later mentality”. There are certain purchases I am now making on a credit card, which offer little more convenience and are being made at greater cost than cold hard cash. For example I recently started to use the City’s parking app to pay for parking. Admittedly very convenient, but who among us takes the time to ponder the total ramifications. Is parking my car soon to be yet another service I am forced to use a credit card? In an not too distant past I slipped a “toonie” in the meter and parked with utter abandon. Now I must surrender by credit card details to some app (who knows where my name and number may end up or be used) but no the ramifications are even greater, the City which after all is me the taxpayer, is paying an extra 6% to collect my parking fee (and I already own and have paid for the damn meters) and another city employee, the guy collecting the coins, is now out of a job so the middle class shrinks yet again. Donald Trump should know about this as the app was probably written in Bangalore.
Speaking of Bangalore, I find it very perverse that India of all places, with among the highest per capita poverty rates in the world, would abruptly scrap 85% of it’s currency. I rarely see eye to eye with Steve Forbes who called this callous act , “breathtaking in its immorality” in a recent editorial, but Steve was right on the money (couldn’t resist) for totally different reasons than he thought. Cash is a public good, created for and by the people almost every other payment method even though it most often has cash as its foundation is a private good (Visa, PayPal,Wepay etc) controlled and own by private companies. When good intentioned government “kill off” cash for what may appear to be legitimate reasons; tax evasion, underground economies and money laundering, they will effectively forced all the decent law abiding citizen into the hands and control of those private companies who have already amply demonstrated a greedy propensity to excess profits. Let’s assume India keeps a few rupee notes for nostalgia and the money supply is only 5-10% of the e-cash in circulation, don’t they lose some control over monetary policy? Seriously Government have a responsibility to protect the citizenry and I for one hope some bright economist in New Delhi, and in every capital of every country is figuring out how best to create e-cash, or a digital currency, which we can all use and will firmly remain a public good.