Felix Salmon has a post today outlining his views on regulation of payments. Some thoughts:
- Felix says that in Scandinavia, consumer payments happen in real time. I know this is often true in Sweden, although not between all banks, but in Denmark interbank payments always take a business day. They are free for most customers if ordered online. Some banks charge a small fee. Banks are compensated through fees and because the bank earns interest on the money while it’s in “transit”.
- There is already an infrastructure for low-quality bank transfers between consumers. It’s not debit cards, but rather ACH debits. It is hopelessly outdated and slow, but it works. Kind of. You can use PayPal to tap into this (“Add Funds from Bank Account”), and it’s free. Dwolla, a new provider that as far as I can tell only uses ACH, charges 25 cents. My credit union charges $1, which is outrageous.
- Beyond the rents being extracted, a big problem with private monopolistic payment providers is that they control who gets to make payments. Right now it may not be a huge deal that PayPal restricts payments to Bradley Manning’s legal defense fund because we can always send a check or cash. This would be much harder if PayPal or a small number of other payment providers dominate the market in a cash- and checkless world. Barring illegal activity as determined after an actual conviction, I really think there should be a right to access common forms of payment.
- Real time payments are costly because the sending bank never knows how much liquidity to keep around. Clearing payments once a day, or perhaps more than once a day, is not a bad idea.