E-payments may bring convenience to shoppers and retailers alike — but do they also boost the wallet?
"All consumers pay between three to five percent more on goods purely to fund payment systems," said Gartner vice president Andy Kyte at the Gartner Symposium last week.
This is not only due to the money that credit and debit card systems cost retailers, it also comes from processing the cash in everyone's pockets. "Cash processing is unbelievably expensive," said Kyte.
Singapore long ago decided it was too expensive to process cash, according to Kyte. In 1998, the Board of Commissioners of Currency in Singapore proposed to create an electronic currency — Singapore Electronic Legal Tender (Selt) — which Kyte said will go live at the end of next year.
According to the Organisation for Economic Co-operation and Development's 2002 publication The Future of Money, Selt will be issued in Singaporean dollars. Banks could then draw Selt from the Board of Commissioners of Currency and load it onto their computers.
Any person requiring money could then draw electronic funds onto devices including mobile phones or smartcards. Last year, Singapore unveiled a standard — Contactless e-Purse Application (Cepas) — which allows merchants to only have one system to deal with multiple cards.
The implications for the rest of the world are huge, said Kyte: "Lots of countries in the world are looking very, very closely at what is happening in Singapore."
E-payments also cost both shoppers and retailers money, Kyte said, but the amounts are typically lower than existing payment systems.
The e-payment push is not only coming from the price of payment processing: virtual worlds are contributing to the drive to use electronic currencies, such as Second Life's Linden Dollar, with some unwanted consequences. Virtual worlds with e-currencies create phenomenal opportunities for money laundering and tax evasion, said Kyte.
"Most of the issues [of electronic money] are around the idea of security," said Kyte. Once this is worked out, it will only be a matter of convincing consumers of the technology.
Consumers are wary of currencies like Linden Dollars because they are unsure of their permanence, Kyte said. He likened the current e-money situation to a "primal soup" — a lot of ideas floating around that will eventually consolidate into the type of services consumers want to use.
Banks, he said, are likely to be the losers unless they jump on the trend. "Smart banks will buy into it and overwhelm," he said, advising banks to "go and get a few teenagers" and run a research project.