egovernment, fee transparency, bitcoin and the free 1% public sector pay rise

When is egovernment not egovernment?

When the front office does not include BACS online payment routing details on invoices, the back office is not able to support manual requests to confirm routing details and the internal financial system does not have the fractional cost online payments option installed?

A look at Lloyds Bank transaction fees gives us some numbers as a starting point:

cash = 60p per £100 excludes 70p per paying in slip

cash exchange = £1.65 per £100

cheque or postal order = 31p

incoming BACS credit = 15p

So, “openmindedly” with numbers that do not reflect any volume discount etc, in the 2014/15 financial year, with cash transactions averaged out at £20 and card transactions averaged out at £50, if a government processed incoming retail transactions without online banking payments (excludes bank account and hardware monthly fees and excludes fraud):

£10m in cash transactions @ £60,000

£0.5m in cash exchange for floats etc @ £8,250

£30m in cheques @ £186,000

£45m in debit card payments (15p) @ £135,000

£15m in credit card payments with 2% fee (£1) @ £300,000

£0m in online banking BACS payments @ £0

However, benchmarked with fintech platforms such as BACS online banking payments, digital currency and banknotey (TM):

£9.5m in cash transactions @ £54,000

£0.5m in banknotey (TM) cash transactions @ £6,000 – £1,250 signup/revshare commission

£0.25m in cash exchange for floats etc @ £4,125

£10m in cheques or postal orders @ £62,000

£45m in debit card payments (15p) @ £135,000

£10m in credit card payments with 2% fee (£1) @ £200,000

£1m in bitcoin with 1% fee (50p) @ £10,000

£24m in online banking BACS payments at 15p fee @ £72,000

Ok, that equates to £689,250 with older ratios and £541,875 with newer ratios or nearly -22% in cost savings.  An interesting headline number in an era of government budget reviews and pressures to rebalance whole economies.

The card companies have not supported any shift to a surcharge process historically because the inevitable customer conclusion is that cash would be a “free” payment method.

If a government amended policy on not absorbing higher cost credit card transaction fees (American Express is not accepted by the Isle of Man Government) but allowing the customer to choose a preferred surcharge on every payment method such as cash, cheque, debit card, credit card, charge card, prepaid card and even points, miles, bitcoin, ripple and banknotey it could contribute the equivalent of a 1% pay rise, offset the living wage and allow credit cards from credit unions as a more flexible payment method on what are typically quality of life public sector services rather than cash from payday lenders or loan sharks.

If a government then progressed legislation to itemise transaction fees outside the public sector at the offline and online point of sale, customers, SMEs and the economy would immediately benefit from more awareness of transaction process costs, more consistent and more competitive commercial rates and open up the opportunities on real time risk based transaction fees.

As someone that reported a fraudulent card transaction to purchase a flight into the UK from online banking in time to catch the criminal at the departure or arrival gate, it is a reasonable assumption that fintech could significantly decrease financial crime with transparent fees, a shift to joined up real time policing of each and every fraudulent transaction and an end to passing a large percentage of the avoidable costs of financial crime to customers.

Graeme Jones

policy advisor, Isle of Man Parliament

project lead, openmindedly @ Isle of Man Government

founder, banknotey



Crypto Businesses Public Register

The Isle of Man does not have a central bank and that is well received by bitcoin believers, of course!

On 10 June 2014, the Isle of Man financial services regulator explained that the policy was to support legitimate businesses within the emerging crypto sector to operate in the jurisdiction without regulation, to support best practice and that a public register would be introduced in new legislation.

On 18 July 2014, the Isle of Man financial services regulator announced guidance notes.

The Crypto Valley Summit prompted extensive discussions and — perhaps not widely enough — I recommended a voluntary public register without a fee pending the compulsory public register with a fee in the new legislation.

The new legislation (explanatory notes) is expected in H1 2015 but will not regulate crypto businesses.  As at 15 December 2014 it has passed the first and second reading in the lower chamber so still requires a third reading in the lower chamber, first, second and third readings in the upper chamber and also (UK) Royal Assent in the joint chamber so it is on the right timescale.

The UK is often cited as the most important onshore jurisdiction to crypto businesses.  I discussed with peer contacts and noted that even the world class UK Government Digital Service has limited public API functionality.

Most regulators and governments struggle to minimise consequential costs but increasingly real time risk management of any business on a public register is a core requirement.

I reviewed the existing Isle of Man public register of regulated banking licence holders and decided to configure a no/low cost public API with as a proof of concept that even an unregulated crypto business would want to be on a voluntary public register that could be monitored with innovative automated services such as alerts (public register ping, highlight a shift to a different jurisdiction) to investors, digital wallet holders, digital currency exchanges, insurance companies, media companies, other regulators and cross-border law enforcement such as Europol and Interpol.

So, what could you do in 2 hours?

  • host a group coffee with some local peer contacts to shortlist crypto businesses already active in the local tech community and the inevitable 1 or 2 handfuls of stealth mode tech startups that may or may not want to be included yet (20 minutes)
  • draft a voluntary public register and any amendments (30 minutes)
  • circulate to highlight any gaps (10 minutes)
  • upload the summary, content and link to a holding page on the regulator website (30 minutes)
  • draft tweet (10 minutes)
  • apologise for making it look easy with (20 minutes)

Best regards,

Graeme Jones

project lead, openmindedly

founder, banknotey