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
etc
openmindedly 