In Canada, a Government-Backed Electronic Currency

An anonymous reader writes "Secure chips have already made it into our credit and debit cards. Next up, they could replace pocket change.The Royal Canadian Mint has been pushing forward with its "MintChip" prototype, a digital cash replacement aimed at transactions under $10, since it surfaced a year ago. The Crown corporation is factoring in developer feedback, hiring a product manager and consulting with the financial sector."

Comments

Do Canadian credit cards for sub $10?

[h4rr4r]

My credit card works fine on transactions below $10.

Where exactly is the need for this?

Re:Do Canadian credit cards for sub $10?

[h4rr4r]

They have too normally via their contracts. If they object and you can report them.

If you want cash, you have to give me a discount greater than my card gives me. I am not here to make your store profitable.

Re:Do Canadian credit cards for sub $10?

[gewalker]

Well, for one thing, it is anonymous by design. Secondly, it is not tied to a bank account, so you could afford to lose this and your bank account would still be safe. Sounds good to me.

Devil is in the details, i.e., not allowing unathorized mods to the balance contained within the card, making sure debits and credits against the card work every time.

Re:Do Canadian credit cards for sub $10?

[LordHatrus]

My credit card works fine on transactions below $10.

Where exactly is the need for this?

Credit cards companies take a cut out of what merchants later get, and it's normally a percentage, but it is not unusual for there to also be a minimum transaction fee. So, small credit card transactions aren't good for retailers, since the lose an unusually high amount of money to the credit card company. ... in fact, in the states, July 2010's Dodd-Frank Wall Street Reform and Consumer Protection Act recently legalized businesses setting a "minimum purchase with credit card" of up to $10.

Re:Do Canadian credit cards for sub $10?

[h4rr4r]

I am not here to keep a store running profitably. Before that law normal agreements forbade that practice. Now, I just will not shop there.

If you want cash give me a better discount than my card does.

Re:Do Canadian credit cards for sub $10?

[Samantha Wright]

Transaction fees. The policy for how this is handled varies from vendor to vendor, and some won't accept transactions below ten dollars at all. More obnoxiously, many put a 25 cent transaction fee on any direct bank debit (Interac) transaction under five dollars, and some will play with variations like 30 cents, or no limit, or something else. Supposedly this balances out the very small flat cost of all Interac transactions, but ultimately it means you're punished for using your card instead of coinage.

Otherwise, however, the debit system is quite successful, and some people can afford to not even have a credit card. If MintChip can genuinely avoid all transaction fees, it'll be the greatest thing since sliced bread for that alone.

Other goals of the system are account anonymity (a government building an anonymous financial system? say what?) and permitting arbitrary peer-to-peer transactions like PayPal... but with no intermediary. Unfortunately they have yet to figure out how to make people RTFA.

Re:Do Canadian credit cards for sub $10?

[h4rr4r]

Afford not to have a Credit Card?
A credit card is more advantageous as you have more money. I get 1% back on most purchases and 5% back on some. I always pay it off every payday, so twice a month. So I am taking a loan with a negative interest rate. Why would you not borrow money, if the payoff was less than the loan?

I see by your UID you are new here, but on slashdot it is traditional to not read the article. Advanced users don't even read the summary.

Re:Do Canadian credit cards for sub $10?

[compro01]

Then this could replace the credit card system as it currently stands.

Probably not. We've already got a replacement for the credit card systems called Interac. It's a direct debit transfer system with way lower fees than the credit card companies.

This would likely go in the niche currently partially occupied by Interac's Flash and e-transfer services, but be even simpler for small transactions.

Re:Do Canadian credit cards for sub $10?

[h4rr4r]

If you can buy the card with cash, it seems pretty anonymous.
Same as burner phones.

Re:Do Canadian credit cards for sub $10?

[h4rr4r]

The article claims this to be an anonymous transfer method.

Also, you can always get foreign currency or gold, or silver, or some standard good. In some prisons canned fish became currency among prisoners because they were not allowed cash and no one wanted to eat the canteen's canned fish. So long as their are goods and services people want to buy without traceability they will find a way.

Re:Do Canadian credit cards for sub $10?

[CastrTroy]

Handling cash has a non-zero cost of doing business as well. There's all sorts of ways cash can go missing be it theft by employees or outsiders, or simply having it misplaced. There's bank deposit fees to actually get the money into the bank. There's the problems with ensuring you always have enough change on hand for a purchase. There's the risk of accepting counterfeit bills. There's employee time lost from counting the money to ensure the money in the till matches the amount on the receipts.

Re:Do Canadian credit cards for sub $10?

[ShanghaiBill]

My credit card works fine on transactions below $10.

Where exactly is the need for this?

1. Credit cards do not do peer-to-peer payments. If my neighbor's kid mows my lawn, I cannot transfer $5 from my CC to his. If my daughter sets up a lemonade stand, she cannot accept CC payments.

2. Credit cards do not do anonymous transactions. Plenty (most?) people want to occasionally conduct transactions where neither the buyer nor seller disclose their identity.

3. Transaction fees. Visa and Mastercard charge high fees, and operate a cartel that keeps out competitors.

4. No assurance of payment. Even if the transaction is approved, the seller can still be subjected to a chargeback, and has no assurance of actually receiving the money.

Re:Do Canadian credit cards for sub $10?

[rjhubs]

The contracts also typically require you charge the same price for goods whether it be paid for by cash or credit. The cashback you get from your credit card at least partially comes from the fees the credit card provider charges. Most vendors already have their prices higher to cover the CC transaction costs A better argument might be is that it is a big economic inefficiency in the market to have a 3% transaction cost on purchases. The Canadian government is trying to remove this inefficiency.

Re:Do Canadian credit cards for sub $10?

[Anonymous Coward]

Their contracts probably forbid it. Credit card transaction fees are a race to the bottom (a sort of prisoner's dilemma). Because the cost of the fees are passed on to all the consumers (regardless of whether you pay cash or not), the only winning move as a consumer is to use your credit card (and get the "rewards"). The rewards, of course, are less than the fees, and the credit card companies bank the rest while you pay a hidden tax.

Because the market cannot correct this itself, this is exactly the thing that requires government intervention.

Re:Do Canadian credit cards for sub $10?

[ShanghaiBill]

If you want cash give me a better discount than my card does.

The CC companies specifically forbid this practice in the merchant agreement. Merchants cannot charge an additional fee for credit cards, and they cannot offer a discount for cash. Gas stations are normally exempted, and a few other low margin businesses may also be able to negotiate an exemption, but most shops are required to charge the same for cash and CCs, and just absorb the transaction fees as a cost of doing business.

Re:Do Canadian credit cards for sub $10?

[barc0001]

Actually ALL of those card benefits you receive come straight out of the merchant's pocket. Airmiles, purchase points and cash back are all being extracted from the merchants in addition to the CC fees which can be as high as 5% or more. There's a reason businesses prefer cash and why Interac is so popular in Canada with merchants as their fees are considerably lower.

Re:Do Canadian credit cards for sub $10?

[sinij]

Because costs are passed down to you.

Re:Do Canadian credit cards for sub $10?

[Anonymous Coward]

Not you maybe, but most customers would want their merchants to stay in business. Businesses don't want people like you as a customer.

Re:Do Canadian credit cards for sub $10?

[barc0001]

" If I can give him $100 and take $1 back vs giving him $100 and $0 back I know which I will select."

Then don't be surprised that the next time you go to the store you're paying $102 for the same amount of goods.... Merchants are there to make money, not run a charity. If the credit card fees and service fees gouge their margin, they'll get it back by passing it all along to us.

Re:Do Canadian credit cards for sub $10?

[Jane Q. Public]

"Sounds good to me. Devil is in the details, i.e., not allowing unathorized mods to the balance contained within the card, making sure debits and credits against the card work every time."

The devil is right there. The question is why you don't see him.

If cash is replaced with an "all electronic" economy, you can take that moment and kiss your freedom goodbye. You have just given government and corporations control of ALL your money.

When was the last time they proved they can be trusted? Eh? It has been so long, I don't remember.

Re:Do Canadian credit cards for sub $10?

[Galestar]

It not about what a single individual (you) thinks he can get away with by passing the costs onto another. Its about what removes inefficiencies from the system in general, and avoids the tragedy of the commons that we have now - which is that individuals acting under rational self interest reduce the general welfare of society as a whole.

Re:Do Canadian credit cards for sub $10?

[Anonymous Coward]

s/credit/debit/

As a Canadian who ran a small business for a long time, we refused debit cards for small transactions as they have a fixed fee (We started at 50 cents but managed to negotiate it down to 15 cents over a few years). Credit cards have no fixed fee, but rather take a percentage (In our case, we started at a horrible 5% and negotiated it down to 1.9% for all but AmEx, which, like many Canadian businesses, we just stopped accepting). I had no problems running a credit card for a $1 purchase, after all, I'm only losing 2 cents. But running a debit card for a $1 purchase hurt terribly.

On the flipside, I would encourage customers to pay cash or debit for large purchases ($1000+) because then my savings would be almost $19.

Re:Do Canadian credit cards for sub $10?

[Jane Q. Public]

" Merchants cannot charge an additional fee for credit cards, and they cannot offer a discount for cash."

They may not be able to charge a "fee", but they can and do raise their prices to compensate, so it amounts to the same thing.

The only difference is that cash customers end up helping to pay for the credit card transactions.

Re:Do Canadian credit cards for sub $10?

[Ravaldy]

Actually you should care more than you want to. These bonuses and rewards are paid for by the merchant BUT guess who is paying the merchant for the rewards? You are! Nothing is free. Most Merchants inflate their prices to cover for these expenses. In the end all you are doing is keeping a marketing infrastructure alive by paying for it. Sure you get air miles or reward dollars but I assure you that you paid more than if you actually used your own money. It's a GIMICK and we are all fooled by it.

Re:Do Canadian credit cards for sub $10?

[barc0001]

"while they cannot have a free for CC use they can offer a rebate to cash customers"

I assume you mean a fee, not a free. In any case, that violates the terms and conditions that the merchant agrees to with their CC processor and they can face sanctions, higher fees or even just be dropped by the processor altogether if caught giving cash rebates. Some of the smaller merchants do it anyway and rely on the goodwill of their clientèle not to rat them out. Then some sanctimonious prick who objects to a .04c difference paying by CC on a pack of gum comes along and pitches a fit to the processor and ruins it for everyone. And this is why we can't have nice things.

Re:Do Canadian credit cards for sub $10?

[witherstaff]

I don't think a kid on a lemonade stand can officially accept paypal, isn't it 18 and older? Same with any merchant account which would let a kid mow a lawn or do all the normal things that kids can do for cash.

Re:Do Canadian credit cards for sub $10?

[h4rr4r]

I can't get the money back any other way.
No matter what I do it costs the same so I might as well use the CC.

Classic tragedy of the commons. Only regulation can solve that. The regulation needs to allow different prices for different payment methods.

Re:Do Canadian credit cards for sub $10?

[Tough Love]

If you want cash, you have to give me a discount greater than my card gives me. I am not here to make your store profitable.

What an ass. Did you ever think for a moment that cutting out the retail bank as middleman could make life better for you, the merchant and society in general?

Re:Do Canadian credit cards for sub $10?

[j-beda]

A 3% charge is likely less than the cost of dealing with cash. It must be counted, moved to the bank, change must be brought back to the store and so on. It is also easy lost or stolen.

Lets not pretend CCs offer no value to the store.

All true. I think the benefit of cash for the merchant is that it's easier to under report.

One of the reasons I like using my CC (in addition to making it easier for me to track my spending) is that it makes it more difficult for the vendor to avoid reporting. I want my vendor to pay all those taxes and I want my wait-staff to report their tip earnings, and pay the taxes due thereby. Gotta keep that national deficit under control, eh?

One thing I find slightly funny is when someone says to me - "Hey - do you want to commit a crime with me? If you can pay me in cash, I won't charge you the sales tax. That way I can not report it as income, and thus avoid paying at least 30% while still being able to deduct all of my business expenses from the income that I do report. Oh yeah, and that will remove your ability to sue me for bad service or not actually doing the work, or any complaint really."

Actually they usually just say: "No tax if you pay in cash" and leave the rest "understood".

I usually respond with "How often do you think the average person informs on tax cheats via http://www.cra-arc.gc.ca/gncy/nvstgtns/lds/menu-eng.html ? I have used it a few times, it is oddly satisfying."

Actually I usually just say "No, I don't think so." and leave the rest "understood".

Re:Do Canadian credit cards for sub $10?

[Penguinisto]

I can agree with the concept, but seriously, the wait-staff?

I usually try to not be a dick to the waiters/waitresses, especially in this economy.

Re:Do Canadian credit cards for sub $10?

[icebraining]

The keyword is Canada. Not everything revolves around the US.

Re:http://www.linuxadvocates.com/p/support.html

[flayzernax]

It looks like a linuxgerian scam...

mint shit

[slashmydots]

Let me fast forward this a bit because MintChip was discussed on the bitcoin forums months ago. It's bullshit. It's set up completely wrong. It's horribly insecure. It's like a spy-on-you version of bitcoin. Even the encryption style was massively flawed from what I heard. It's absolute, utter crap.

Re:mint shit

[h4rr4r]

I am so sure the BitCoin folks have no incentive or ideological basis that might taint their view of a workable solution other than their own.

Re:mint shit

[CastrTroy]

I really don't see how a currency can be digital, decentralized, and anonymous. If that's the case, then whatever amount the card says it has, it has. Sure you can put in all kinds of encryption and digital signatures, but at the end of the day, you're trusting the card. It's like those photocopier or transit pass cards. If they aren't centrally managed, eventually they all get cracked. And the incentive to crack these things will be very high. Even if you have to make 10,000, $10 transactions to make it worth your while, people will still do it.

Re:mint shit

[wronkiew]

You really need to familiarize yourself with how crypto-currencies work. To a certain extent, it is the burden of the issuer to prove that their system is secure, so you can rail on how insecure digital, decentralized, and anonymous currency is all you want. However, consider this. Bitcoins are being used in everyday trade right now. The market cap is > $1B last I checked. The FIRST TIME the core algorithm is hacked to give someone free money, the total value of the system drops to $0. That $1B represents the discounted future value of the currency plus a certain level of speculation (and minus a large chunk of investors who don't understand what they are looking at). It includes our collective best guess as to how secure the system is. That is a lot of confidence in the system. MintChip sounds pretty lame, but it shouldn't taint the efforts of better cryptocurrencies.

Sounds like the Dutch "ChipKnip"

[Anonymous Coward]

Sounds a lot like the now pretty much dead "ChipKnip" scheme we had in the Netherlands. It wasn't practical; it died.

lets stop beating around the bush

[nimbius]

credit cards have been digital currency for decades, wallstreet doesnt trade in physical bonds or stocks anymore, theives steal credit cards more than cash, and the concept of a 'processing fee' in an era of such ubiquitous computing is absurd. the easiest way to digital currency is to use the system in place and be gone with visa and mastercard endorsed 'debit' cards.

like the mafia, they want their cut and control

[iggymanz]

the end game will be cashless society so banks and the government in their pockets get a piece of any action. If government labels you a "terrorist", your ability to buy, hold money and sell gets instantly revoked. convenient way to make everyone in an area come in for "questioning" just to get their "privileges" back

Re:like the mafia, they want their cut and control

[iggymanz]

you mean goods that soon will all have embedded rfid in them?

Re:like the mafia, they want their cut and control

[h4rr4r]

So then people will place the item in the microwave for a couple seconds, or use gold, or silver, or shiny rocks or bottle caps.

just copy Hong Kong or Japan

[moxfactor]

we have the Octopus card in Hong Kong which works for convenience stores, subway and other transportation fees, and some retailers like Starbucks or our local supermarkets. it can only be topped up to 500HKD($64.43USD) at any convenience store or subway station and is anonymous. it uses an RFID chip, so it doesn't need swiping, just place close to the machine will charge the card. same goes for Japan's Suica card, which was only for Tokyo before but has just gone national. having an electronic currency card is wonderful, instead of having to pocket so much change for those times u need to use the payphone or pay for a one time bus ticket or buy something from a vending machine. and it's not attached to my credit or debit card, so i can hand it to a relative or friend when they visit me in Hong Kong, or i can buy a Suica card in Japan and use it just for the duration of the trip without worrying about daily exchange rates.

I was part of the original MintChip challenge

[kruhft]

After trying to get them to support Linux and even offering to do the development to get it to work with Linux they informed me that the hardware requires a binary blob and that Linux would never be supported.

Some other developer also found an easy way to pull money off the chip without permission using a bit javascript and I wasn't too impressed with the design and security.

There's a hard limit (1000?) transactions per chip so once you go over you need a new chip. I found that quite odd but maybe that's the limit to the amount of transactions this "anonymous" cash system can hold.