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?

[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?

[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?

[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?

[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?

[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: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.

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

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.