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Survival of the slickest

Turning money and small-value payments into digital form doesn’t interest the banks – it’s against their interests and too expensive. Into the vacuum have stepped hundreds of payment schemes, many of them claiming they have found the Holy Grail. These boasts are premature. Some ideas are elegant but don’t have critical mass. Worse still, they rely on those indifferent beasts, the banks. Find your way through the Darwinian jungle with the help of David Shirreff

A Martian looking at the way Earth has organized its payment and settlement systems, would find his fingers itching to rip them up and start again. Unfortunately these payment systems are not going to benefit from a Martian invasion anytime soon. There is so much vested interest in keeping large chunks of the status quo that change is slow. The main inertia comes from the banks: the beginning and end of practically every transaction, be it online or offline. They are dragging their feet because of the use they make of the free float between order and settlement, and because changing payment systems is expensive.


Customers are faced in this electronic age with money-transfers taking three to four days just to make a retail payment from one high street bank to another. Correspondent banking across national borders is a joke. A money transfer can take more than a week and cost $30. Banking practices in a small country such as Finland show that the technology and security are there to make a retail transfer between banks in real time, triggered by a single person-to-person phone call.


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