Retail Not Wholesale
APS retail systems, not wholesale systems
- Dollar value of all non-cash payments
- Use of cash and checks for retail transactions
Longer term: possible new construct that is a “super-set” of traditional system and developing alternative systems
It is important to focus on the fact that, currently, alternative payment systems are essentially retail systems rather than wholesale systems. It is on the retail level that the jurisdiction issues arise. Wholesale systems are still the province of the traditional players, and as a practical matter the alternative payment systems are just short-cuts to the larger players. Fundamentally, at some point the entity operating the alternative payment system must “convert” its accumulated value to something “real”, i.e., a recognized and accepted form of currency outside of the closed environment that has chosen to accept the alternative payment system.
The US data is instructive in this regard. Nearly all wholesale payments in the United States are conducted electronically via governmental and non-governmental payment system networks. Measured in terms of dollar value, approximately 90 percent of all non-cash payments in the United States are made by electronic transfer. Currently, retail transactions conducted electronically through the Internet are only a small fraction of the whole. Further, in the US, cash and checks are used for payment in more than 80 percent of the number of retail transactions and about 30 percent of the dollar value of such transactions.
In the Internet environment, those cash and checks can be replaced by any token of value that the other participants in that system agree to accept (that’s all currency is, in reality – a medium of exchange which everyone, most importantly, the government, agrees to recognize). But unless and until those alternative systems become sufficiently pervasive and diverse enough for the participants to be self-sufficient in their economy (if, indeed, attaining such a goal is possible in the context of our current global economy), they must at some point rely on the traditional payment systems and the agreements and structures that underpin it.