Monday, August 16, 2004

More truth about credit cards

Credit cards are a 50 year old technology. Sure, there have been some incidental improvements, but on the whole, a 16-digit number and a signature are a crappy way to assure payment to anyone in the 21st century.

Look at my posts previously about credit cards and identification. Banks and merchants are trying desperately to keep what is effectively an ancient banking tool afloat, by tweaking the rules here and there and screwing each other in the process. The result is that to avoid inconveniencing consumers, small businesspeople are getting screwed. The merchants, in return, skirt the rules, balancing consumer convenience versus their own self-interest, occasionally getting into trouble, occasionally losing a customer, and rarely actually preventing the problem.

The solution is painful, but such is the way with revolution. Consumers must force merchants to comply with the rules. Eventually, without the placebo of requesting ID, merchants will be forced to take the bull by the horns, and either take action against the banks for reversing charges on authorized payments, or stop accepting credit cards. Either way, the banks will start to feel the pain.

Banks, in return, will be forced to finally research and adopt new transaction processing tools that are genuinely friendly to all involved, instead of leaving merchants as the scapegoat.

Invention comes from pain. We, as the protected consumer class in this story, are in the best position to bring pain to the merchants and banks. In the end, we will have to give up our credit cards, but they will be replaced with something better because if it.

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