Sunday, September 09, 2007

Time for a big hand?

Most of us think that regulation is bad and should be avoided - even at some cost. With the benefit of hindsight it is easy to say that some more of it could have been good for us.

Looking at digitalization from the financial transaction angle it is interesting to start summing up cost saving potential:

1. Handling cash is said to cost a total of 50 billion € in EU. Who is paying this? Of course the consumer in EU - via the prices he pays in shops. If it would be more transparent he might use his digital tool - the card keeps money in digital form.

2. Slow payments and inefficient reconciliation costs tens and tens of billions (according to a study commissioned by EU a 10% improvement in automation here could improve GDP with 0,5%..). Who are paying these costs? The consumer of course - not the shareholders (who of course are the same consumers via their pension schemes..)

3. Paper based invoicing is estimated by EACT to cost 243bn€ a year for enterprises in the business to business area only. Consumer invoicing is saving less as the time spent by bill payers is not calculated as a cost. Still the cost is massive. And again it is the end-user of the products and services who pays the bill.

4. Not to talk about cheques...

Hundreds of billions - every year. Money that the EU citizens could use for real value. The dilemma is on the one hand the lack of awareness and on the other hand that cost savings are spread among so many enterprises that there may not be enough incentives to take the step. That is why even regulative-like steps must be considered.

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