Death by Little Transactions?

Original Image by Gerard Altman on Pixabay.

There was a video I saw in the past week where a gentleman was comparing how things used to be as opposed to how they are now.

The story went that you gave $50 to the barber, then the barber would spend the $50 at the car wash or something similar, and then that $50 would go somewhere else.

These days, his point was, when you pay a barber $50 in a transaction using a car, the barber only gets $49, which he spends on something else, and eventually that $50 gets cut into nothing by transaction fees.

He’s not necessarily wrong, but it is an oversimplification.

If the barber owns his place, he has to upkeep it, which is a cost, and if he rents a place, he has to pay that rent, etc. The barber has to pay for upkeep of the tools of the trade, electricity these days to power them as well as lighting, even clothing. All of those transactions have been hidden from most people who have never run a business. Therefore, when he gets $50, he has to plan to spend on all of those things and he really hasn’t made $50.

To highlight his point, though, if he does all those transactions electronically, the banks are making money on every single transaction. Micropayments come with these costs, and for video games they’re labeled microtransactions, but really, they’re just very small transactions that happen all the time and only the most pedantic would correct someone who used them interchangeably. They’re all transactions, aren’t they?

Either way, it’s easy to see that every time you use any form of digital currency, someone’s taking a cut. It’s reminiscent of the rumor of some programmer making off with millions from rounding off on pennies when a bank calculates interest – if the error is less than 50% of a penny, it disappears, and as the story goes, the programmer took those shavings and stuck it in an account and made off with millions. It’s a fun story that highlights an issue with these microtransactions, which allegedly banks now take advantage of themselves. It’s called salami slicing.

Yet we need banks to do commerce across the internet. Some people are big on cryptocurrencies for this and other reasons, and it is understandable – bankers have quickly come to the same level of disregard as lawyers in some circles. Yet cryptocurrency has it’s own issues which are public knowledge these days, largely driven by confidence men – shortened for convenience to con-men, those who practice confidence tricks.

Is there an issue with the digital currencies in this regard, where small transactions to banks can rob people? I think so, particularly those of lower income, since their transactions should be smaller – and thus the micropayments would be larger, percentage wise, to the transactions.

This is a problem, I think, and one that we should become increasingly wary of. Yet what is the answer to death by thousands of small transactions? It would seem banks would need to stop strangling the goose with the golden egg, but they are also shifting who lays the golden eggs.

It bears some thought. If there is a problem, and we can figure out what the problem is, we could solve it with technology.

What do you think?

6 thoughts on “Death by Little Transactions?

  1. The whole system favors the banks. When foreclosures and defaults happen, they still get the property. The money to pay back all the loans doesn’t exist so this is the cycle we are stuck with.

        1. We built a system of exchange based on barter, someone saw a way to profit from barter by being the middle man.

          Then that someone made enough money to loan out and charge interest.

          Then they started repossessing things, so now they could give loans for the stuff they themselves were selling, even becoming the middlemen for their own transactions.

          At some point the fractal cannot be self sustaining.

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