Canadians could soon be using a government-backed digital currency, dubbed MintChip, to make in-store point-of-sale purchases.
Sounds as though this could end up costing retailers a "Mint" to deploy!
The cost of a retail terminal, depending on the interface, could be as low as US$5.00 (in volume). If there is a value proposition for the merchant (see below), they will happily pay even US$20-50.
The weakest link are the loading points, unless all the participating merchants agree to perform funds loading for free.
The key question: what is the business case behind MintChip?.. If it is along the line of "one penny" one (http://www.finextra.com/blogs/fullblog.aspx?blogid=7666), it
may well work.
Alex. I think the small cost of a terminal may well work for the smaller retailers, but any large retailer with legacy systems could potentially have a lot of integration work to complete before they could deploy this - not to mention the additional cost
of reconciliations etc.
Your right in that it'd be interesting to know what the business case might look like. That and what the consumer apetite for it would be.....
It will be interesting to see if the transactions will really be "fee-free".
Looking at the description of the ecosystem at their website (http://developer.mintchipchallenge.com/devguide/ecosystem.html), they say:
"The MintChip Minter is the trusted entity that creates the MintChip value and which it puts into circulation by selling value to the Broker. The Broker trades MintChip value with the users of the system and MintChip value is exchanged with consumers and
merchants. The Broker debits and credits the merchant and consumer bank accounts in exchange for MintChip value. Senders and Receivers are users of MintChip value and may be consumers, merchants, businesses, Government, etc."
It comes down to who will be the Brokers and what will be their business model? Merchants today accept several electronic payment methods provided by their processor/acquirer. Processors will not acquire MintChip transactions for free. If there is a 3rd
party to act as a broker there will be a challenge with (a) merchant entering into another service agreement, (b) brokers are unlikely to be not-for profit.
In Canada you have a super low cost national debit card network: Interac, which receives 1c for each transaction (from acquirer and issuer); and there is no interchange payable (at least for the next couple of years - government mandate).
And there is an increasing number of low cost card accepting terminals out there too...which are very often integrated into the merchant's point of sale.
So what is the need for a digital currency, when your loonies are already stored, accepted and processed digitally, at low cost?
Considering the above I don't understand the value of a digitial currency for use in-store...
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