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Inside the world of business

AIB’s mixed message on cashless society

“CONTACTLESS PAYMENTS allow cardholders to pay simply by tapping their card at the point-of-sale terminal,” enthused AIB Merchant Services yesterday, as it activated its first contactless payment terminal at the Bord Gáis Energy Theatre in Dublin.

It is good to see such innovations finally reach Irish consumers – or at least they will do, once banks issues them with a Visa and Mastercard with contactless functionality.

AIB’s message on electronic payments seems rather confused, however.

On the one hand, its initiative on contactless terminals promotes the greater use of electronic payments and discourages the kind of “loose change”, cash-dependent society that the Irish Payment Services Organisation intermittently warns reduces the competitiveness of the Irish economy.

On the other hand, AIB’s decision to impose bank charges on customers who don’t maintain a €2,500 balance from May 28th means the bank is effectively encouraging people to keep their Laser cards zipped in their wallets and carry about cash instead.

To minimise the impact of the 20 cent a pop charge on debit card transactions, affected AIB customers will likely shun card transactions and revert to hitting the ATMs for large sums. At least, that’s how the situation will stand for many AIB Laser customers this summer. It is unclear what transaction costs will apply to the new generation of cards once they emerge in significant numbers from later in the year. But it would hardly make sense for AIB to advocate the convenience of contactless payments, while at the same time slapping on a 20 cent charge per transaction – especially as payments can only actually be contactless if the value of the transaction is below €15.

Ireland is already behind the UK when it comes to contactless technology. The charging policies of the banks should reflect the desirability that we catch up, not further hinder progress.

Equine deal has potential

GIVEN THAT Punchestown, Ireland’s premier horse-racing festival, is just a week away, it’s timely that the Government has just announced a new initiative that could open the door to a huge opportunity for the country’s racing and breeding industries.

Minister for Agriculture Simon Coveney announced a €40 million tie-in with China’s first national equine industry facility in Tinajin. This will facilitate the export of racehorses and Irish racing expertise to the world’s second biggest economy.

The venture at Tianjin will require between 600 and 800 thoroughbreds for its first year. It will also require broodmares and stallions to found a breeding programme. At the same time Chinese agriculture graduates will spend time at Coolmore Stud in Tipperary learning the industry ropes.

It’s no accident that China has chosen Ireland as a preferred partner in this venture. Irish-bred and Irish-trained racehorses feature at or near the top in all the sport’s league tables.

The potential benefits of getting in on the ground floor of a nascent industry in an economy the size of China’s are enormous. Those benefits have to feed back to racing and breeding as a whole.

They are worth more than €1 billion to the Irish economy, but have suffered during the recession. At the same time, racing is struggling to find a way to get a slice of the betting cake in an era of online gambling.

China is far away from this stage. Gambling is allowed in Hong Kong and Macau, but not on the mainland, where it was banned in 1949.

Given the link between racing and betting, and the fact that gambling is part of the sport’s funding structure, it seems unusual that, for now, the authorities seem unlikely to change the rules.

The evidence from Hong Kong, where two racetracks produced a betting turnover of €8 billion in the 2010/2011 season, suggests that there is plenty of appetite for racing and gambling in the region. And there was a big spin-off for Hong Kong itself, as the Jockey Club, which runs racing and betting, paid €1.8 billion in tax and duty.

Quote of the Day

We need to make sure that we do not contribute to a democratic deficit in global governance

– Nigeria’s Ngozi Okonjo-Iweal after losing the election to head the World Bank to Jim Yong Kim of the US

Today

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