Local has come a long way in just the past decade; it has gone from the mantra of a few, to a legitimate economic driver. And I celebrate that, but I’m also frustrated, because we can do better. No matter how much we shop locally, produce locally, and support local, there are a few big economic systems that keep us tethered – in a not so good way – to antiquated business models that, with a little thought, could be re-localized and bring jobs and development to our state.
In this series, I plan to address some of these systems, in hopes of spurring conversation about moving forward locally, on global-sized problems.
System 1: Credit Cards
I don’t think credit cards are evil; I like them, and so do US consumers. That is why there are 1.5 billion credit cards in the US alone, according to statisticbrain.com. Because consumers like them, small businesses have to like them too. But – they’re taking away profits, no matter how you slice it. Not so much for the architect or the contractor, but for the baker, the mechanic and the retailer. In some cases this is just 2.5%, but I have heard horror stories of nearly 5%…that’s per transaction. That’s up to $5.00 for every $100 sale that goes not towards covering fixed costs or reinvestment, but to processing, often outside of our community. It is too high, and too much.
What are our options? We can try a consumer education campaign where we work to convince consumers to spend cash at local businesses. But consumers don’t like that; we like credit cards, and we need to build credit to buy a house, a car, or increasingly, to do anything. And education campaigns are a blunt instrument, and have a mixed track record to begin with.
So what if we localized credit cards. Most of the processing is or could be automated, and with some real-time monitoring tools and financial support tactics, I would be willing to bet we could drastically reduce collections, charge-backs, and defaults. Instead of 2.5% to 5%, why not 1% or 1.5%, and why not have that modest fee go to a company right here in Keene, thus amplifying those percentage points in our local economy through jobs and complementary spending. We could even put a picture of Mt. Monadnock on the card.
And we could integrate behavioral economics feedback tools for consumers as well; such as displaying the amplifier effect of each purchase into the local economy on each customer receipt. Now that would make shopping fun again!