Posts tagged ‘ATM’

Great Moments in Government Process Innovation

I have noticed recently that the TSA has created split lines at many airport security screening posts - one for experienced travelers and one for "casual" travelers - i.e. noobs.

I have no problem with the basic idea.  Long ago I began advocating special lines for public electronic devices (airport boarding pass machines, supermarket self-checkout, ATM's) for people with IQ's over 90 because I always seemed to get behind the person who had never even seen a keyboard in their life.

But the actual execution of this concept in airports is laughable.  In the last 4 airports I have been in, the split between passengers who know what they are doing and those who don't is only through the screener who checks ID.  Even the lamest travel noobs are generally able to cough up an ID and boarding pass without too much trouble (though I will say I always seem to get behind the guy traveling on some bizarre 1930's-era League of Nations passport that seems to take forever to process).  However, after this ID screening the two lines come back together and everyone is mixed again.  Just in time to hit the x-ray screening station, where inexperienced travelers can hold up the line for hours.

Students Make $100 Financial Mistake: Very Alarming!

This story comes from the Arizona Republic as part of the general effort to maintain the ban on payday loan companies passed earlier this year (their is a proposition on the ballot in November to overturn the ban).

At least 5 percent of last year's freshmen at the University of Arizona obtained a payday loan, a figure the surveyor described as "very alarming."

Arizona's Norton School of Family and Consumer Sciences conducted
the survey, which measured the financial habits of 2,172 freshmen -
about a third of the class - who enrolled in fall 2007.

Student use of payday loans
more than doubled based on a survey taken a year ago that included
freshmen through seniors, said professor Soyeon Shim, the group's
director.

"As consumers, students shouldn't be using payday loans as a resort to deal with financial stress," Shim said.

I wouldn't really recommend that students use this expensive form of ready cash, but I can't say I am particularly alarmed.  How can any of us know what pressures they are under.  In most circumstances, paying a 30% interest rate seems too high.  But I know, from personal experience, there are times when short term liquidity is so valuable you might pay anything for it  (just look - the American taxpayers are paying about a trillion dollars this year just for short-term liquidity).

In fact, if students have a bad experience, it's probably better to learn a $100 life lesson in college rather than a $500,000 life lesson later flipping condos on interest-only loans.  I personally had my own caveat emptor eye-opener with Columbia House Records in college.  Nothing like getting stuck with a couple of over-priced America albums to teach financial horse sense.  Muskrat Love... aaaarrrggghhh!

Anyway, the effort to ban payday loans altogether is one of those elitist, snobby, holier-than-thou, we're smarter than you unwashed masses issues.  Middle class homeowners who are upside down in their mortgages are not calling for inexpensive mortgages to be banned, they just want a government bailout.  The government may spend a trillion dollars in the end supporting the mortgage market.  But if poor people pay a high fee for a $100 loan, we have to ban the whole industry. 

The fact is that there is always a demand for ready cash at high interest rates, and if you drive it under ground, people just go to Tony Soprano instead. 

Oh, but you are not for banning payday loans, you just think the interest rates are too high, and that what is needed is government regulation of the rates?  Uh, OK, I'm sure that will go well.  Past government efforts to reduce the interest rate premium for risk have worked out really well *cough* mortgages *cough*. 

But, if you are still thinking that you are much smarter in money management than people who go to payday loan stores and you really want to use the coercive power of government to force poor people to make the same decisions you would, here's this:

However, for those who think they are ever so much smarter than payday
loan customers, who are charged a lot of money for small liquidity
boosts, consider this:  Let's say you take out $40 each week from an
ATM to keep you liquid and that the ATM fee is $1.50.  You are
therefore spending $1.50 or 3.75% for a one week liquidity boost of
$40, which you must again refresh next week.  Annualized, you are
effectively paying 195% to get liquid with your own money.  For this kind of vig, at least payday loan customers are getting the use of someone else's money.

Restricting Credit to the Unsophisticated -- And Are You Really Any Better?

After years of arguing that expanded credit is critical for the poor, and attacking banks for "red-lining" poor and minority districts, the liberal-left of this country has reversed directions, and has decided that the poor can't handle credit.

No matter how much folks want to paint the recent mortgage problem as some sort of fraud perptrated on homeowners, the fact of the matter is that in large part, lenders lowered their income standards and a lot of those folks now can't pay.  While we have yet to see any specific legislation beyond bailouts, it is impossible for me to imagine any reaction-regulation that does not have the consequence (intended or not) of restricting credit to the poor.

But these restrictions are not limited to the housing market.  Many states, for example, are cracking down and even outright banning payday loan companies, often the last resort (legal) credit source before people turn to the loansharks.  First in Ohio (via Mises Blog)

  If Ohio's 1,600 payday-lending stores want to continue operating past this fall, it
appears they will have to find something else to offer besides payday loans.

   A hotly debated bill that effectively would spell the end of the short-term,
high-interest payday-lending industry in Ohio sailed through the Ohio Senate yesterday despite
pleas from lenders that their stores would close and 6,000 employees would be put out of work.

   The Senate was unable to find a compromise that both satisfied payday lenders and
eliminated the debt trap that bill supporters said forced too many borrowers to take out new loans
to pay for old ones. So it did what the House did last month: dropped the hammer.

   "I think everybody said there is just no way to redeem this product. It's
fundamentally flawed," Bill Faith, a leader of the Ohio Coalition for Responsible Lending, said of
the twoweek loans. The industry "drew a line in the sand, and the legislature kicked the line aside
and said we're done with this toxic product."

And perhaps soon in Arizona.  Yes, the interest rates are astonishing, though the dollars involved are seldom huge for the short life and small size of the loan.  And, as an extra added bonus, Tony Soprano does not send someone to break your legs if you don't pay (the Sopranos being the only alternative provider once payday loan companies are illegal).

So, for those of you oppose payday loans, you are welcome to comment below about what a bad idea they are.  However, I challenge folks to criticize payday loans without simultaneously implicitly expressing disdain for the intelligence of payday loan customers, or trumpeting your ability to make better decisions for payday loan customers than they can make for themselves.

However, for those who think they are ever so much smarter than payday loan customers, who are charged a lot of money for small liquidity boosts, consider this:  Let's say you take out $40 each week from an ATM to keep you liquid and that the ATM fee is $1.50.  You are therefore spending $1.50 or 3.75% for a one week liquidity boost of $40, which you must again refresh next week.  Annualized, you are effectively paying 195% to get liquid with your own money.  For this kind of vig, at least payday loan customers are getting the use of someone else's money.

Fortifying the Border

So we're going to build a wall and send an army to the border.

Maintaining a military to defend a group of people against outsiders who wish to use force against them is one of the core functions of government.  Even crazed libertarian anarcho-capitalists like myself concede it as a function of government.  If libertarians were to have their version of the ten commandments, the only phrase that would have to be on the stone is "Thou shalt not deal with thy neighbor through force or fraud."  The government maintains police and a military to handle the people who wish to violate this one commandment.

Throughout the years, countries have built armies and fortifications to defend against invaders who wanted to loot their lands, or steal their property, or impose their own version of racial or religious uniformity.  The US Army itself has fought for freedom, it has fought to restore democracy and individual rights, it has fought to stop genocides. 

Today, the US Army sallies forth again, to fight for and defend .... what? 

It fights to stop waves of Mexican immigrants that are dangerous because they ... want to freely exchange their labor with US Citizens?

It fights to protect Americans from ... competition for unskilled labor jobs?

It valiantly rides forth to make sure Americans never face the horror of ... interacting with someone with only broken English?

The soldiers racing to the borders are not fighting for me, because I am not in danger.  And neither is anyone around me here in Arizona -- no one from outside the border is threatening me with force or fraud (surprisingly frequent emailers sending me messages about Mexicans all being diseased criminals notwithstanding).  Its not like I live blithely ignorant of the border area in Kansas.  I life in Phoenix, and run businesses  right down on the border.  I don't feel a threat or danger.  In fact, the only danger I see is that the army may come down and drag families who are my friends out of their homes and out of the country (or into concentration camps, as one conservative writer longed for).

Immigration opponents are sometimes a little hazy about what danger they are trying to fix.  I agree there is a problem with the welfare state when it meets immigration, which I discussed here and proposed a solution for it here.  Democratic politicians still are confused on this particular problem, wanting some immigration solution but refusing to consider limiting access to the welfare state.   If the problem is infrastructure (police, prisons, schools, etc.) then it could be possible to provide national funds to border regions for this purpose, rather than for armies and walls (the Feds, after all, are handing out hundreds of billions to New Orleans).  And if the problem is too many people who don't look like us Anglo-Saxons, well, sorry  (If you don't think that this is the real issue for many anti-immigration folks, think about the recent scare headlines that soon a majority in the US may be Hispanic.  Can you imagine similar anxiety over the headline "majority of US may soon be of Canadian descent"?)

Update:  Nick Gillespie comments on the fact that Congress has given its official sanction to my speaking English.

Thank you, Middle Eastern 9/11 hijackers, for finally getting the point
through our thick skulls (forgive our slowness, but all too many of us are
descended from immigrants) that the greatest security threat to the United
States is the influx of Spanish speakers from across the border with Mexico.

Christ, it's bad enough that we have to eat foreign food, live in states
with Spanish-derived names, and answer that extra question about which
language to use at the ATM. (Thought experiment: How much is that extra
second or two of time slowing down the U.S. economy and driving down our
productivity, precisely at the moment when the Chinese are breathing down
our
necks like a bunch of post-industrial railroad coolies? You can be damn sure
that the Chinese government doesn't allow ATM users to pick their own
language.)

As I have written before, I have gotten more bizzaro emails on my pro-immigration stand than anything else I have written about.  Gillespie apparently has had the same experience.

We Don't Need No Stinking Consistency

For the past 6-months, gas station owners have been under attack by state regulators for their pricing practices just after Katrina, when fears of shut-in Gulf oil production and refining capacity led to a temporary spike in gas prices.  Gas station owners have tried to patiently explain about supply and demand and market dynamics, but to no avail, and are starting to settle:

Sunoco Inc. became the second oil company to
settle a price gouging lawsuit brought by New Jersey authorities,
agreeing to pay $325,000 but admitting no wrongdoing....

As part of a state probe into all oil companies doing business
in New Jersey, more than 100 violations were found at 400 gas
stations in the first week of September, the most common of which
were prices being raised more than once every 24 hours, and
stations showing different prices at the pump compared to their
posted prices, officials said.

Nobody is really getting fined hundreds of thousands of dollars for changing their prices more than once in a day.  Gasoline retailers are getting fined for being unliked, and because politicians find it a populist boon to their reelection to wack on oil companies every once in a while.  One of the reasons that gasoline retailers get fined for petty crap like this is that they are the only retail industry that I know of that actually posts their prices so you can see them on the street when you drive by.  A while back we also highlighted this funny bit of high-handedness in Illinois:

Illinois State Attorney General Lisa Madigan asked 18
operators whose prices jumped significantly after Hurricane Katrina to
donate $1,000 to the American Red Cross or risk a potential consumer
fraud lawsuit, reports the Chicago Tribune.

And you just knew enemy-of-Antarctica and Aspiring Governor Eliot Spitzer couldn't miss out on the populist fun:

Illinois isn't the only state to go after retailers for
price gouging after Hurricane Katrina; New York Attorney General Eliot
Spitzer fined 15 operators $10,000 for pumping up their prices.

Anyway, I guess we still haven't gotten to the "consistency" thing I mentioned in the title.  Having been at the receiving end of such ill-conceived and populist price-gouging and anti-trust lawsuits, what is the gas station trade group doing this week?  Why, appearing in front of Congress to accuse someone else of price-gouging.  In this case, they have dragged credit card companies in front of Congress to demand action on interchange fees:

All consumers pay more at the store and at the pump" as
a result of high interchange rates, added Mierzwinski. He also noted
that "legally suspect" practices have led to market power of the card
associations, and that banks engage in a variety of deceptive practices
to steer customers toward higher transaction fees, such as charging
customers who use PIN debit, as opposed to signature-based debit, which
is much less secure yet carries a higher transaction fee to the
retailer.

Of course, he is all for free markets, as he says with this pious piece of BS:

I believe in the light of day and I believe in free
markets," noted Armour, in explaining what retailers are--and
aren't--seeking with regard to interchange. He stressed that retailers
are not requesting price caps and price controls, but rather a better
understanding of why U.S. interchange rates are so high.

Right.  Then why are we dragging these people in front of Congress, except that you want to use the coercive power of government to change their business practices?  If you have Ralph Nader's PIRG behind you, then you are looking to weild the government's hammer to achieve something you couldn't achieve through free, voluntary association and negotiation.

As a retailer, credit card companies piss me off too, but I don't run to Uncle Sam for relief.  I just don't accept certain types of cards, like ATM cards with PIN verification, since they cost a fortune in fees.   And in a lot of locations, I don't accept cards at all.  We have put ATM's onsite in a lot of places, reasoning that if consumers want debit card convinience, they can pay the fees by using the ATM machine and then paying us in cash.

ATM Cards More Expensive to Process than Credit?

Does this make any sense:  It costs us a lot more, for small transactions, to process an ATM / debit card with the pin pad than a credit card.  Bank of America charges a flat 60 cents per ATM card / PIN pad transaction in our stores but charges 10 cents plus 2% on credit cards.  So, on a typical $5 convenience store purchase, BofA charges $0.60 or 12% to process a ATM / debit card but $0.20 or 4% for the credit card.

I understand the difference between value- and cost-based pricing, but in an economy of scale transaction processing business with a lot of competitors, I would think debit would be cheaper to process, even without the credit risk issues. 

Customers give me feedback that I am a neanderthal for not accepting ATM cards with a pin pad at the registers.  This is the reason.  Its cheaper for me to provide an ATM and then have them pay cash - that way they pay the fee, not me.  Also, their fee is lower.  Even if they only take out $20 and pay a $1.50 fee, they are still only paying 7.5% vs. the 12% typical I would be paying.  If anyone knows a company that offers a better deal, the comment section is wide open!

Update:  A couple of notes based on the comments.  First, I do indeed understand that prices are not cost-based.  The notion that pricing should be cost-based is one of the worst economic misconceptions held by the average person (behind the commerce is zero-sum myth).  When prices don't make sense to me, I don't run to the government asking for Senate hearings so corporations can "justify" their pricing, I just don't buy from them. 

Second, to another commenter's point, most card processing agreements and some state laws prevent merchants from passing card processing fees onto consumers in a discriminatory way - ie they can be built into the general pricing but you can't charge one person one price and another a different price for the same item based on what kind of payment they use.

Outsourcing to Your Customers

So what does valet parking, soft drinks, and firewood have in common?  More in a second.  First, some background.

We have had a problem over the last few years in our California campgrounds.  We sell a lot of firewood to campers, usually in bags of 6-8 sticks.  We are having difficulties getting a good, inexpensive firewood source in the Owens Valley.  We can find a bunch of people who will deliver stacks of firewood by the cord for a very good price, but only one person in the valley bags the wood.  As a result, the bagging step alone is effectively costing us between $1 and $2 a bundle, which is a lot for something we sell for $5-$6. 

In kicking the problem around, we considered what is becoming an increasingly common approach - if bagging is labor intensive and costly, lets see if we can outsource that step to our customers.  Outsourcing to your customers has been around for a while, but has gotten more popular of late.  Many furniture and equipment makers have been doing this for years, by outsourcing final assembly to customers.  While some of this is to reduce shipping costs, part of the benefit to manufacturers is that they save on assembly labor.

Service industries have started to get into the act of late.  Banks have been outsourcing teller functions for years via ATM's.  Most fast food restaurants have outsourced soft drink cup filling to the customers.  Grocery stores (and now Home Depot) have hopped on the bandwagon, providing self-service checkout for those who don't want to wait in line.

What all these examples have in common is that they seem to meet with customer acceptance if they provide some sort of value to the customer(short-circuiting lines, easier drink refills, the right amount of ice in the cup) , and not just cost-savings to the company.

Which brings me to the examples that really irritate me - of companies outsourcing their payroll to me.  [Note, I am a libertarian -- please do not interpret the following as a call for government action!]  Tipping, in its purest form, is a way to reward exceptional (meaning - beyond the standard or expected) service.  Unfortunately, restaurants and other service establishments have twisted this act of reward and generosity into having customers pay the wages of their staff.  Restaurants are simultaneously increasing tipping expectations (from 15% to 20%+) while requiring tips on more and more occasions by building them automatically into the bill.

The event that brought my irritation to a boil the other day actually happened valet parking my car at a restaurant.  As background, the establishment charged $4 to valet park your car.  Now, I am not a socialist, so I accept that value is not driven by cost but rather by what I am willing to pay for it, and I was willing to pay $4 to avoid having to walk a few blocks from the free lot  (those of you from Boston or NY are wondering what the fuss is about -- a valet parking charge of any amount is virtually unprecedented in Phoenix, at least until recently).

So I paid my $4, and then I saw the sign:

"Our employees work for tips"

What?  You mean I just paid your company $4 for what amounts to about 5 minutes of labor, and now you are telling me that in addition, I need to pay your employees' wages for you too?  This is pretty nervy - I mean, other than a percentage concession payment they are probably making to be the parking company at that location, what other costs do they have?  I didn't want to hurt the young guy actually doing the parking, but for the first time in years I didn't tip the valet.  That little sign turned, for me, an act of goodwill into a grim obligation, extorted from me by guilt. 

Which brings me back to firewood.  In outsourcing bagging to the customer, I did not want to tick off our customers like I had been angered by similar steps, so I set two criteria for my managers and any plan they came up with:

  • It had to save a substantial amount of money, some of which we could pass back to customers as a price savings
  • It had to offer the customer more value - a better product somehow.

The plan my managers hit on was to purchase a number of small milk crates that customers could fill with wood for the same price as the old bag.  These crates would hold a bit more than the old bag, so customers can get more wood for their money.  In addition, customers can pick out their own pieces of wood from the stack.  This is actually something that has been requested in the past - some customers complained the bags had too many small sticks, some complained they had too many large sticks.  Now people can get what they want.  We will try this out in a few sites to see what customer reaction is, and, perhaps more importantly, to see if we can hold on to our milk crates without them walking away.

Directory Listing Checks are the Worst Non-Internet Scam

I don't know if you get these, but about twice a month we get what looks like a refund check in the mail, usually for a couple of dollars and change, from some yellow pages company.  Today we got one from "Directory Billing, LLC" for $3.25.  We get a lot of small checks for pay phone and ATM commissions, NSF check refunds, etc, so sometimes these almost slip through - be VERY careful.

Why?  Well, the check looks all normal and innocuous, but in tiny grey lettering in the background of the endorsement section on the back, there is a lot of legal verbiage that amounts to the following "by endorsing and cashing this check, you are signing up for a directory listing in some random yellow pages you never heard of for some god-awful amount of money which we will bill later".