Have you heard of Bartercard?


Ever heard of bartercard?

Nov 10 2009

Sri Ramakrishna, the guru of Swami Viveka nanda, advised his discipl es to be detached from money. “Ta ka Mati, Mati Taka,” he said. “Consider ca sh as a handful of dust and dust as a handful of money.” Rather th an devoting oneself to the pu rsuit of we alth, many followed his call of serving humanity. Some interpreted his advice like the Delphic Oracle. They focused only on the second part of his sermon. They ma de pots of money by investing in “land” — another translation of the word “ma ti”. Poet Omar Khaiyam focused on ca­sh flows. “Ah, take the cash, and let the credit go, nor heed the rumble of a distant dr um!” was his advice.

Money is important. Exce pt for the tiny Himalayan ki ngdom of Bhutan, which imaginatively measures gross dome stic happiness, all countri es in the world measure pro gress by tracking the growth of gross domestic product (GDP). GDP is invariably expressed in units of money. If you are unable to express the worth of an asset in monetary terms, you confuse the financial world. No wonder knowledge companies curse ba nk ers for their inability to assess intangible assets. It was, perhaps, his frustration with bankers that led Irish wri ter Oscar Wilde to proclaim, “Th ey know the price of everyth ing and the value of nothing.”

Most money does not exist in physical form any more. The trillions of dollars that cr iss-cross the globe with great speed do so in digital form ac ross networks. We have succe eded in converting paper into virtual, electronic impulses.

Before the digital age, bar ter was physical. I gave you rice and in exchange you provided me with cooking oil. You fixed my car and I helped you file your tax returns. Digital innovation is providing new ways of enabling exchanges and redefining the role of mo ney. If you are in Africa, you may choose to pay with phone minutes. The innovation is in the payment model that uses existing technological infrast ructure. Africa has more than 100 million mobile phones. By 2012, it will have almost 400 million phones. But people in Africa have limited access to a reliable and stable banking system in parts of the vast continent.

Enter innovation. The mobile phones are doubling up as electronic wallets. The vast majority of mobile users in Africa do not have post-paid connections. They buy “ph one minutes” from shops. The mobile network of Kenya has an innovative payment mechanism called M-Pesa. M stands for Mobile and Pesa in Swahili means money. People can send to each other via te xt, the value in the form of phone minutes.

During the political instability in Kenya in 2008, phone shops were closed, phone ca rds became scarce and phone minutes became a quasi-currency. Family members sent phone minutes across netwo rks at great distances, which people used to buy food and other necessities. Suddenly, a mobile telephony company has the opportunity of replacing a mint or a bank in creating a new type of currency or enabling a new form of barter.

There is another kind of innovation from Down Under. You have heard of Diners, Visa and Mastercards. Have you heard of a Bartercard? If you have not please check it out @http://au.bartercard. com/. Bartercard is the wor ld's largest barter trading exchange. It enables member businesses to exchange goods and services with other member businesses without using cash or cash equivalents. It operates in nine countries wi th a member database of over 75,000. Members earn Bar tercard trade dollars for the go ods and services they sell and this value is recorded el ectronically in the member’s account database.

According to International Reciprocal Trade Association, more than 400,000 businesses transacted $10 billion globally in 2008 and the volume of business is growing. Barter ex­changes are taking a leaf out of the time-share condomi nium business. They are marketing barter cards as a tool of enhancing capacity utilisation a nd volumes. Hotels, for inst­ance, which are suffering from low occupancy, are “banking” rooms to create credits that can later be used to buy flowers, paint and chicken.

The bartercards of the wo rld are making the exchange methods more sophisticated and with the touch and feel of bank credit cards. They issue monthly statements and an in­terest-free line of credit — with solid security and safety. A hotel in need of Rs 50,000 worth of paints may offer me als worth Rs 50,000. It is unlikely that the paint supplier will use Rs 50,000 to buy bi riyanis or tandoori chicken. But he does not have to. In the exchange transaction, the hotel owes Rs 50,000 to the network, not to the paint supplier. The paint supplier is fr ee to buy other stuff he needs by using his “credit”. The exchange becomes a sophistica t ed, multilateral barter-clear ing house.

The banking system is unlikely to be replaced by these innovations in payment systems. They will merely supplement it. Therefore, Voltai re’s advice may still be valid, “If you see a Swiss banker, ju mp out of a window, follow him. There is surely money to be made."

The writer is the managing director of Deloitte Consulting, India. These are his personal views

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