Business Transactions through Cards and Cheques

The Greek Ministry of Finance recently announced that, as of 1/1/2011, all “business transactions” above 1,500 € will be done exclusively through credit card or cheques and drafts. Today, we shall examine what this means for the tax-collecting mechanisms, what implications are going to emerge but, most importantly, what it means for software vendors (for whom this column shows particular interest in).

First, let’s define what a “business transaction” is, in this context. There are two kinds:
  • B2B: One company or enterprise pays another legal entity for its services or products.
  • B2C: A customer pays the company for its services and products.
    In the first case, the drafts and cheques will dominate, while in the second case the credit cards will (there used to be drafts – “grammatia” – in the Greek market but nowadays they are limited). You can also think of variants of the above, but the main idea is the same..

    What does this new “method of payment” mean for the tax-collection mechanisms?
    I think that this measure is moving to the right direction. If money change hands not as cash but in another form, then, by definition, there is actual proof of the money transaction! Therefore the tax-collector can ask “why this transaction happened? What was sold? Where is the actual invoice?”
    Regarding individual transactions, we also see benefits. If the company is obliged to take your money through credit card, it is becoming less and less easy to not issue a sales invoice. If an invoice does not exist, then why did the company take your money in the first place?!

    What are the implications involved?
  • All these transactions will obviously pass through banks (and their computer systems). The banks must be ready for a sudden increase of the data volumes and flexibility in problem solving. We can also assume that the State will require new summary reporting for the volumes that are transacted through cards and cheques.
  • Now, let’s hope that the banks will not find a way to irrationally increase their “services fee” just for executing a State-regulated task!
  • A lot of new people – that still resist “plastic money” – will be obliged to issue at least one credit card. This will definitely increase bank revenue but, most importantly, the volume of “private lending” in Greece. A card is basically a loan and, as such, it is very probable that it will create overdue interest!
  • Elderly people will also be obliged to join this game. So, we can expect “honest mistakes” to rise in number. The banks must establish mechanisms for quickly and securely resolving these issues.

    What do all these things mean for the software companies in Greece? Opportunity! Companies will need new software to keep track of these “new kind of transactions”. From personal experience I know that a lot of SME’s keep track of their cheques and drafts “by hand” or in EXCEL. Regarding credit cards, they do have POS’es from one or more banks, but they register these transactions in their computer systems as either cash or with just basic information, entered in some silly “comments” field of their software. The margin of error is very big… I will try to better define “opportunity” in these next lines:
  • If an enterprise has a lot of credit card transactions, it is logical to request the POS functionality INSIDE the cashier’s software module: The user prepares the invoice, as usual, but when he selects “payment through credit card” a POS simulator pops-up and the transaction is done on the computer instead of the bank’s little machine.
  • The software must able to print reports of the daily credit card transactions for validation etc. It is probable that these reports will also be requested by the tax collector, too.
  • It is also probable that monthly or annual relevant reports may be requested by the state (and in electronic format, too).
  • Regarding drafts and cheques, the increasing volume will drive buyers to purchase new systems (or even modules of their existing systems) for the “drafts management”. I remember, back in the 90’s this was a hot issue, but not any more. Well, I predict that it will once again become hot!

    Let’s just hope that this will be a real opportunity for software vendors to create something new and earn some good money in the process. Let’s hope that these systems (that will surely emerge in the market) are not sold for… 100 €, thus killing once again the Greek Software market. We are talking about true value to the end-customer and this has to be paid…
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