Home Credit Cards Are Killing Creativity: The Case for a New Online Payments System

Credit Cards Are Killing Creativity: The Case for a New Online Payments System

With the rise of startups like Square, and near-field communication technology going global, we’re seeing payment systems change drastically in the real world. These tools are making our lives easier and are enabling new transactions to occur that would not have been possible before.

Surprisingly, however, we are not seeing much change at all in payment systems online. PayPal is still huge. We still need a credit card for almost all transactions online. In my opinion, attention on payments needs to be directed back to the Internet – because there are a huge number of negative effects resulting from using credit cards online.

Michael Moore-Jones is a 16-year-old New Zealander passionate about technology and business. He is the founder of They Don’t Teach You This In School, a website which helps young people benefit from the experiences of adults through short videos, and a co-founder of Duo.

10 Cents and $1

We are all very used to receiving free content on the Internet. But why is that? Do we no longer place value on quality? A high-quality news article on the New York Times, for example, is worth about 10 cents to me. I’m willing to pay that. I would bet that millions of other people worldwide would pay it too. However, because of the fact that existing payment systems online are controlled by the credit card companies, it isn’t profitable for anyone to charge less than a dollar for content, as there are minimum transaction fees.

This gap between 10 cents and $1 is where all the problems are occurring. Most credit card payment systems on the Internet charge a minimum of 30 cents per transaction. Content sellers would lose money if they sold content for anything less than this, and, depending on their costs of production, they’d still lose money at prices up to a dollar. This means that content producers are forced to give their content away for free, because people won’t pay a dollar for an article.

Enforced Generosity, Enforced Mediocrity

What are the implications if credit card companies continue to dominate, and everyone is forced to give content away for free online? For starters, less quality content. If people can’t make money from what they produce, they start to lose the motivation to produce.

There really is no incentive quite like money. Of course there will always be bloggers and news websites and musicians and movie producers – but unless there is a monetary incentive, a much lower quantity of content with much lower quality will be produced if people are not incentivized enough to put in the effort.

Content, in its broadest form, is information available to individuals. Information makes the world go around, and therefore content is crucial to societies. It is of utmost important that multiple news sources exist, so that democracy can function effectively.

We’ve seen the huge benefits from citizen journalism, for example. But perhaps those citizens decided to be journalists because of the novelty factor. Once that novelty wears off, will we still have as many citizen journalists unless they can profit from their content? I would argue that we are going to see the number of citizen content producers decrease over the coming years after the novelty of these technologies wears off. Therefore if we want to continue to see the benefits of citizen journalists, the ability for these people to be incentivized will have to be introduced to the Internet.

Just Because You Can, Doesn’t Mean You Must

There is no reason for all content producers to start charging for their content. Steven Brill, the founder of Journalism Online, recently said that “publishers don’t need to make a choice between advertising and circulation revenue. By charging only certain kinds of readers or for certain kinds of content, they can still maintain a big, non-paying audience capable of generating ad revenues.”

To create a positive and beneficial Internet, we have to give content producers the ability to choose how they monetize their content. The first step in that is reducing the importance of credit card companies in online payments.

To create a positive and beneficial Internet, we have to give content producers the ability to


how they monetize their content. The first step in that is reducing the importance of credit card companies in online payments.

There is another benefit to having an alternative to credit card payments online: a

Nielsen study recently showed

that 71% of global consumers would pay for online content, provided that it is in some way better than what they would receive if they bought it in the physical world.

What this means is that content producers have incentive to produce better content. At the same time, consumers will receive higher quality content. It’s a win-win situation for all parties.

Micropayments Aren’t Enough – We Need Nanopayments

So, what should we do to provide an alternative to the current credit card payment system? Micropayments aren’t enough – we need to be talking nanopayments. There must be a ubiquitous digital payment system that gives content producers the ability to charge for their content, from amounts as small as one cent. Bitcoin is one of the key current players in this space, and the new social exchange MyCube is also working on solving this problem.

The Internet is fantastic at breaking down barriers. The problem we have here is that credit cards have been incorporated into the very fabric of payments through the Internet, and it is therefore slightly harder to break the barriers set up by credit card companies. It is very possible though – and there is no solid competition as of yet. So get to work.

[Disclosure: I was a member of the Digital Life Academy, of which MyCube is a sponsor].

Credit card photo by Andres Rueda

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